<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 24, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
(Exact Name of Registrants as Specified in Their Respective Charters)
<TABLE>
<C> <C>
DELAWARE 54-1787646
DELAWARE 58-2332106
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification Number)
Organization)
</TABLE>
AND AFFILIATE GUARANTORS
<TABLE>
<S> <C> <C>
DTS MANAGEMENT, LLC GEORGIA 58-2255906
DIGITAL TELEVISION SERVICES OF CALIFORNIA, LLC DELAWARE 54-1792385
DIGITAL TELEVISION SERVICES OF COLORADO, LLC GEORGIA 58-2255909
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC GEORGIA 58-2278248
DIGITAL TELEVISION SERVICES OF KANSAS, LLC GEORGIA 58-2269693
DIGITAL TELEVISION SERVICES OF KENTUCKY, LLC GEORGIA 58-2263782
DIGITAL TELEVISION SERVICES OF NEW MEXICO, LLC GEORGIA 58-2255917
DIGITAL TELEVISION SERVICES OF NEW YORK I, LLC GEORGIA 58-2255915
DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA I, LLC GEORGIA 58-2261740
DIGITAL TELEVISION SERVICES OF VERMONT, LLC GEORGIA 58-2272519
SPACENET, INC. NEW MEXICO 85-0418709
(Exact Name of Registrants as Specified in Their Respective (State or Other Jurisdiction (I.R.S. Employer
Charters) of Incorporation or Identification No.)
Organization)
</TABLE>
4841
(Primary Standard Industrial Classification Code Number)
<TABLE>
<C> <C>
MR. DOUGLAS S. HOLLADAY, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
880 HOLCOMB BRIDGE ROAD DIGITAL TELEVISION SERVICES, LLC
BUILDING C-200 BUILDING C-200
ROSWELL, GEORGIA 30076 ROSWELL, GEORGIA 30076
TELEPHONE: (770) 645-4440 TELEPHONE: (770) 645-4440
(Address, Including Zip Code, and Telephone Number, (Name, Address, Including Zip Code, and Telephone
Including Area Code, of Registrants' Principal Number, Including Area Code, of Agent for Service)
Executive Offices)
</TABLE>
---------------------
COPIES TO:
H. BRYAN IVES III, ESQ.
C. MARK KELLY, ESQ.
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
2600 NATIONSBANK CORPORATE CENTER
100 NORTH TRYON STREET
CHARLOTTE, NC 28202-4000
TELEPHONE: (704) 417-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED OFFERING PROPOSED AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER NOTE OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 1/2% Senior Subordinated Notes
due 2007......................... $155,000,000 100% $155,000,000 $46,970
- --------------------------------------------------------------------------------------------------------------------------
Guarantees of 12 1/2% Senior
Subordinated Notes due 2007...... $155,000,000 (1) (1) (1)
- --------------------------------------------------------------------------------------------------------------------------
Total.............................. $155,000,000 100% $155,000,000 $46,970
==========================================================================================================================
</TABLE>
(1) No additional consideration will be paid by the recipients of the 12 1/2%
Senior Subordinated Notes due 2007 for the Guarantees. Pursuant to Rule
457(n) under the Securities Act of 1933, no separate fee is payable for the
Guarantees.
---------------------
THE REGISTRANTS HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K showing location in Prospectus of
Information Required by Items of Part I of Form S-4
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM CAPTION OR
NUMBER AND CAPTION LOCATION IN PROSPECTUS
--------------------------- ----------------------
<S> <C> <C> <C>
A.
INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover of Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus Inside Front Cover Page; Outside Back
Cover Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges; and Other Information Prospectus Summary; Risk Factors;
Selected Historical Financial Data
Unaudited Pro Forma Financial Data
4. Terms of the Transaction Outside Front Cover Page; Summary;
Description of the Notes; The Exchange
Offer; Certain Federal Income Tax
Consequences
5. Pro Forma Financial Information Unaudited Pro Forma Financial Data
6. Material Contracts with the Company Being
Acquired Inapplicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters Inapplicable
8. Interests of Named Experts and Counsel Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Inapplicable
B.
INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants Inapplicable
11. Incorporation of Certain Information by
Reference Inapplicable
12. Information with Respect to S-2 or S-3
Registrants Inapplicable
13. Incorporation of Certain Information by
Reference Inapplicable
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants Outside Front Cover Page; Prospectus
Summary; Risk Factors; The Company; Use
of Proceeds; Capitalization; Unaudited
Pro Forma Financial Data; Selected
Historical Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Security Ownership of
Certain Beneficial Owners and Management;
Limited Liability Company Agreement;
Description of Certain Indebtedness;
Description of the Notes
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM CAPTION OR
NUMBER AND CAPTION LOCATION IN PROSPECTUS
--------------------------- ----------------------
<S> <C> <C> <C>
C.
INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies Inapplicable
16. Information with Respect to S-2 or S-3
Companies Inapplicable
17. Information with Respect to Companies
Other than S-3 or S-2 Companies Inapplicable
D.
VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited Inapplicable
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited or
in an Exchange Offer The Exchange Offer; Management; Security
Ownership of Certain Beneficial Owners
and Management; Certain Transactions
</TABLE>
2
<PAGE> 4
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.
SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 1997
PROSPECTUS
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
OFFER TO EXCHANGE $1,000 PRINCIPAL AMOUNT OF THEIR
SERIES B 12 1/2% SENIOR SUBORDINATED NOTES DUE 2007 WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000
PRINCIPAL AMOUNT OF THEIR OUTSTANDING
SERIES A 12 1/2% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
Digital Television Services, LLC, a Delaware limited liability company (the
"Company"), and DTS Capital, Inc., a Delaware corporation ("Capital" and,
together with the Company, the "Issuers"), hereby offer to exchange (the
"Exchange Offer") up to $155,000,000 in aggregate principal amount of their new
Series B 12 1/2% Senior Subordinated Notes due 2007 (the "Exchange Notes"),
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for up to $155,000,000 in aggregate principal amount of their outstanding Series
A 12 1/2% Senior Subordinated Notes due 2007 (the "Private Notes"), that were
issued and sold in a transaction exempt from registration under the Securities
Act.
The terms of the Exchange Notes are identical in all material respects
(including principal amount, interest rate, maturity, security and ranking) to
the terms of the Private Notes (which they replace), except that the Exchange
Notes: (i) will bear a Series B designation, (ii) will have been registered
under the Securities Act and, therefore, will not bear legends restricting their
transfer, and (iii) will not be entitled to certain registration rights and
certain liquidated damages which were applicable to the Private Notes in certain
circumstances under the Registration Rights Agreement (as defined). The Exchange
Notes will evidence the same debt as the Private Notes (which they replace) and
will be issued under and be entitled to the benefits of the Indenture, dated as
of July 30, 1997 (the "Indenture"), among the Issuers, certain guarantors named
therein (the "Guarantors") and The Bank of New York, as trustee. The Private
Notes and the Exchange Notes are sometimes referred to herein collectively as
the "Notes." See "The Exchange Offer" and "Description of the Notes."
(Cover continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
<PAGE> 5
Interest on the Exchange Notes will be payable semi-annually in arrears on
each August 1 and February 1 of each year, commencing February 1, 1998. The
Exchange Notes will be redeemable at the option of the Issuers, in whole or in
part, at any time on or after August 1, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest thereon, if any, to the redemption
date. In addition, prior to August 1, 2000, the Issuers may, other than in any
circumstance resulting in a Change of Control (as defined), redeem up to 35% of
the originally issued principal amount of the Notes at a redemption price equal
to 112.50% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the redemption date, with net cash proceeds of (i) one or
more Public Equity Offerings (as defined) of common equity of the Company or
(ii) a sale or series of related sales of Qualified Equity Interests (as
defined) of the Company to Strategic Equity Investors (as defined), in any such
case resulting in gross cash proceeds to the Company of at least $25.0 million
in the aggregate; provided, however, that at least 65% of the originally issued
principal amount of the Notes would remain outstanding after giving effect to
any such redemption. In the event of a Change of Control, the holders of
Exchange Notes will have the right to require the Issuers to purchase their
Exchange Notes, in whole or in part, at a price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date of
purchase.
The Issuers placed approximately $36.2 million of the net proceeds realized
from the sale of the Private Notes into an Interest Escrow Account (as defined)
to be held by the Escrow Agent (as defined) for the benefit of the holders of
the Notes. Funds in the Interest Escrow Account, together with the proceeds from
the investment thereof, will secure, and will be sufficient to pay, the first
four semi-annual interest payments on the Notes.
The Exchange Notes will be unconditionally guaranteed (the "Exchange
Guaranties"), on a subordinated basis, jointly and severally, by all direct and
indirect Restricted Subsidiaries (as defined) of the Company. The Exchange Notes
and the Exchange Guaranties will rank junior to, and be subordinated in right of
payment to, all existing and future Senior Indebtedness of the Company (included
under the Restated Credit Facility (as defined)) and senior in right of payment
to all subordinated Indebtedness (as defined). Borrowings under the Restated
Credit Facility are secured by substantially all of the assets of the Company
and its subsidiaries (the "Subsidiaries") and a pledge of the equity interests
in the Subsidiaries. As of June 30, 1997, the Company has approximately $21.4
million of Senior Indebtedness outstanding, on a pro forma basis after giving
effect to the Initial Offering and the Transactions, and has up to $90 million
of borrowing availability under the Restated Credit Facility, of which $56.5 is
available, and is permitted by the Indenture to incur up to $75.0 million of
indebtedness thereunder.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Private Notes being tendered or accepted for exchange. The Issuers
will accept for exchange any and all Private Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time on , 1997, unless
extended by the Issuers in their sole discretion (the "Expiration Date").
Tenders of Private Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date; otherwise such tenders are irrevocable. The date of acceptance
for exchange (the "Exchange Date") will be the first business day following the
Expiration Date, upon surrender of the Private Notes.
The Private Notes were sold by the Issuers on July 30, 1997 to Donaldson,
Lufkin & Jenrette Securities Corporation, CIBC Wood Gundy Securities Corp. and
J. P. Morgan Securities Inc. (the "Initial Purchasers") in a transaction not
registered under the Securities Act in reliance upon an exemption under the
Securities Act (the "Initial Offering"). The Initial Purchasers subsequently
placed the Private Notes with qualified institutional buyers in reliance upon
Rule 144A under the Securities Act and with institutional accredited investors,
as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
Accordingly, the Private Notes may not be reoffered, resold or otherwise
transferred in the United States unless registered under the Securities Act or
unless an applicable exemption from the registration requirements of the
Securities Act is available. The Exchange Notes are being offered hereunder in
order to satisfy the obligations of the Issuers under the Registration Rights
Agreement entered into by the Issuers in connection with the Initial Offering.
See "The Exchange Offer."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Issuers believe that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than any such holder that
is an affiliate of the Issuers within the meaning of Rule 405 under
ii
<PAGE> 6
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act; provided that the holder is acquiring
the Exchange Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Private Notes
wishing to accept the Exchange Offer must represent to the Issuers, as required
by the Registration Rights Agreement, that such conditions have been met. Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes for
its own account in exchange for Private Notes, where such Private Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Issuers
believe that none of the registered holders of the Private Notes is an affiliate
(as such term is defined in Rule 405 under the Securities Act) of the Issuers.
The Private Notes and the Exchange Notes constitute new issues of
securities with no established public trading market. Any Private Notes not
tendered and accepted in the Exchange Offer will remain outstanding. To the
extent that Private Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered and tendered, but unaccepted, Private Notes
are likely to be adversely affected. Following consummation of the Exchange
Offer, the holders of any remaining Private Notes will continue to be subject to
the existing restrictions on transfer thereof and the Issuers will have no
further obligation to such holders to provide for the registration under the
Securities Act of the Private Notes except under certain very limited
circumstances. See "Description of Exchange Notes -- Private Notes' Registration
Rights; Additional Interest."
Prior to the Exchange Offer, there has been no public market for the Notes.
The Issuers do not intend to list the Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can be
no assurance that an active market for the Notes will develop. To the extent
that a market for the Notes does develop, the market value of the Notes will
depend on market conditions (such as yields on alternative investments), general
economic conditions, the Issuers' financial condition and certain other factors.
Such conditions might cause the Notes, to the extent that they are traded, to
trade at a significant discount from face value. See "Risk Factors -- Absence of
Public Market for the Notes."
Each Participating Broker-Dealer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal that is filed as an exhibit to the Registration Statement of which
this Prospectus is a part (the "Letter of Transmittal") states that by so
acknowledging and by delivering a prospectus, a Participating Broker-Dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Private Notes where such Private
Notes were acquired by such Participating Broker-Dealer as a result of market-
making activities or other trading activities. The Issuers have indicated their
intention to make this Prospectus (as it may be amended or supplemented)
available to any Participating Broker-Dealer for use in connection with any such
resale for a period of 180 days after the Expiration Date. See "The Exchange
Offer -- Resale of the Exchange Notes" and "Plan of Distribution."
The Issuers will not receive any proceeds from, and have agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection with
this Exchange Offer. See "The Exchange Offer -- Resale of the Exchange Notes"
and "Plan of Distribution."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUERS ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
---------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUERS. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER
iii
<PAGE> 7
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------
Until , 1997 (90 days after the date of this Prospectus), all
dealers offering transactions in the Exchange Notes, whether or not
participating in the Exchange Offer, may be required to deliver a prospectus in
connection therewith. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
---------------------
The Private Notes initially purchased by qualified institutional buyers and
institutional accredited investors were initially represented by two Global
Notes in registered form, deposited with, or on behalf of, the Depository Trust
Company ("DTC" or the "Depositary") and registered in its name or in the name of
Cede & Co., as its nominee. The Exchange Notes exchanged for the Private Notes
represented by the Global Notes will be represented by one or more fully
registered Global Exchange Notes that will be deposited with, or on behalf of,
the Depository. Beneficial interests in the Global Exchange Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
the Depositary and its participants. After the initial issuance of such Global
Exchange Notes, Exchange Notes in certificated form will be issued in exchange
for the Global Exchange Notes only in accordance with the terms and conditions
set forth in the Indenture. See "Description of the Notes -- Book Entry,
Delivery and Form."
---------------------
THIS PROSPECTUS (THE "PROSPECTUS") DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY NOTES BY ANY PERSON IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------
This Prospectus includes product or trade names and trademarks which are
the property of their respective owners.
iv
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including the financial statements and the notes thereto, appearing
elsewhere in this Prospectus. As used in this Prospectus, unless the context
otherwise requires, the term "Company" refers to Digital Television Services,
LLC ("DTS"), its consolidated subsidiaries and the respective predecessors of
DTS and such subsidiaries, and the term "DirecTv" refers to DirecTv, Inc. Unless
otherwise indicated, the discussion below refers to and the information in this
Prospectus (including data on the number of subscribers of the Company) gives
effect to the Transactions (as defined), as if they were completed as of January
1, 1996. Unless otherwise indicated, all data on the number of households set
forth herein is based upon information compiled by Claritas as of April 1, 1996,
and all data on the numbers of subscribers is as of May 31, 1997.
THE COMPANY
The Company is a leading independent provider of direct broadcast satellite
("DBS") television services offered by DirecTv ("DIRECTV Services"). DirecTv is
the leading provider of direct to home ("DTH") satellite television in the
United States, offering over 175 program channels to approximately 2.6 million
subscribers. The Company has the exclusive right to provide DIRECTV Services
within certain rural territories in the United States encompassing approximately
1.5 million households. The Company has approximately 93,000 subscribers
representing a household penetration rate of approximately 6.2%. The Company
believes that rural territories such as those served by the Company are the most
attractive market for DTH services because such territories generally are
underserved or are not served by cable systems and offer limited access to
entertainment alternatives. The relative attractiveness of DBS in these rural
areas is evidenced by DirecTv's penetration, which is over three times its
penetration in all other areas of the United States.
The Company believes that DBS and medium power DTH satellite service
provides the lowest cost, highest quality platform for distributing television
programming to households and commercial locations. As of May 31, 1997, there
were approximately 5.0 million subscribers to such satellite services in the
United States. Paul Kagan Associates, Inc. ("Kagan") estimates that there will
be approximately 14.6 million DBS and medium power DTH subscribers by the year
2002, for a compounded annual growth rate from December 31, 1996, of
approximately 23%. A recent Nielsen Media Research ("Nielsen") survey measuring
satisfaction levels with current pay television services revealed that on a 1-5
scale (with 5 being the most satisfied), 80% of DBS and medium power DTH
satellite users responded with a 4 or 5. Only 45% of cable subscribers indicated
a similar level of satisfaction.
DBS is the fastest growing segment of DTH satellite television because,
among other factors, it offers subscribers higher channel capacity and
programming variety, superior video and audio quality and the ability to receive
transmission on an 18 inch dish as compared to a 27 inch to six foot dish
required by other DTH providers. Consumer acceptance of DBS is evidenced by the
high level of sales of the Digital Satellite System(R) ("DSS(R)") equipment used
to receive DIRECTV Services. DSS(R) equipment, which was introduced in 1994, is
widely regarded as the most successful launch of a major consumer electronics
product in United States history, eclipsing the television, the VCR and the
compact disc player. DSS(R) equipment is now produced by major manufacturers
under the brand names RCA, GE, ProScan, Sony, Hughes, Panasonic, Hitachi,
Toshiba, Uniden, Magnavox, Sanyo, Samsung, Daewoo and Memorex. DSS(R) equipment
is currently sold through over 25,000 retail outlets throughout the United
States for prices typically ranging from $199 to $599, depending upon the
generation of the equipment, the level of features and the retail outlet. Prices
for DSS(R) equipment have declined consistently since introduction and have
declined by over 50% in the last year alone, thereby further stimulating demand
for DIRECTV Services.
The Company believes that DIRECTV Services are superior to those provided
by other DTH service providers. The Company believes that DirecTv's extensive
programming, including up to 60 channels of pay per view movies and events,
various sports packages and the exclusive NFL Sunday Ticket(TM), will continue
to contribute to the growth of DirecTv's subscriber base and DirecTv's market
share for DTH services in the future. In addition, the Company believes that
DirecTv's national marketing campaign (budgeted at approximately $150 million in
1996) and its alliances with significant strategic partners such as AT&T and
Microsoft provide the
1
<PAGE> 9
Company with significant marketing advantages over other DTH competitors.
DirecTv's share of current DBS and medium power DTH subscribers was
approximately 51% as of May 31, 1997, and DirecTv obtained approximately 50% of
all new subscribers to DBS and medium power DTH services for each calendar
quarter in 1996 despite the entrance of two new competitors in the DTH
marketplace. During the first five months of 1997, DirecTv again added more new
subscribers (37%) than any other DBS or medium power DTH provider. Although
DirecTv's share of new subscribers can be expected to decline as existing and
new DTH providers aggressively compete for new subscribers, the Company expects
DirecTv to remain one of the leading providers of DBS and medium power DTH
services in an expanding market.
The Company owns the exclusive right to distribute DIRECTV Services in its
territories pursuant to agreements (the "NRTC Member Agreements") with the
National Rural Telecommunications Cooperative (the "NRTC"), an organization the
members of which (the "NRTC Members") are engaged in the distribution of
telecommunications and other services in predominantly rural areas of the United
States. The NRTC acquired in 1992 the exclusive right to provide DIRECTV
Services to residential households and business establishments located in
designated rural areas of the United States (the "Rural DirecTv Markets") under
an agreement (the "Hughes Agreement") with Hughes Communication Galaxy, Inc.
("Hughes"), the parent company of DirecTv. The Company believes that the
approximately eight million households and numerous business establishments
located in the Rural DirecTv Markets are the most attractive market for DBS
services. Generally, Rural DirecTv Markets are not served or are underserved by
cable systems and offer limited access to other entertainment alternatives,
which should enable the Company to maximize penetration levels and maintain high
customer retention.
The Company has the exclusive right to distribute DIRECTV Services in 16
Rural DirecTv Markets in the following locations:
<TABLE>
<CAPTION>
PERCENTAGE
OF HOMES
NOT
PASSED
LOCATION(1) HOUSEHOLDS BY CABLE SUBSCRIBERS(2) PENETRATION(3)
<S> <C> <C> <C> <C>
Kentucky....................... 368,445 31.23% 21,205 5.76%
Kansas......................... 299,423 19.17% 12,111 4.04%
Georgia........................ 240,229 28.89% 14,490 6.03%
Vermont........................ 209,332 34.80% 22,567 10.78%
South Carolina................. 164,314 31.66% 7,056 4.29%
New Mexico..................... 84,920 16.06% 4,977 5.86%
California..................... 84,006 3.84% 5,660 6.74%
New York....................... 49,593 30.52% 4,579 9.23%
--------- ----- ------ -----
Total................ 1,500,262 26.58% 92,645 6.18%
========= ===== ====== =====
</TABLE>
- ------------------------------
(1) See the chart on page 38 for the geographical areas covered by the Company's
Rural DirecTv Markets.
(2) Reflects actual subscribers at May 31, 1997.
(3) Represents the percentage of households which subscribe to DIRECTV Services
in the Company's Rural DirecTv Markets.
The Company's objective is to be the leading provider of pay television
entertainment and information services in its Rural DirecTv Markets. To achieve
this objective, the Company pursues the following strategy:
- Capitalize on DirecTv Brand Name and Programming. The Company will build
on the recognition of DirecTv and DSS(R) brand names. In addition, the
Company believes that it can continue to capitalize on DirecTv's extensive
programming, unique and exclusive sports packages and large selection of
pay per view movies and events to broaden the Company's subscriber base in
its Rural DirecTv Markets. Management also believes that competitively
priced DSS(R) equipment, which is sold in more retail outlets within its
Rural DirecTv Markets than any other DTH product, provides the Company
with a competitive advantage over other DTH providers.
2
<PAGE> 10
- Emphasize Direct Marketing. The Company plans to complement the
extensive marketing efforts of DirecTv and its other national distribution
partners through targeted local and regional marketing. The Company has
established or is establishing a direct sales force and Company-owned full
service retail stores in each of its Rural DirecTv Markets. The Company
believes that it can increase penetration more rapidly through its direct
sales approach instead of relying, as some DTH providers have, upon the
consumer to take the initiative to purchase the product and services.
- Establish Strong Local Presence. Unlike a majority of traditional DTH
providers, the Company will continue to seek to maximize penetration and
customer satisfaction in its Rural DirecTv Markets by establishing a
strong local presence within the communities it serves. The Company
provides a full range of services at the local level, including direct
sales, Company-owned retail stores, dealer support services, equipment
installation and customer service. The Company has managers in these
communities to oversee local marketing and customer service operations.
- Operate Regional Clusters. The Company operates in regional clusters
that generate the significant economies of scale of a larger operator and
offer quality centralized customer service to complement local customer
service. The Company believes that the clustering of its Rural DirecTv
Markets results in increased operating efficiencies, including lower
administrative costs as a percentage of revenues, better trained employees
and a higher level of customer service.
- Acquire Additional Rural DirecTv Markets. The Company believes that
consolidation of the Rural DirecTv Markets will continue over the next
three to five years. Beginning with its initial acquisition in March 1996,
the Company has systematically implemented a successful acquisition and
consolidation strategy focused on the Rural DirecTv Markets. The Company
believes that it has a significant opportunity to aggressively acquire
additional rights to provide DIRECTV Services to the approximately 4.0
million households in the approximately 200 Rural DirecTv Markets
currently owned by the original NRTC Members, the majority of which are
rural electric and telephone cooperatives. Management believes that the
Company's experience in completing 16 acquisitions will be instrumental in
identifying, negotiating and integrating future acquisitions. In addition,
as the Company continues to grow as a leading independent provider of
DIRECTV Services in the Rural DirecTv Markets, "fill-in" and contiguous
acquisitions should become less attractive to other potential acquirors as
their ability to create significant clusters is reduced.
The Company believes its strategy, combined with the general
characteristics of the Company's business of marketing DIRECTV Services,
including relatively low administrative overhead and capital expenditure
requirements, strengthens the opportunity for the Company to generate operating
cash flows.
The principal offices of the Issuers are located at 880 Holcomb Bridge
Road, Building C-200, Roswell, Georgia, 30076, and their telephone number is
(770) 645-4440.
OWNERSHIP AND MANAGEMENT
The Company was formed in January 1996 by Columbia Capital Corporation
("Columbia") and senior management to acquire and operate the exclusive rights
to distribute DIRECTV Services in Rural DirecTv Markets. The Company completed
its first acquisition in March 1996 and has made a total of 16 acquisitions to
date. In 1997, the Company raised additional equity from Columbia, J.H. Whitney
& Co. and Fleet Equity Partners (collectively, the "Equity Investors"). The
Equity Investors and management have contributed to date, in the aggregate,
$50.5 million of equity capital to the Company.
The Company has assembled an experienced management team to execute its
business strategy. Certain members of the senior management team have
significant experience working together at Sterling Cellular, LLC ("Sterling
Cellular"), a multi-system cellular operator serving rural markets comparable to
the Rural DirecTv Markets. The Company's executive team brings to the Company
extensive business acquisition experience in the telecommunications industry, as
well as experience in the sales and delivery of a full array of communications
services to customers in rural America.
3
<PAGE> 11
RECENT AND PENDING TRANSACTIONS
The Company has completed the following transactions: (i) the acquisition
by the Company during 1996 of the rights to distribute DIRECTV Services in eight
Rural DirecTv Markets (the "1996 Acquisitions"), (ii) the acquisition by the
Company in the first half of 1997 of the rights to distribute DIRECTV Services
in eight Rural DirecTv Markets in Kentucky, Kansas, Vermont and Georgia (the
"1997 Acquisitions"), (iii) the sale by the Company in January 1997 of 205,902
Class B Units to Columbia and senior management raising approximately $2,059,000
of equity capital and the sale by the Company in February 1997 of 1,333,333
Class A Units to the Equity Investors raising an additional $30.0 million of
equity capital (collectively, the "1997 Equity"), (iv) the repayment of
approximately $14.8 million of outstanding indebtedness under certain seller
notes incurred in connection with the 1996 Acquisitions, and (v) the amendment
and restatement of its existing credit facility (the "Existing Credit Facility")
in May 1997 to provide for a $50.0 million term loan facility and a revolving
credit facility in the amount of $85.0 million, with a $50.0 million sublimit
for letters of credit.
In contemplation of and in connection with the offering (the "Initial
Offering") of the Private Notes generating gross proceeds to the Company of
$155.0 million, the Company effected the following transactions: (i) the
placement of approximately $36.2 million in an interest escrow account (the
"Interest Escrow Account") to fund the first four semi-annual interest payments
on the Private Notes, (ii) the repayment of the $50.0 million term loans which
were outstanding under the Existing Credit Facility and approximately $32.2
million of the revolving credit loans which were outstanding under the Existing
Credit Facility, and (iii) the amendment and restatement of the Existing Credit
Facility pursuant to the Second Amended and Restated Credit Agreement dated July
30, 1997 among the Company and the lenders parties thereto providing for a
revolving credit facility in the amount of up to $70.0 million, with a $50.0
million sublimit for letters of credit, and a $20.0 million term loan facility,
of which $56.5 million is immediately available thereunder (as amended, the
"Restated Credit Facility"). Such transactions which have been effected are
collectively referred to as the "Transactions."
THE EXCHANGE OFFER
The Exchange Offer......... $1,000 principal amount of Exchange Notes in
exchange for each offer $1,000 principal amount of
Private Notes. As of the date hereof, $155,000,000
aggregate principal amount of Private Notes are
outstanding. The Issuers will issue the Exchange
Notes to holders on or promptly after the
Expiration Date.
Resale..................... Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Issuers believe that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Private Notes may be offered for
resale, resold and otherwise transferred by any
holder thereof (other than any such holder which is
an "affiliate" of the Issuers within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the
ordinary course of such holder's business and that
such holder does not intend to participate and has
no arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes. Each holder accepting the Exchange Offer is
required to represent to the Issuers in the Letter
of Transmittal that, among other things, the
Exchange Notes will be acquired by the holder in
the ordinary course of business and the holder does
not intend to participate and has no arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes.
Any Participating Broker-Dealer that acquired
Private Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter. Each
Participating Broker-Dealer that
4
<PAGE> 12
receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter
of Transmittal states that by so acknowledging and
by delivering a prospectus, a Participating Broker-
Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with
resales of Exchange Notes received in exchange for
Private Notes where such Private Notes were
acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading
activities. The Issuers have agreed that, for a
period of 180 days after the Expiration Date, they
will make this Prospectus available to any
Participating Broker-Dealer for use in connection
with any such resale; provided, however, the
Issuers have no obligation to amend or supplement
this Prospectus unless one of them has received
written notice from a Participating Broker-Dealer
of their prospectus delivery requirements under the
Securities Act within five business days following
consummation of the Exchange Offer. See "Plan of
Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the Commission enunciated in no-action letters
and, in the absence of an exemption therefrom, must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. Failure to
comply with such requirements in such instance may
result in such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Issuers.
Minimum Condition.......... The Exchange Offer is not conditioned upon Notes
being tendered or accepted for exchange.
Expiration Date............ 5:00 p.m., New York City time, on ,
1997 unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended.
Exchange Date.............. The first date of acceptance for exchange of Notes
following the Expiration Date.
Accrued Interest on the
Exchange Notes and the
Private Notes............ Each Exchange Note will bear interest from its
issuance date. Holders of Private Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the
issuance date of the Exchange Notes. Such interest
will be paid with the first interest payment on the
Exchange Notes. Interest on the Private Notes
accepted for exchange will cease to accrue upon
issuance of the Exchange Notes.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Issuers. See
"The Exchange Offer -- Conditions."
Procedures for Tendering
Private Notes............ Each holder of Private Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, or an Agent's Message in connection with
a book-entry transfer, together with the Private
Notes and any other required documentation to
5
<PAGE> 13
the Exchange Agent (as defined) at the address set
forth herein. By executing the Letter of
Transmittal, each holder will represent to the
Issuers that, among other things, the Exchange
Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business
of the person receiving such Exchange Notes,
whether or not such person is the holder, that
neither the holder nor any such other person (i)
has any arrangement or understanding with any
person to participate in the distribution of such
Exchange Notes, (ii) is engaging or intends to
engage in the distribution of such Exchange Notes
or (iii) is an "affiliate," as defined under Rule
405 of the Securities Act, of the Issuers. See "The
Exchange Offer -- Purpose of the Exchange Offer"
and "-- Procedures for Tendering."
Untendered Private Notes... Following the consummation of the Exchange Offer,
holders of Private Notes eligible to participate
but who do not tender their Private Notes will not
have any further exchange rights and such Private
Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the
liquidity of the market for such Private Notes
could be adversely affected.
Consequences of Failure to
Exchange................. The Private Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Private Notes may be
resold only (i) to the Issuers, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the
Securities Act, (iii) outside the United States to
a foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursuant
to an effective registration statement under the
Securities Act. See "The Exchange
Offer -- Consequences of Failure to Exchange."
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal
and delivering its Private Notes, either make
appropriate arrangements to register ownership of
the Private Notes in such owner's name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may
take considerable time. The Issuers will keep the
Exchange Offer open for not less than thirty days
in order to provide for the transfer of registered
ownership.
Guaranteed Delivery
Procedures............... Holders of Private Notes who wish to tender their
Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent (or comply with
the procedures for book-entry transfer) prior to
the Expiration Date must tender their Private Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Private Notes
and Delivery of Exchange
Notes.................... The Issuers will accept for exchange any and all
Private Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
6
<PAGE> 14
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Use of Proceeds............ There will be no cash proceeds to the Issuers from
the exchange pursuant to the Exchange Offer.
Exchange Agent............. The Bank of New York
THE EXCHANGE NOTES
The Exchange Offer applies to $155,000,000 aggregate principal amount of
Private Notes. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Private Notes (which they
replace) except that: (i) the Exchange Notes bear a Series B designation, (ii)
the Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof, and (iii) the holders of
Exchange Notes will not be entitled to certain rights under the Registration
Rights Agreement, including the provisions providing for an increase in the
interest rate on the Private Notes in certain circumstances relating to the
timing of the Exchange Offer, which rights will terminate when the Exchange
Offer is consummated. See "The Exchange Offer -- Purpose of the Exchange Offer."
The Exchange Notes will evidence the same debt as the Private Notes and will be
entitled to the benefits of the Indenture. See "Description of the Notes." The
Private Notes and the Exchange Notes are referred to herein collectively as the
"Notes."
Securities Offered......... $155,000,000 aggregate principal amount of Series B
12 1/2% Senior Subordinated Notes due 2007 (the
"Exchange Notes").
Issuers.................... Digital Television Services, LLC and DTS Capital,
Inc. ("Capital"). The Exchange Notes are the joint
and several obligations of the Issuers. In serving
as co-issuer, Capital is acting as an agent of the
Company. Capital has nominal assets, does not
conduct any operations and will not provide
additional security for the Exchange Notes.
Maturity Date.............. August 1, 2007.
Interest Payment Dates..... Interest will accrue at a rate of 12 1/2% per annum
and will be payable semi-annually in cash on each
August 1 and February 1 of each year, commencing
February 1, 1998. See "Description of the
Notes -- Maturity, Interest and Principal of the
Notes."
Ranking.................... The Exchange Notes will rank junior to, and be
subordinated in right of payment to, all existing
and future Senior Indebtedness of the Company, pari
passu in right of payment with all senior
subordinated Indebtedness (as defined) of the
Company and senior in right of payment to all
Subordinated Indebtedness (as defined) of the
Company. At June 30, 1997, the Company has
approximately $21.4 million of Senior Indebtedness
outstanding on a pro forma basis after giving
effect to the Initial Offering and the
Transactions. The Company has $90.0 million of
availability under the Restated Credit Facility (of
which approximately $56.5 million is available) and
is permitted by the Indenture to incur up to $75.0
million of indebtedness thereunder. Borrowings
under the Restated Credit Facility are guaranteed
on a senior basis by all Subsidiaries (as defined)
of the Company and are secured by a security
interest in substantially all of the assets of the
Company and its Subsidiaries. The Company will not
be permitted to incur any debt that is subordinated
in right of payment to any Senior Indebtedness of
the Company and senior in right of payment to the
Notes. See "Risk Factors -- Holding Company
Structure; Subordination" and "Description of the
Notes -- Subordination of the Notes and the
Guaranties."
7
<PAGE> 15
Optional Redemption........ The Exchange Notes will be redeemable at the option
of the Company, in whole or in part, at any time on
or after August 1, 2002 at the redemption prices
set forth under "Description of the
Notes -- Optional Redemption," plus accrued and
unpaid interest (including Additional Interest, if
any) thereon, if any, to the date of redemption. In
addition, prior to August 1, 2000, the Company,
other than in any circumstance resulting in a
Change of Control, may redeem up to 35% of the
originally issued principal amount of the Exchange
Notes at a redemption price equal to 112.50% of the
principal amount thereof so redeemed, plus accrued
and unpaid interest thereon, if any, to the date of
redemption, in each case with the net cash proceeds
of (a) one or more Public Equity Offerings of
common equity of the Company or (b) a sale or
series of related sales of Qualified Equity
Interests of the Company to Strategic Equity
Investors, in any such case resulting in gross cash
proceeds to the Company of at least $25.0 million
in the aggregate; provided, however, that at least
65% of the originally issued principal amount of
Notes would remain outstanding immediately after
giving effect to such redemption. See "Description
of the Notes -- Optional Redemption."
Change of Control Offer.... Following the occurrence of a Change of Control,
the Company will be required to make an offer to
purchase all outstanding Exchange Notes at a
purchase price in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest (including Additional Interest, if any)
thereon, if any, to the date of purchase. See
"Description of the Notes -- Offer to Purchase Upon
Change of Control."
Asset Sale Proceeds........ The Company will, under certain circumstances, be
required to make an offer to purchase Exchange
Notes with the net cash proceeds of certain asset
sales or other dispositions of assets at a purchase
price in cash equal to 100% of the principal amount
thereof, plus accrued and unpaid interest
(including Additional Interest, if any) thereon, if
any, to the date of purchase. See "Description of
the Notes -- Certain Covenants -- Disposition of
Proceeds of Asset Sales."
Interest Escrow Account.... The Issuers placed approximately $36.2 million of
the net proceeds realized from the sale of the
Private Notes into the Interest Escrow Account to
be held by the Escrow Agent for the benefit of the
holders of the Notes. Such funds, together with the
proceeds from the investment thereof, secure, and
is sufficient to pay, the first four semi-annual
interest payments on the Notes. See "Description of
the Notes -- Security -- Interest Escrow Account."
Security................... The Exchange Notes will be secured by a first
priority security interest in the Interest Escrow
Account.
Guaranty................... The Exchange Notes will be unconditionally
guaranteed, on a senior subordinated basis, as to
payment of principal, premium, if any, and
interest, jointly and severally, by all direct and
indirect Restricted Subsidiaries (as defined) of
the Company (the "Guarantors"). No Guarantor will
be permitted to incur any debt that is subordinated
in right of payment to its Guarantor Senior
Indebtedness (as defined) and senior in right of
payment to its Guaranty. Each Guaranty will, to the
extent set forth in the Indenture, be subordinated
in right of payment in full of all Guarantor Senior
Indebtedness of the respective Guarantor, including
obligations of such Guarantor with respect to the
Restated Credit Facility (including any guaranty
thereof).
8
<PAGE> 16
Certain Covenants.......... The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries to incur
additional Indebtedness, create certain Liens (as
defined), make certain Restricted Payments (as
defined), permit dividend and other payment
restrictions to apply to such Restricted
Subsidiaries, enter into certain transactions with
Affiliates (as defined) and certain other related
persons or consummate certain merger, consolidation
or similar transactions. These covenants are
subject to a number of significant exceptions and
qualifications. See "Description of the
Notes -- Certain Covenants."
RISK FACTORS
In reviewing this Prospectus, potential investors should carefully consider
the matters described under the heading "Risk Factors" beginning on page 11.
9
<PAGE> 17
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents summary financial data relating to the Company
as of the dates and for the periods indicated. In addition, the following table
presents summary financial data relating to the Company's unaudited pro forma
balance sheet data as of June 30, 1997, and the Company's unaudited pro forma
statement of operations data for the year ended December 31, 1996 and the six
months ended June 30, 1997, each as adjusted to give effect to the Transactions.
The historical data for the period from January 30, 1996 (date of formation) to
December 31, 1996, have been derived from the audited financial statements of
the Company audited by Arthur Andersen LLP, independent public accountants. The
historical data for other periods presented have been derived from unaudited
information. The data set forth in this table should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto and Unaudited
Condensed Pro Forma Financial Statements and Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
JANUARY 30 TO SIX MONTHS JANUARY 1 TO SIX MONTHS
DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30,
1996 1997 1996 1997
-----------------------------------------------
------------- (UNAUDITED)
($ IN THOUSANDS, EXCEPT REVENUE PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Programming revenue............................ $ 3,085 $ 17,013 $ 29,685 $ 20,746
Equipment sales and installation revenue....... 324 1,481 6,751 2,302
-------- ---------- ---------- ----------
Total revenue.............................. 3,409 18,494 36,436 23,048
-------- ---------- ---------- ----------
Programming gross profit....................... 1,213 7,123 11,673 8,600
Equipment sales and installation gross profit
(loss)....................................... (74) (196) 1,547 61
-------- ---------- ---------- ----------
Total gross profit......................... 1,139 6,927 13,220 8,661
Operating expenses excluding depreciation and
amortization................................. 2,732 6,457 17,122 8,012
Total depreciation and amortization............ 1,148 6,552 14,957 8,205
-------- ---------- ---------- ----------
Operating loss................................. (2,741) (6,082) (18,859) (7,556)
Interest expense............................... (818) (4,308) (23,115) (11,757)
Other income(1)................................ 24 61 31 61
-------- ---------- ---------- ----------
Net loss(1)(2)................................. $ (3,535) $ (10,329) $ (41,943) $ (19,252)
======== ========== ========== ==========
Ratio of eanings to fixed charges(3)........... -- -- -- --
OTHER DATA:
Pro forma average monthly programming revenue
per subscriber............................... n/a n/a n/a $ 38.89
Operating Cash Flow(1)(4)...................... $ (1,593) $ 470 $ (3,902) 649
Number of subscribers at end of period......... 19,659 93,801 84,014 93,801
Number of households at end of period.......... 382,833 1,500,262 1,500,262 1,500,262
Household penetration at end of period......... 5.14% 6.25% 5.60% 6.25%
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------
HISTORICAL PRO FORMA
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable investment
securities(5).......................................... $ 1,875 $ 31,892
Total assets............................................ 150,349 223,434
Total debt (including current portion).................. 100,585 174,257
Members' equity......................................... 36,456 36,456
</TABLE>
- ------------------------------
(1) Pro forma other income amounts do not include interest income which will be
recognized on amounts included in the Interest Escrow Account. If such
interest income was included, the pro forma net loss for the period from
January 1 to December 31, 1996 and for the six months ended June 30, 1997
would be approximately $40.2 million and $18.2 million, respectively. In
addition, operating cash flow would increase approximately $1.8 million and
$1.0 million, respectively, for the same periods.
(2) The Company is a limited liability company and is not required to pay United
States federal income taxes.
(3) Earnings were insufficient to cover fixed charges by approximately
$4,353,000 and $65,058,000 for the period from January 30, 1996 (date of
inception) to December 31, 1996 and pro forma for the year ended December
31, 1996 and $14,637,000 and $31,009,000 for the six months ended June 30,
1997 and pro forma for such period. The ratio of earnings to fixed charges
is calculated by adding (i) earnings (loss) before income taxes plus (ii)
fixed charges, with the resulting sum divided by fixed charges. Fixed
charges consist of interest on all indebtedness, amortization of debt
issuance costs, plus that portion of operating lease rentals representative
of the interest factor.
(4) "Operating Cash Flow" represents earnings before interest expense, other
income (expense), taxes, depreciation and amortization. Operating Cash Flow
is presented because it is a widely accepted financial measure in the
communications industry and is similar to one of the financial measures used
to calculate whether the Company is in compliance with certain covenants
under the Indenture. Operating Cash Flow is not intended to be a substitute
for a measure of performance in accordance with generally accepted
accounting principles and should not be relied on as such.
(5) Excludes approximately $36.2 million placed in the Interest Escrow Account
to fund, together with the proceeds from the investment thereof, the first
four semi-annual interest payments on the Notes.
10
<PAGE> 18
RISK FACTORS
Holders of the Private Notes should consider carefully all of the
information contained in this Prospectus, which may be generally applicable to
the Private Notes as well as the Exchange Notes, before deciding whether to
tender their Private Notes for the Exchange Notes offered hereby and, in
particular, the following factors:
FAILURE TO EXCHANGE PRIVATE NOTES
Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly completed
and duly executed Letter of Transmittal and all other required documentation.
Therefore, holders of Private Notes desiring to tender such Private Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Issuers are under any duty to give
notification of defects or irregularities with respect to tenders of Private
Notes for exchange. Private Notes that are not tendered or are tendered but not
accepted will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof. In addition, any
holder of Private Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each Participating Broker-Dealer that
receives Exchange Notes for its own account in exchange for Private Notes, where
such Private Notes were acquired by such Participating Broker-Dealer as a result
of market-making activities or any other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. To the extent that Private Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Private Notes could be adversely affected due to the limited amount, or "float,"
of the Private Notes that are expected to remain outstanding following the
Exchange Offer. Generally, a lower "float" of a security could result in less
demand to purchase such security and could, therefore, result in lower prices
for such security. For the same reason, to the extent that a large amount of
Private Notes are not tendered or are tendered and not accepted in the Exchange
Offer, the trading market for the Exchange Notes could be adversely affected.
See "Plan of Distribution" and "The Exchange Offer."
INDEBTEDNESS OF THE COMPANY; HIGH DEGREE OF LEVERAGE
The Company has a substantial amount of indebtedness outstanding. At June
30, 1997, total consolidated long-term indebtedness of the Company, on a pro
forma basis after giving effect to the Initial Offering and the Transactions,
was approximately $165.7 million, representing approximately 82% of the
Company's total capitalization. See "Capitalization." The Company also may incur
up to $90.0 million of indebtedness under the Restated Credit Facility (of which
approximately $56.5 million is available) and is permitted by the Indenture to
incur up to $75.0 million of indebtedness thereunder. The ability of the Company
to make payments of principal and interest on the Notes will be largely
dependent upon its future operating performance. Such operating performance can
be subject to many factors, some of which will be beyond the Company's control,
such as prevailing economic conditions. There can be no assurance that the
Company will be able to generate sufficient cash flow to service required
interest and principal payments. Borrowings under the revolving credit facility
established pursuant to the Restated Credit Facility become due and payable on
July 31, 2003 and borrowings under the term loan established pursuant thereto
shall be repaid in 20 consecutive quarterly installments of $200,000 commencing
September 30, 1998 with the remaining balance due on July 31, 2003. If the
Company does not have sufficient available resources to repay any indebtedness
under the Restated Credit Facility at such time, the Company may find it
necessary to refinance such indebtedness, and there can be no assurance that
such refinancing would be available, or available on reasonable terms.
The level of the Company's indebtedness also could have other adverse
consequences to holders of the Notes including the effect of such indebtedness
on: (i) the Company's ability to fund internally, or obtain additional debt or
equity financing in the future for, acquisitions, working capital, operating
losses, capital expenditures and other purposes; (ii) the Company's flexibility
in planning for, or reacting to, changes to its business and market conditions;
(iii) the Company's ability to compete with less highly leveraged competitors;
and (iv) the Company's financial vulnerability in the event of a downturn in its
business or the general economy.
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See "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Description of Certain
Indebtedness -- Restated Credit Facility" and "Description of the Notes."
HOLDING COMPANY STRUCTURE; SUBORDINATION
The Company is a holding company and derives substantially all of its
operating income and cash flows from the operations of its Subsidiaries. The
Company's cash flow and, consequently, its ability to meet its debt service
obligations, including payment of principal, premium, if any, and interest on
the Notes, is dependent upon cash flow of its Subsidiaries and the payment of
funds by the Subsidiaries to the Company in the form of loans, dividends, fees
or otherwise. While the Guaranties are intended to afford the holders of the
Notes direct claims against the assets of Restricted Subsidiaries, substantially
all of the assets of such Restricted Subsidiaries are pledged to secure
outstanding amounts under the Restated Credit Facility and, further, such
Guaranties are subject to the possible application of fraudulent conveyance
statutes. See "-- Fraudulent Conveyance Considerations."
The Notes will be general unsecured obligations of the Issuers and will be
subordinate in right of payment to all Senior Indebtedness, including
indebtedness under the Restated Credit Facility. As of June 30, 1997, on a pro
forma basis after giving effect to the Initial Offering and the Transactions,
the Company and its Subsidiaries had $21.4 million of Senior Indebtedness
outstanding and $90.0 million of availability under the Restated Credit Facility
(of which approximately $56.5 million would have been immediately available).
The Indenture permits the Company and its Subsidiaries to incur additional
Senior Indebtedness, including up to $75.0 million under the Restated Credit
Facility, subject to certain limitations, and the Company expects from time to
time to incur additional Indebtedness, including Senior Indebtedness, subject to
such limitations. By reason of the subordination provisions of the Indenture, in
the event of the insolvency, liquidation, rearrangement, reorganization,
dissolution or other winding-up of the Issuers, the lenders under the Credit
Facility and other creditors who are holders of Senior Indebtedness must be paid
in full before payment of amounts due on the Notes. Accordingly, there may be
insufficient assets remaining after such payments to pay amounts due on the
Notes. The Guaranties are subordinated to Guarantor Senior Indebtedness of each
Guarantor to the same extent that the Notes are subordinated to Senior
Indebtedness of the Issuers, and the ability to collect under any Guaranties may
therefore be similarly limited.
In addition, the Issuers may not pay principal of, premium, if any, or
interest on, or any other amounts owing in respect of, the Notes, or purchase,
redeem or otherwise retire the Notes, or make any deposit pursuant to defeasance
provisions for the Notes, if Designated Senior Indebtedness (as such term is
defined in the Indenture) is not paid when due, unless such default is cured or
waived or has ceased to exist or such Designated Senior Indebtedness has been
discharged or repaid in full in cash. Under certain circumstances, no payments
may be made for a specified period with respect to the principal of, premium, if
any, and interest on, and any other amounts owing in respect of, the Notes if a
default, other than a payment default, exists with respect to Designated Senior
Indebtedness, including indebtedness under the Restated Credit Facility, unless
such default is cured, waived or has ceased to exist or such indebtedness has
been repaid in full. See "Description of the Notes -- Subordination of the Notes
and the Guaranties." If any Event of Default occurs and is continuing, the
Trustee (as defined) or the holders of at least 25% in principal amount of the
then outstanding Notes may declare all the Notes to be due and payable
immediately. However, such a continuing Event of Default also would permit the
acceleration of all outstanding obligations under the Restated Credit Facility.
In such an event, the subordination provisions of the Indenture would prohibit
any payments to holders of the Notes unless and until such obligations (and any
other accelerated Senior Indebtedness) have been repaid in full. See
"Description of the Notes -- Subordination of the Notes and the Guaranties."
In addition, the Notes will not be secured by any assets of the Issuers or
the Guarantors. The obligations of the Issuers and the Guarantors under the
Restated Credit Facility will be secured by substantially all of their assets,
including a pledge of all of the equity interests of the Subsidiaries. If the
Issuers become insolvent or are liquidated, or if payment under the Restated
Credit Facility is accelerated, the lenders under the Restated Credit Facility
would be entitled to exercise the remedies available to a secured lender under
applicable law and pursuant to the terms of the Restated Credit Facility.
Accordingly, any claims of such lenders with respect to such assets
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<PAGE> 20
and pledged equity interests will be prior to any claim of the holders of the
Notes with respect to such assets and pledged equity interests. See "Description
of Certain Indebtedness -- Restated Credit Facility."
LIMITED OPERATING HISTORY; NEGATIVE CASH FLOW
The Company has had a limited operating history during which time it has
generated negative cash flows and net losses. The negative cash flows can be
attributed to the costs incurred to purchase Rural DirecTv Markets, to develop
and implement its business plan and to generate the subscriber base required to
cover general corporate overhead expenses. The Company expects negative cash
flows and net losses to continue through at least 1997 as the Company plans to
purchase additional Rural DirecTv Markets and to incur substantial sales and
marketing expenses to build its subscriber base. The ability to generate
positive cash flow in the future is dependent upon many factors, including
general economic conditions, the level of market acceptance for the Company's
services and the degree of competition encountered by the Company. There can be
no assurance when or if the Company will generate positive operating cash flow
or net income.
SUBSTANTIAL CAPITAL REQUIREMENTS; RESTRICTIONS IMPOSED BY LENDERS
Borrowings under the Restated Credit Facility and the proceeds of the
Initial Offering will be used to finance future acquisitions of Rural DirecTv
Markets, to fund capital expenditures, to fund general working capital
requirements and operating losses. The Company believes that the proceeds of the
Initial Offering and the availability under the Restated Credit Facility
together with the Company's existing cash will be sufficient to fund such
acquisitions and the Company's operations. However, no assurance can be given
that actual cash requirements will not materially exceed the Company's estimated
capital requirements and available capital. Moreover, the Company's ability to
access the total availability of the Restated Credit Facility is dependent on
maintaining certain specified financial and operating covenants. Thus, there can
be no assurance that the Company will be able to draw funds under the Restated
Credit Facility sufficient to finance the continued development of the Company's
planned acquisitions and operations. In addition, the amount of capital required
will depend upon a number of factors, including costs of future acquisitions,
capital costs, growth in the number of subscribers, technological developments,
marketing and sales expense and competitive conditions. No assurance can be
given that, in the event the Company were to require additional financing, such
additional financing would be available on terms satisfactory to the Company or
at all.
The Restated Credit Facility contains financial and operating covenants
which, among other things, require that the Company maintain certain financial
ratios and satisfy certain financial tests and limit the Company's ability to
incur other indebtedness, pay dividends, engage in transactions with affiliates,
sell assets and engage in mergers and consolidations and other acquisitions. If
the Company fails to comply with these covenants, the lenders under the Restated
Credit Facility will be able to accelerate the maturity of the indebtedness
under the Restated Credit Facility which could materially adversely affect the
Company's financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources," "Description of Certain
Indebtedness -- Restated Credit Facility" and "Description of the Notes."
RELIANCE ON DIRECTV AND NRTC
Because the Company is, through the NRTC, a distributor of DIRECTV
Services, the Company would be adversely affected by any material adverse change
in the assets, financial condition, programming, technological capabilities or
services of DirecTv or its parent corporation, Hughes, including DirecTv's
failure to retain or renew its FCC licenses to transmit radio frequency signals
from the orbital slots occupied by its satellites, at least some of which
licenses expire and are subject to renewal in December 1999.
The Company acquired the exclusive right to provide DIRECTV Services to
residential and commercial subscribers in the Rural DirecTv Markets pursuant to
the Hughes Agreement and the NRTC Member Agreements. The Company does not have a
direct contractual relationship with Hughes. In general, upon a default by the
NRTC under the Hughes Agreement the Company would have the right to acquire
DIRECTV Services directly from DirecTv. In addition, the NRTC has contracted
with third parties to provide the Company
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and other NRTC Members with certain services, including customer authorization,
billing services and centralized remittance processing services. If the NRTC is
unable to provide these services for whatever reason, the Company would be
required to acquire the services from other sources. There can be no assurance
that the cost to the Company of acquiring those services elsewhere would not
exceed the amounts payable to the NRTC under the NRTC Member Agreements.
The Company would also be adversely affected by the termination of the NRTC
Member Agreements by the NRTC prior to the expiration of their respective terms.
Such agreements may be terminated by the NRTC (i) as a result of a breach by
Hughes under the Hughes Agreement, with the NRTC remaining responsible for
paying to the Company its pro rata portion of any refunds that the NRTC receives
from Hughes under the Hughes Agreement, (ii) if the Company fails to make any
payment due to the NRTC or otherwise breaches a material obligation of the NRTC
Member Agreement and such failure or breach continues for more than 30 days
after written notice from the NRTC, or (iii) if the Company fails to keep and
maintain any letter of credit required to be provided to the NRTC in full force
and effect or to adjust the amount of the letter of credit as required by the
NRTC Member Agreement. If the NRTC Member Agreements are terminated by the NRTC,
the Company would no longer have the right to provide DIRECTV Services. There
can be no assurance that the Company will be able to obtain similar DBS services
from other sources.
ABILITY TO ACQUIRE DBS SERVICES FROM THE NRTC AND DIRECTV AFTER EXPIRATION OF
TERM OF NRTC MEMBER AGREEMENTS
The DIRECTV Services offered by the Company to its subscribers are acquired
by the Company's operating subsidiaries (the "Subsidiaries") pursuant the NRTC
Member Agreements. The NRTC, in turn, acquires the services through the Hughes
Agreement, pursuant to which Hughes has granted to the NRTC the exclusive right
to provide DIRECTV Services in the Rural DirecTv Markets. Under the NRTC Member
Agreements, each Subsidiary has the right to provide DIRECTV Services in its
Rural DirecTv Markets.
Both the Hughes Agreement and the NRTC Member Agreements expire when Hughes
removes its current satellites from their assigned orbital locations. Although
according to Hughes and United States Satellite Broadcasting Corporation
("USSB"), which owns five transponders on the first DirecTv satellite, the three
DirecTv satellites have estimated orbital lives of approximately 15 years from
their respective launches in December 1993 and 1994, there can be no assurance
as to the longevity of the satellites and thus no assurance as to how long the
Company will be able to continue to acquire DBS services pursuant to the NRTC
Member Agreements.
The NRTC has advised the Company that the Hughes Agreement provides the
NRTC with a right of first refusal to obtain DBS Services (other than
programming services) in substantially the same form as such DBS Services are
provided under the existing Hughes Agreement in the event that Hughes elects to
launch one or more successor satellites upon the removal of the present
satellites from their assigned orbital locations. The NRTC Member Agreements do
not expressly provide an equivalent right of first refusal for the NRTC Members
to acquire DBS services through the NRTC should the NRTC exercise its right of
first refusal under the Hughes Agreement. The NRTC Member Agreements do provide,
however, that the Company has substantial proprietary interests in and rights to
the information and data with respect to the Company's subscribers who subscribe
to its "select" services only. DirecTv and the Company each have such interests
and rights with respect to the information and data regarding the Company's
subscribers who subscribe to both DIRECTV Services and "non-select" services.
Moreover, the Company (through the Subsidiaries) is an affiliate of the NRTC.
While affiliates have no vote, they do have an interest in the NRTC in
proportion to their prior patronage. Although the Company believes that if the
NRTC exercises its right of first refusal under the Hughes Agreement, such right
will be made available by the NRTC to the Company, the NRTC is not obligated to
exercise its right of first refusal or, if such right of first refusal is
exercised, to make such right available to the Company. There can be no
assurance that, upon removal of the current satellites from their orbital
locations at the end of their useful lives (estimated to be in 2008 or 2009),
the Company would continue to have access to DIRECTV Services.
The right of first refusal in the Hughes Agreement may not be available to
the NRTC if Hughes does not launch a successor satellite, which may be the case,
for example, if Hughes ceases to own the FCC licenses
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<PAGE> 22
necessary to transmit from its existing orbital locations. The right of first
refusal also may not be available to the NRTC if the NRTC is in default under
the Hughes Agreement or if the NRTC is unable to raise sufficient funds from its
then existing members or others to purchase rights in any successor Hughes
satellite. Even if the NRTC is able to exercise its right of first refusal to
acquire such rights, the terms and conditions, including the financial terms, of
the continuing relationship between the NRTC and Hughes cannot be predicted.
Moreover, the terms and conditions, including the financial terms, under which
the NRTC may make available such rights to the Subsidiaries and other NRTC
Members is unknown. Specifically, given the rapid changes in satellite
transmission technology (including digital compression) and the expected
longevity of the existing DirecTv satellites, it is not possible to predict
Hughes' cost to launch successor satellites, a proportionate part of which would
likely be passed through to the NRTC and to the Company. In the event the
Company is unable to acquire DIRECTV Services through Hughes and the NRTC after
the expiration of the NRTC Member Agreements, the Company would be required to
acquire such DBS services from others, or to sell its subscriber base to one or
more other DBS providers and cease business operations.
DEPENDENCE ON KEY PERSONNEL
The Company's future success may depend to a significant extent upon the
performance of a number of the Company's key personnel, including Douglas S.
Holladay, Jr., who serves as the President of DTS Management, LLC ("DTS
Management"), the sole manager of DTS, Earle A. MacKenzie, DTS Management's
Chief Operating Officer, William J. Dorran, DTS Management's Senior Vice
President, and Donald A. Doering, DTS Management's Vice President and Chief
Financial Officer, each of whom has an employment agreement with DTS Management.
See "Management." Although DTS Management maintains "key-man" insurance on the
lives of Messrs. Holladay and Doering, the loss of any of Messrs. Holladay,
MacKenzie, Dorran or Doering or other key management personnel or the failure to
recruit and retain additional key personnel could have a material adverse effect
on the Company's financial condition and results of operations.
RELIANCE ON SATELLITE TRANSMISSION TECHNOLOGY
There are numerous risks associated with satellite transmission technology,
in general, and DirecTv's delivery of DBS services, in particular. Satellite
transmission of video, audio and other data is highly complex and requires the
manufacture and integration of diverse and advanced components that may not
function as expected. Although according to Hughes and USSB the DirecTv
satellites used to provide the DBS services have estimated orbital lives of
approximately 15 years from their respective launches in December 1993 and 1994,
there can be no assurance as to the longevity of the satellites or that loss,
damage or changes in the satellites as a result of acts of war, anti-satellite
devices, electrostatic storms or collisions with space debris will not occur.
The loss of a satellite could have a material adverse effect on DirecTv and the
Company. Furthermore, the digital compression technology used by DBS providers
is not standardized and is undergoing rapid change. Such changes or other
technological changes or innovations may require modifications to ground station
programming uplink facilities, satellites and subscriber equipment, which
modifications could be costly. Such costs would likely be passed through by
DirecTv or the NRTC to the Company, and would be borne by the Company to the
extent it could not pass such costs through to its subscribers in the form of
higher fees.
RISK OF SIGNAL THEFT
The delivery of subscription programming requires the use of encryption
technology. Signal theft or "piracy" in the C-band DTH, cable television and
European DBS industries has been widely reported. There can be no assurance that
the encryption technology used in the DSS(R) equipment will remain totally
effective. If the DSS(R) equipment encryption technology is compromised in a
manner which is not promptly corrected, the Company's revenue could be adversely
affected. Recent published reports indicate that the DSS(R) equipment encryption
systems have been compromised. There can be no assurance that continued theft of
DirecTv programming will not adversely affect the Company's operations in the
future.
DirecTv and the Company are prohibited by law from providing DIRECTV
Services outside the United States. Despite subscribers' assurances that they
receive programming within one of the Company's Rural DirecTv Markets, a portion
of the Company's subscribers may, in fact, be receiving DIRECTV Services outside
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the Company's markets. If the Company must disconnect a significant portion of
its subscribers because they receive services outside the Company's Rural
DirecTv Markets, the Company's financial condition and results of operations
could be adversely affected.
DEPENDENCE ON THIRD PARTY PROGRAMMERS
DirecTv, and therefore the Company, is dependent on third parties to
provide high quality programming that appeals to mass audiences. DirecTv's
programming agreements have terms which expire on various dates and different
renewal and cancellation provisions. There can be no assurance that any such
agreements will be renewed or will not be cancelled prior to expiration of their
original term. In the event any such agreements are not renewed or are
cancelled, there is no assurance that DirecTv would be able to obtain or develop
substitute programming, or that such substitute programming would be comparable
in quality or cost to the Company's existing programming. The ability of the
Company to compete successfully will depend on DirecTv's ability to continue to
obtain desirable programming and attractively package it to its customers at
competitive prices. See "Business -- DirecTv."
Pursuant to the Cable Act and the FCC's rules, programming developed by
vertically integrated cable-affiliated programmers generally must be offered to
all multi-channel video programming distributors on non-discriminatory terms and
conditions. The Cable Act and the FCC's rules also prohibit certain exclusive
programming contracts. The Company anticipates that DirecTv will continue to
purchase a substantial percentage of its programming from cable-affiliated
programmers. Certain of the restrictions on cable-affiliated programmers will
expire in 2002 unless extended by the FCC. As a result, any expiration of,
amendment to, or interpretation of, the Cable Act and the FCC's rules that
permits the cable industry or programmers to discriminate in the sale of
programming against competing businesses, such as that of DirecTv, could
adversely affect DirecTv's ability, and therefore the Company's ability, to
acquire programming or acquire programming on a cost-effective basis.
LIMITED CONSUMER ADOPTION OF SATELLITE TELEVISION
The Company believes that one of the largest hurdles to the mass market
adoption of DBS has been the cost to the subscriber of purchasing the DSS(R)
equipment, currently ranging from $199 to $599 depending upon the level of
features desired and number of television sets to be connected. While the
Company believes that the suppliers of the subscriber equipment have strong
incentives to supply equipment at affordable prices as the subscriber base
expands and as competition increases among equipment vendors, there can be no
assurance that such costs will in fact remain at a level that will allow the
Company to continue to build its subscriber base. To the extent that the cost of
the equipment remains an obstacle to increased demand for satellite services
offered by the Company, the growth of the Company's subscriber base could be
delayed, adversely affecting the Company's financial condition and results of
operations.
Another potential hurdle to widespread adoption of DBS is that subscribers
do not receive local news and sports. While all of the major DBS providers,
including DirecTv, offer broadcast network channels on an a la carte or package
basis, the issue of the extent to which FCC regulations prohibit satellite
providers from selling network programming to households that can receive a
signal from that network's local affiliate station using traditional off-air
antennae remains unresolved. Certain subscribers may not be willing to purchase
DBS because of this uncertainty. See "Regulation."
REGULATION
Unlike a common carrier, such as a telephone company or cable operator, DBS
operators such as DirecTv are free to set prices and serve customers according
to their business judgment, without rate of return and other regulation.
However, there are laws and regulations that affect DirecTv and, therefore
indirectly, the Company. As an operator of a privately owned United States
satellite system, DirecTv is subject to the regulatory jurisdiction of the FCC,
primarily with respect to (i) licensing of satellites, (ii) avoidance of
interference with other broadcasting signals, and (iii) compliance with rules
that the FCC has established specifically for DBS satellite licenses.
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State and local authorities in some jurisdictions (including some
residential developments) restrict or prohibit the use of satellite dishes
pursuant to zoning and other regulations. The FCC has recently adopted new rules
that preempt state and local regulations that affect satellite dishes that are
(i) three feet or less in diameter in any area, or (ii) six feet or less in
diameter in any area where commercial or industrial uses are generally permitted
by local land use regulation. As the DSS(R) dishes are only 18 inches in
diameter, the FCC's rules are expected to ease local regulatory burdens on the
use of such dishes. See "Business -- Regulation."
The Satellite Home Viewer Act (the "SHVA") establishes a "compulsory"
copyright license that allows a DTH operator, for a statutorily-established fee,
to retransmit network programming to subscribers for private home viewing so
long as that retransmission is limited to those persons in unserved households.
In general, an "unserved household" is one that cannot receive, through the use
of a conventional outdoor rooftop antenna, a sufficient over-the-air network
signal, and has not, within 90 days prior to subscribing to the DTH service,
subscribed to a cable service that provides that network signal. Although
DirecTv and the Company have implemented guidelines to safeguard against
violations of the SHVA, certain subscribers within the Company's Rural DirecTv
Markets receive network programming despite their misrepresentation that they
are unserved households. Although not mandated by law, DirecTv and the Company
presently disconnect such subscribers which any local network affiliate
maintains are not unserved households. Pending Congressional action or
administrative rulemaking, the inability of DirecTv and the Company to provide
network programming to subscribers in Rural DirecTv Markets could adversely
affect the Company's average programming revenue per subscriber and subscriber
growth.
COMPETITION AND TECHNOLOGICAL CHANGE
The industry in which the Company operates is highly competitive, and the
Company expects to face intense competition from existing and potential
competitors. The Company's competitors include a broad range of companies
engaged in the provision of communications and entertainment services, including
cable operators, other DTH programming providers, wireless cable operators,
broadcast television networks and home video products companies, as well as
companies developing new technologies. Certain of these competitors and
potential competitors are well established companies and have significantly
greater financial and marketing resources than the Company. The Company expects
to compete primarily against providers of subscription programming, such as
cable and satellite operators. The Company also expects to encounter a number of
challenges in competing with cable television providers. Cable operators
generally have large installed customer bases, and many cable television
operators have significant investments in, and access to, programming. The
Company anticipates that many cable systems in the United States will be
upgraded to provide the quality of programming and quality signal currently
available through DBS services; the Company believes, however, that due to the
expense of upgrading less densely populated areas such as those within the Rural
DirecTv Markets, cable systems in the Rural DirecTv Markets in general will be
upgraded more slowly than those in more densely populated areas. In order to
substantially increase its subscriber base, the Company may find it necessary to
attract customers who currently subscribe to cable.
The Company competes with companies offering programming through various
satellite broadcasting systems, although DirecTv, USSB and EchoStar Satellite
Broadcasting Corporation ("EchoStar") are the only current domestic DBS
operators. All other domestic DTH operators currently transmit from low power or
medium power satellites, which generally require the use of larger and, in the
case of low power DTH broadcasting, more expensive dishes. Several companies,
including medium power DTH operators, have announced plans to broadcast from DBS
satellites. Certain regional telephone operators have also expressed an interest
in becoming subscription television providers. The entry of these competitors
into the subscription television market would increase competition substantially
and could have a material adverse effect on the financial condition and results
of operations of the Company.
A variety of other technologies are under development that could result in
increased competition for the Company. There can be no assurance that additional
competitors will not enter the markets that the Company serves or that the
Company will be able to succeed against such competition. Moreover, changes in
technology could lower the cost of competitive services to a level where the
Company's services will become less
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competitive or where the Company will need to reduce its service prices in order
to remain competitive. See "Business -- Competition."
INABILITY TO MANAGE GROWTH EFFECTIVELY
The Company has experienced a period of rapid growth primarily as a result
of the implementation of its acquisition strategy. In order to achieve its
business objectives, the Company expects to continue to expand largely through
acquisitions of Rural DirecTv Markets, which could place a significant strain on
its management, operating procedures, financial resources, employees and other
resources. The Company's ability to manage its growth will require it to
continue to improve its operational, financial and management information
systems, and to motivate and effectively manage its existing employees, and hire
and retain additional personnel as its level of operations grows. If the
Company's management is unable to manage growth effectively, the Company's
financial condition and results of operations could be materially adversely
affected.
RISKS ATTENDANT TO ACQUISITION STRATEGY
The Company's primary business objective is to build its subscriber base
and increase its revenues and achieve profitability as it acquires the right to
provide DIRECTV Services in additional Rural DirecTv Markets. Since January
1996, the Company has acquired the right to provide DIRECTV Services in 16 Rural
DirecTv Markets. Each acquisition is subject to the negotiation of a definitive
agreement and, among other conditions, the prior approval of Hughes and the
NRTC. In addition to these conditions, each such acquisition is subject to
conditions typical in acquisitions of this nature, certain of which conditions,
such as the consent of Hughes and the NRTC, may be beyond the control of the
Company. There can be no assurance that future acquisitions can be completed by
the Company at prices acceptable to the Company or at all. There can be no
assurance that the anticipated benefits of any of the acquisitions described
herein or future acquisitions will be realized. The process of integrating
acquired operations into the Company's operations may result in unforeseen
operating difficulties, could absorb significant management attention and may
require significant financial resources that would otherwise be available for
the ongoing development or expansion of the Company's existing operations. The
Company's acquisition strategy may be unsuccessful since the Company may be
unable to identify suitable acquisitions in the future or, if identified, to
arrive at favorable prices and terms. The Company's ability to continue to
pursue its acquisition strategy will also be dependent upon its ability to
obtain additional financing on favorable terms. The Company is aware that at
least two other companies are currently pursuing a strategy of acquiring Rural
DirecTv Markets, and there can be no assurance that such companies or others
will not have greater financial resources than the Company and that their
attempts to acquire Rural DirecTv Markets will not have an adverse effect on the
Company's ability to implement its acquisition strategy. In addition, possible
future acquisitions by the Company could result in the incurrence of additional
debt and contingent liabilities which could materially adversely affect the
Company's financial condition and results of operations.
CHANGE OF CONTROL
A Change of Control, as defined in the Indenture, would entitle the holders
of the Notes to require that the Issuers offer to purchase the Notes at a
purchase price of 101% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of purchase. The Restated Credit Facility
may prohibit the Issuers from repurchasing any subordinated indebtedness of the
Company, including the Notes, the violation of which would constitute an event
of default under the Restated Credit Facility. A Change of Control may also
constitute an event of default under the Restated Credit Facility, permitting
the lenders thereunder to accelerate the repayment of indebtedness thereunder,
in which case the subordination provisions of the Notes would require the
payment in full of outstanding amounts under the Restated Credit Facility and
any other Senior Indebtedness before the Issuers could distribute cash to
purchase the Notes. There can be no assurance that, upon a Change of Control,
the Issuers would have sufficient funds available at such time to satisfy their
obligations under the Indenture and the Restated Credit Facility or would have
the ability at such time to refinance outstanding amounts thereunder. See
"Description of Certain Indebtedness -- Restated Credit Facility" and
"Description of the Notes."
18
<PAGE> 26
RISK OF INABILITY TO REALIZE UPON SECURITY INTERESTS
The Notes are secured by amounts segregated in the Interest Escrow Account.
See "Description of the Notes -- Security." The security interests are perfected
and financing statements have been filed in jurisdictions considered
appropriate. The ability of the Trustee under the Indenture to foreclose on such
collateral upon the occurrence of an Event of Default (as defined herein),
however, will be subject to perfection and priority issues and to practical
problems associated with realization upon the security interest. If an Event of
Default occurs with respect to the Notes, the liquidation of the collateral
securing the Notes would not produce proceeds in an amount sufficient to pay the
principal, premium, if any, and accrued interest on the Notes. In addition, the
ability to take possession and dispose of the collateral securing the Notes upon
acceleration is likely to be significantly impaired or delayed by applicable
bankruptcy law if a bankruptcy action were to be commenced by or against the
Issuers.
FRAUDULENT CONVEYANCE CONSIDERATIONS
The Issuers' obligations under the Notes will be guaranteed by
substantially all of the Company's Restricted Subsidiaries. If, under relevant
federal and state fraudulent conveyance statutes in a bankruptcy, reorganization
or rehabilitation case or similar proceeding or a lawsuit by or on behalf of
unpaid creditors of the Issuers or the Restricted Subsidiaries, a court were to
find that, at the time the Guaranties of the Restricted Subsidiaries were
issued, (i) the Restricted Subsidiaries issued such Guaranties with the intent
of hindering, delaying or defrauding current or future creditors or (ii) the
Restricted Subsidiaries received less than reasonably equivalent value or fair
consideration for issuing such Guaranties and a Restricted Subsidiary (A) was
insolvent or was rendered insolvent by reason of the transactions, (B) was
engaged, or about to engage, in a business or transaction for which its assets
constituted unreasonably small capital, (C) intended to incur, or believed that
it would incur, debts beyond its ability to pay as such debts matured (as all of
the foregoing terms are defined in or interpreted under such fraudulent
conveyance statutes) or (D) was a defendant in an action for money damages, or
had a judgment for money damages docketed against it (if, in either case, after
final judgement, the judgment is unsatisfied), such court could avoid or
subordinate the Guaranties of the Restricted Subsidiaries to presently existing
and future indebtedness of the Restricted Subsidiaries and take other action
detrimental to the rights of the holders of the Notes and the Guaranties of the
Restricted Subsidiaries, including, under certain circumstances, invalidating
such Guaranties. Among other things, a legal challenge of a Guaranty of a
Restricted Subsidiary on fraudulent conveyance grounds may focus on the
benefits, if any, realized by such Restricted Subsidiary as a result of the
issuance by the Issuers of the Notes. To the extent such Guaranty is voided as a
fraudulent conveyance or held unenforceable for any other reason, the holders of
the Notes would cease to have any claim in respect of such Restricted Subsidiary
and would be creditors solely of the Issuers.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or local law that is being applied in any such
proceeding. Generally, however, a Restricted Subsidiary would be considered
insolvent if, at the time it incurs the indebtedness constituting its Guaranty,
either (i) the fair market value (or fair saleable value) of its assets is less
than the amount required to pay its total existing debts and liabilities
(including the probable liability on contingent liabilities) as they become
absolute and matured or (ii) it is incurring debts beyond its ability to pay as
such debts mature.
The Company believes that at the time of issuance of the Notes and the
Guaranties by the Restricted Subsidiaries, which will occur upon the
consummation of the Offering, the Company and the Guarantors (i) will (A) be
neither insolvent nor rendered insolvent thereby, (B) have sufficient capital to
operate their respective businesses effectively and (C) be incurring debts
within their respective abilities to pay as the same mature or become due and
(ii) will have sufficient resources to satisfy any probable money judgment
against them in any pending action. There can be no assurance, however, that
such beliefs will prove to be correct or that a court passing on such questions
would reach the same conclusions.
CERTAIN CONSEQUENCES RELATED TO ISSUANCE OF THE NOTES AT A DISCOUNT
The Private Notes were issued at a discount from their principal amount. If
a bankruptcy is commenced by or against either of the Issuers or any of the
Guarantors under the United States Bankruptcy Code after the issuance of the
Notes, the claim of a holder of Notes against such Issuer or Guarantor with
respect to the principal
19
<PAGE> 27
amount thereof may be limited to an amount equal to the sum of (i) the initial
offering price for the Notes and (ii) that portion of the discount that is not
deemed to constitute "unmatured interest" for purposes of the United States
Bankruptcy Code. Any discount on the Notes that was not amortized as of any such
bankruptcy filing may constitute "unmatured interest."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
As of the date hereof, the only registered holder of Private Notes is Cede
& Co., as the nominee of DTC. Prior to the offering of the Private Notes, there
had been no market for the Notes and there can be no assurance that such a
market will develop, or if such market develops, as to the liquidity of such
market. The Exchange Notes will not be listed on any securities exchange, but
the Private Notes are eligible for trading in the National Association of
Securities Dealers, Inc.'s Private Offerings, Resales and Trading through
Automatic Linkages (PORTAL) market. The Initial Purchasers have advised the
Issuers that they currently intend to make a market in the Notes, as permitted
by applicable laws and regulations; however, the Initial Purchasers are not
obligated to do so and may discontinue such market-making at any time without
notice to the holders of the Notes. In addition, such market-making activities
may be limited during the Exchange Offer and the pendency of the Shelf
Registration Statement. Accordingly, there can be no assurance that a trading
market for the Notes will develop or will provide liquidity to the holders
thereof. Historically, the market for non-investment grade debt has been subject
to disruptions that have caused substantial volatility in the prices of
securities similar to the Notes. There can be no assurance that, if a market for
the Notes were to develop, such a market would not be subject to similar
disruptions. See "The Exchange Offer" and "Plan of Distribution."
20
<PAGE> 28
THE COMPANY
DTS was formed in January 1996 by Columbia and senior management to acquire
and operate the exclusive rights to distribute DIRECTV Services in Rural DirecTv
Markets. The Company completed its first acquisition in March 1996 and has made
a total of 16 acquisitions to date. In connection with the Company's expansion,
Columbia increased its investment in the Company while raising additional equity
from the other Equity Investors. The Equity Investors and management have
contributed to date, in the aggregate, $50.5 million of equity capital to the
Company.
DTS is a limited liability company organized under the laws of the State of
Delaware. Pursuant to the Limited Liability Company Agreement of DTS (the "LLC
Agreement"), the members of DTS have appointed DTS' wholly-owned subsidiary, DTS
Management, a Georgia limited liability company, as the sole manager of DTS.
Capital is a Delaware corporation and a wholly-owned subsidiary of DTS. In
connection with the reorganization of the Company in February 1997 (the
"Reorganization"), the Company contributed to the capital of DTS Management the
Company's ownership interest in each of its direct Subsidiaries (other than DTS
Management). As a result thereof, each Subsidiary became a wholly-owned direct
Subsidiary of DTS Management and a wholly-owned indirect Subsidiary of the
Company. Except for one Subsidiary which is a Delaware limited liability company
and one Subsidiary which is a New Mexico corporation, all of the wholly-owned
indirect Subsidiaries of the Company are limited liability companies organized
under the laws of the State of Georgia.
The Company's principal executive offices are located at 880 Holcomb Bridge
Road, Building C-200, Roswell, Georgia, 30076, and its telephone number is (770)
645-4440.
ORGANIZATIONAL STRUCTURE
[ORGANIZATIONAL STRUCTURE CHART]
- ------------------------------
(1) The Notes are the joint and several obligations of the Company and Capital.
Capital has nominal assets, does not conduct any operations and will not
provide additional security for the Notes.
(2) The Restated Credit Facility is secured by a pledge of the Company's member
interest in DTS Management.
(3) The Restated Credit Facility is Senior Indebtedness to which the Notes are
subordinated in right of payment.
(4) The Guaranties by the Subsidiaries of the Notes are subordinated to the
guaranties by the Subsidiaries of the Restated Credit Facility.
(5) The Restated Credit Facility is secured by a pledge of DTS Management's
member interests in and stock of the Subsidiaries.
(6) The guaranties by the Subsidiaries of the Restated Credit Facility are
secured by a pledge of substantially all of the assets of the Subsidiaries.
21
<PAGE> 29
USE OF PROCEEDS
USE OF PROCEEDS OF THE EXCHANGE NOTES
The Exchange Offer is intended to satisfy certain obligations of the
Issuers under the Registration Rights Agreement. The Issuers will not receive
any proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Issuers will receive, in exchange, Private Notes in like principal amount.
The form and terms of the Exchange Notes are substantially identical in all
material respects to the form and terms of the Private Notes, except as
otherwise described herein under "The Exchange Offer -- Terms of the Exchange
Offer". The Private Notes surrendered in exchange for the Exchange Notes will be
retired and cancelled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase in the outstanding indebtedness
of the Issuers.
USE OF PROCEEDS OF THE PRIVATE NOTES
The net proceeds to the Company from the sale of the Private Notes were
approximately $146.0 million, after deducting discounts, commissions and
estimated offering expenses. The Company placed approximately $36.2 million of
the net proceeds in the Interest Escrow Account to fund, together with the
proceeds from the investment thereof, the first four semi-annual interest
payments on the Notes, and repaid (i) the $50.0 million term loans outstanding
under the Existing Credit Facility and (ii) approximately $32.2 million of the
revolving credit loans outstanding under the Existing Credit Facility. The
balance of the net proceeds of the Initial Offering will be used (i) to finance
the acquisition of Rural DirecTv Markets and related costs and expenses, (ii) to
finance capital expenditures of the Company and its Subsidiaries and (iii) for
the general corporate purposes and working capital needs of the Company and its
Subsidiaries.
The Existing Credit Facility provided for a $50.0 million term loan
facility and a $85.0 million revolving credit facility, with a $50.0 million
sublimit for letters of credit. Of the approximately $79.2 million of
indebtedness incurred under the Existing Credit Facility as of June 30, 1997,
approximately $66.9 million was used, together with funds from the Equity
Investors, to acquire the exclusive rights to provide DIRECTV Services in 9 of
the Company's Rural DirecTv Markets, approximately $3.6 million was used to
refinance indebtedness incurred in connection with the Company's acquisition of
DBS rights in two other Rural DirecTv Markets and approximately $8.7 million was
used to cover operating losses and for general corporate purposes. The Restated
Credit Facility provides for a revolving credit facility in the amount of $70.0
million, with a $50.0 million sublimit for letters of credit, and a $20.0
million term loan facility. The revolving credit commitments under the Restated
Credit Facility reduce quarterly commencing in September 1999 until June 30,
2003, at which time all loans outstanding at that date will be repayable. The
term loan facility established pursuant to the Restated Credit Facility shall be
repaid in 20 consecutive quarterly installments of $200,000 each commencing
September 30, 1998 with the remaining balance due on July 31, 2003. See
"Description of Certain Indebtedness -- Restated Credit Facility." Borrowings
under the Restated Credit Facility may be used (i) to refinance certain existing
indebtedness, (ii) to finance the acquisition of certain Rural DirecTv Markets
and related costs and expenses, (iii) to finance capital expenditures of the
Company and its Subsidiaries and (iv) for the general corporate purposes and
working capital needs of the Company and its Subsidiaries. See "Description of
Certain Indebtedness -- Restated Credit Facility."
22
<PAGE> 30
<TABLE>
<CAPTION>
($ IN MILLIONS)
<S> <C>
SOURCES:
Net proceeds from the Private Notes(1).................... $146.0
======
USES:
Deposit to be placed in the Interest Escrow Account....... $ 36.2
Repayment of Term Loans................................... 50.0
Repayment of Revolving Credit Loans (2)................... 32.2
Acquisitions and general corporate purposes............... 27.6
------
Total uses........................................ $146.0
======
</TABLE>
- ---------------
(1) Net proceeds of the sale of the Private Notes are net of approximately $9.0
million of estimated transaction expenses, including discounts and
commissions.
(2) Includes repayment of approximately $3.0 million borrowed after June 30,
1997.
23
<PAGE> 31
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were originally issued and sold on July 30, 1997 (the
"Issue Date"). Such sales were not registered under the Securities Act in
reliance upon the exemption provided in Section 4(2) of the Securities Act and
Rule 144A promulgated under the Securities Act. In connection with the sale of
the Private Notes, the Issuers agreed to file with the Commission a registration
statement relating to the Exchange Offer (the "Registration Statement"),
pursuant to which the Exchange Notes, consisting of another series of senior
subordinated notes of the Issuers covered by such Registration Statement and
containing terms identical in all material respects to the Private Notes, except
as set forth in this Prospectus, would be offered in exchange for Private Notes
tendered at the option of the holders thereof.
The Issuers, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on July 30, 1997 (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, the Issuers and the
Guarantors agreed to file with the Commission the Registration Statement on the
appropriate form under the Securities Act with respect to the Exchange Notes to
be exchanged for the Private Notes. Upon the effectiveness of the Registration
Statement, the Issuers and the Guarantors will offer, pursuant to the Exchange
Offer, to the holders of Registrable Notes who are able to make certain
representations, the opportunity to exchange their Registrable Notes for
Exchange Notes. If: (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Issuers reasonably determine
in good faith, after consultation with counsel, that they are not permitted to
effect the Exchange Offer (a "Legal Prohibition"), (ii) the Exchange Offer is
not commenced on or prior to December 27, 1997, (iii) the Exchange Offer is not,
for any reason, consummated on or prior to January 26, 1998, (iv) any holder of
notes of the Issuers (the "Private Exchange Notes") issued simultaneously with
the issuance of the Exchange Notes in exchange for certain Private Notes held by
the Initial Purchasers so requests, or (v) in the case of any holder that
participates in the Exchange Offer, such holder does not receive Exchange Notes
on the Exchange Date that may be sold without restriction under state and
federal securities laws (each of the foregoing, a "Shelf Registration Event"),
the Issuers and the Guarantors will file with the Commission the Shelf
Registration Statement to cover resales of the Private Notes by the holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. For purposes of the
foregoing, "Registrable Notes" means each Note until: (i) a registration
statement (other than, with respect to any Exchange Note described in clause (v)
above, the Registration Statement) covering such Private Note, Exchange Note or
Private Exchange Note has been declared effective by the Commission and such
Private Note, Exchange Note or Private Exchange Note, as the case may be, has
been disposed of in accordance with such effective registration statement, (ii)
such Private Note, Exchange Note or Private Exchange Note, as the case may be,
is sold in compliance with Rule 144, (iii) such Private Note has been exchanged
for an Exchange Note and such Exchange Note is not described in clause (v) above
or (iv) such Private Note, Exchange Note or Private Exchange Note, as the case
may be, ceases to be outstanding.
The Registration Rights Agreement provides that the Issuers and the
Guarantors will: (i) file the Registration Statement with the Commission on or
prior to December 27, 1997; (ii) use their commercially reasonable best efforts
to (x) cause the Registration Statement to be declared effective and to commence
the Exchange Offer on or prior to January 26, 1998, (y) keep the Exchange Offer
open for 30 days (or longer if required by applicable law) and (z) exchange
Exchange Notes for all Private Notes validly tendered and not withdrawn pursuant
to the Exchange Offer on or prior to the fifth day following the date on which
the Exchange Offer expires and (iii) if obligated to file the Shelf Registration
Statement, file the Shelf Registration Statement with the Commission on or prior
to (x) the 30th day after the Shelf Registration Event occurs, if the Shelf
Registration Event occurs fewer than 30 days prior to November 27, 1997 or (y)
the 45th day after the Shelf Registration Event occurs, if the Shelf
Registration Event occurs after the filing of the Registration Statement (in
either case, the "Filing Date") with the Commission and use their commercially
reasonable best efforts to cause the Shelf Registration Statement to become
effective on or prior to, if the Filing Date in respect thereof is fewer than 60
days prior to December 27, 1997, the 60th day after such Filing Date and, if the
Filing Date if after the filing of the Registration Statement, the 60th day
after such Filing Date. If: (a) the Issuers and the Guarantors fail to file any
of the Registration
24
<PAGE> 32
Statements on or before the date specified for such filing (other than due to a
Legal Prohibition), (b) any of such Registration Statements is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (other than due to a Legal Prohibition), (c) the Issuers have not
exchanged Exchange Notes for all Registrable Notes validly tendered and not
withdrawn on or prior to the fifth day after the expiration of the Exchange
Offer, (d) the Registration Statement ceases to be effective at any time prior
to the date on which the Exchange Offer is to expire or (e) the Shelf
Registration Statement is declared effective but ceases to be effective at any
time during the periods specified in the Registration Rights Agreement (each
such event referred to in clauses (a) through (e) above, a "Registration
Default"), then the Issuers agree to pay to each holder of Notes, with respect
to the first 90-day period immediately following the occurrence of such
Registration Default, an amount equal to $.05 per week per $1,000 principal
amount of Notes held by such holder. Such interest, together with interest
accrued by the Issuers pursuant to the next succeeding sentence, is collectively
referred to herein as "Additional Interest." The amount of the Additional
Interest will increase by an additional $.05 per week per $1,000 principal
amount of Notes with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Additional
Interest of $.40 per week per $1,000 principal amount of Notes. All Additional
Interest will be payable to holders of the Private Notes in cash on each August
1 and February 1, commencing with the first such date occurring after any such
Additional Interest commences to accrue, until such Registration Default is
cured. After the date on which such Registration Default is cured, the interest
rate on the Private Notes will revert to 12 1/2% per annum.
Holders of Private Notes will be required to make certain representations
to the Issuers (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreement in order to have their
Private Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Additional Interest set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Private
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Private Notes will not have any further registration rights and
such Private Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Private Notes could
be adversely affected.
TERMS OF THE EXCHANGE OFFER
General. Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Issuers will accept any and all
Private Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Issuers will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
outstanding Private Notes accepted in the Exchange Offer. Holders may tender
some or all of their Private Notes pursuant to the Exchange Offer. However,
Private Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are identical in all material
respects to the form and terms of the Private Notes except that (i) the Exchange
Notes bear a Series B designation and different CUSIP Numbers from the Private
Notes, (ii) the Exchange Notes have been registered under the Securities Act and
hence will not bear legends restricting the transfer thereof and (iii) the
holders of the Exchange Notes (as well as any remaining holders of Private
Notes) will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Private Notes in certain circumstances relating to the timing of the
Exchange Offer, all of which rights will terminate when the Exchange Offer is
terminated. The Exchange Notes will evidence the same debt as the Private Notes
and will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $155,000,000 aggregate principal amount
of Private Notes were outstanding. The Issuers have fixed the close of business
on , 1997 as the record date for the
25
<PAGE> 33
Exchange Offer for purposes of determining the persons to whom this Prospectus
and the Letter of Transmittal will be mailed initially.
Holders of Private Notes do not have any appraisal or dissenters' rights
under the General Corporation Law of Delaware, the Limited Liability Company Act
of Delaware or the Indenture in connection with the Exchange Offer. The Issuers
intend to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder.
The Issuers shall be deemed to have accepted validly tendered Private Notes
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Issuers.
If any tendered Private Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Private Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Issuers will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the Exchange Offer.
Expiration Date; Extensions; Amendments. The term "Expiration Date" shall
mean 5:00 p.m., New York City time, on , 1997, unless the Issuers,
in their sole discretion, extend the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Issuers reserve the right, in their sole discretion, prior to the
Expiration Date (i) to delay accepting any Private Notes, to extend the Exchange
Offer or to terminate the Exchange Offer if any of the conditions set forth
below under "Conditions" shall not have been satisfied, by giving oral or
written notice of such delay, extension or termination to the Exchange Agent or
(ii) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance extension, termination or amendment will be followed promptly as
practicable by oral or written notice thereof to the registered holders.
Interest on the New Notes. The Exchange Notes will bear interest from
their date of issuance. Holders of Private Notes that are accepted for exchange
will receive, in cash, accrued interest thereon to, but not including, the date
of issuance of the Exchange Notes. Such interest will be paid with the first
interest payment on the Exchange Notes on February 1, 1998. Interest on the
Private Notes accepted for exchange will cease to accrue upon issuance of the
Exchange Notes.
Interest on the Exchange Notes is payable semi annually on each August 1
and February 1, commencing on February 1, 1998.
Procedures for Tendering. Only a holder of Private Notes may tender such
Private Notes in the Exchange Offer. To tender in the Exchange Offer, a holder
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Private Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
To be tendered effectively, the Private Notes, Letter of Transmittal or an
Agent's Message in connection with a book-entry transfer and other required
documents must be completed and received by the Exchange Agent at the address
set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time,
on the Expiration Date. Delivery of the Private Notes may be made by book-entry
transfer in accordance with the procedures described below. Confirmation of such
book-entry transfer must be received by the Exchange Agent prior to the
Expiration Date.
26
<PAGE> 34
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry transfer, which states that such Book-Entry
Transfer Facility has received an express acknowledgment from the participant in
such Book-Entry Transfer Facility tendering the Notes that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Company may enforce such agreement against such participant.
By executing the Letter of Transmittal, each holder will make to the
Issuers the representation set forth above in the third paragraph under the
heading "-- Purpose of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Issuers will
constitute agreement between such holder and the Issuers in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD BE SENT TO THE ISSUERS.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Private Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Private Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Private Notes listed therein, such Private Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Private Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Issuers of their authority to so act must be submitted with the Letter of
Transmittal.
Book-Entry Transfer. The Issuers understand that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish accounts
with respect to the Private Notes at the Book-Entry Transfer Facility for the
purpose of facilitating the Exchange Offer, and subject to the establishment
thereof, any financial institution that is a participant in the Book-Entry
Transfer Facility's system may make book-entry delivery of Private Notes by
causing such Book-Entry Transfer Facility to transfer such Private Notes into
the Exchange Agent's account with respect to the Private Notes in accordance
with the Book-Entry Transfer Facility's procedures for such transfer. Although
delivery of the Private Notes may be effected through book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate
Letter of Transmittal properly completed and duly executed with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied
27
<PAGE> 35
with, within the time period provided under such procedures. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Private Notes and withdrawal of tendered
Private Notes will be determined by the Issuers in their sole discretion, which
determination will be final and binding. The Issuers reserve the absolute right
to reject any and all Private Notes not properly tendered or any Private Notes
the Issuers' acceptance of which would, in the opinion of counsel for the
Issuers, be unlawful. The Issuers also reserve the right in their sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Private Notes. The Issuers' interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Private Notes must be
cured within such time as the Issuers shall determine. Although the Issuers
intend to notify holders of defects or irregularities with respect to tenders of
Private Notes, neither the Issuers, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tender of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Private Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
Guaranteed Delivery Procedures. Holders who wish to tender their Private
Notes and (i) whose Private Notes are not immediately available, (ii) who cannot
deliver their Private Notes, the Letter of Transmittal or any other required
documents to the Exchange Agent or (iii) cannot complete the procedures for
book-entry transfer, prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution,
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Private Notes and the principal amount of Private Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
five New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Private Notes (or a confirmation of
book-entry transfer of such Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Private Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Private Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
Withdrawal of Tenders. Except as otherwise provided herein, tenders of
Private Notes may be withdrawn at any time prior to 5:00 p.m, New York City
time, on the Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received by
the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Private Notes to be
withdrawn (the "Depositor"); (ii) identify the Private Notes to be withdrawn
(including the certificate numbers) and principal amount of such Private Notes,
or, in the case of Private Noes transferred by book-entry transfer, the name and
number of the account at the Book-Entry Transfer Facility to be credited); (iii)
be signed by the holder in the same manner as the original signature on the
Letter of Transmittal by which such Private Note were tendered (including any
required signature guarantees) or be accompanied by documents of transfer of
such Private Notes into the name of the person withdrawing the
28
<PAGE> 36
tender and (iv) specify the name in which any such Private Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Issuers, whose determination shall be final and binding on
all parties. Any Private Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Private Notes so withdrawn are validly
retendered. Any Private Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Private Notes may be
retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange Exchange Notes for, any Private
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Private Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Issuers, might materially impair
the ability of the Issuers to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Issuers or any of their subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted which, in the reasonable
judgment of the Issuers, might materially impair the ability of the Issuers
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Issuers; or
(c) any governmental approval has not been obtained, which approval
the Issuers shall, in their reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Issuers determine in their reasonable discretion that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any Private
Notes and return all tendered Private Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Private Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Private Notes (see "-- Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Private Notes which have not been withdrawn.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Courier:
The Bank of New York The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, New York 10286 Corporate Trust Services Window
Attn: Reorganization Section Ground Level
New York, New York 10286
Attn: Reorganization Section
Facsimile Transmission: (212) 571-3080
Confirm by Telephone: (212) 815- For Information Call: (212) 815-
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
29
<PAGE> 37
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Private Notes as reflected in the Company's accounting records on the date of
exchange (see Pro Forma Financial Statements). Accordingly, no gain or loss for
accounting purposes will be recognized by the Company. The expenses of the
Exchange Offer will be expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Private Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Private
Notes may be resold only (i) to the Issuers (upon redemption thereof or
otherwise), (ii) so long as the Private Notes are eligible for resale pursuant
to Rule 144A, to a person inside the United States whom the seller reasonably
believes is a qualified institutional buyer within the meaning of Rule 144A
under the Securities Act in a transaction meeting the requirements of Rule 144A,
in accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Issuers), (iii) outside
the United States to a foreign person in a transaction meeting the requirements
of Rule 904 under the Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Issuers believe that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Private Notes in the ordinary
course of business and who is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Private Notes, where such
Private Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the
30
<PAGE> 38
holder, in the ordinary course of business, (ii) the holder or any such other
person (other than a broker-dealer referred to in the next sentence) is not
engaging and does not intend to engage in the distribution of the Exchange
Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or other person
participates in the Exchange Offer for the purposes of distributing the Exchange
Notes it must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale of the Exchange Notes and
cannot rely on those no-action letters. As indicated above, each Participating
Broker-Dealer that receives an Exchange Note for its own account in exchange for
Private Notes must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. For a description of the procedures for
such resales by Participating Broker-Dealers, see "Plan of Distribution."
31
<PAGE> 39
CAPITALIZATION
The following table sets forth as of June 30, 1997 the actual
capitalization of the Company, and the capitalization of the Company as adjusted
to reflect the effects of the Transactions. The historical information in this
table is derived from the Consolidated Financial Statements of the Company and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Conditions and Results of Operations," the Consolidated Financial
Statements and the Notes thereto and the Condensed Pro Forma Financial
Statements and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------
ACTUAL PRO FORMA
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and marketable securities(1)......... $ 1,875 $ 31,892
======== ========
Current maturities of long-term debt(2)..................... $ 8,595 $ 8,595
======== ========
Long-term debt:
Private Notes(3).......................................... $ -- $152,841
Existing Credit Facility(4)............................... 79,169 --
Seller notes(2)........................................... 12,516 12,516
Other..................................................... 305 305
-------- --------
Total long-term debt.............................. 91,990 165,662
-------- --------
Members' equity:
Total members' equity............................. 36,456 36,456
-------- --------
Total capitalization........................................ $128,446 $202,118
======== ========
</TABLE>
- ---------------
(1) Excludes approximately $36.2 million placed in the Interest Escrow Account
to fund, together with the proceeds from the investment thereof, the first
four semi-annual interest payments on the Notes.
(2) The long-term portion of seller notes are recorded net of original issue
discount of approximately $2,406,000 at June 30, 1997 on both an actual
basis and a pro forma basis to yield 9%. The current portion of the original
issue discount on the seller notes of approximately $1,120,000 is included
in current maturities of long-term debt.
(3) The Private Notes are recorded net of original issue discount of
approximately $2,159,000 at June 30, 1997.
(4) The Restated Credit Facility provides for a revolving credit facility in the
amount of $70.0 million, with a $50.0 million sublimit for letters of
credit, and a $20.0 million term loan facility, of which $56.5 million is
available. The Company is permitted by the Indenture to incur up to $75.0
million of indebtedness under the Restated Credit Facility.
32
<PAGE> 40
SELECTED FINANCIAL DATA
The following table presents selected financial data relating to the
Company as of the dates and for the periods indicated. In addition, the
following table presents selected financial data relating to the Company's
unaudited pro forma balance sheet data as of June 30, 1997 and the Company's
unaudited pro forma statement of operations data for the year ended December 31,
1996 and the six months ended June 30, 1997, each as adjusted to give effect to
the Transactions. The historical data for the period from January 30, 1996 (date
of formation) to December 31, 1996, has been derived from the audited financial
statements of the Company audited by Arthur Andersen LLP, independent public
accountants. The historical data for other periods presented has been derived
from unaudited information. The data set forth in this table should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and Unaudited Condensed Pro Forma Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
JANUARY 30 TO SIX MONTHS JANUARY 1 TO SIX MONTHS
DECEMBER 31, JANUARY 30 TO ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30,
1996 JUNE 30, 1996 1997 1996 1997
------------- --------------------------------------------------------------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT REVENUE PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Programming revenue.............. $ 3,085 $ 553 $ 17,013 $ 29,685 $ 20,746
Equipment sales and installation
revenue........................ 324 50 1,481 6,751 2,302
------- ------ --------- ----------- ---------
Total revenue.................. 3,409 603 18,494 36,436 23,048
Cost of revenue.................. 2,270 419 11,567 23,216 14,387
------- ------ --------- ----------- ---------
Total gross profit............. 1,139 184 6,927 13,220 8,661
Operating expenses excluding
depreciation and
amortization................... 2,732 463 6,457 17,122 8,012
Total depreciation and
amortization................... 1,148 264 6,552 14,957 8,205
------- ------ --------- ----------- ---------
Operating loss................... (2,741) (543) (6,082) (18,859) (7,556)
Interest expense................. (818) (33) (4,308) (23,115) (11,757)
Other income(1).................. 24 11 61 31 61
------- ------ --------- ----------- ---------
Net loss(1)(2)................... $(3,535) $ (565) $ (10,329) $ (41,943) $ (19,252)
======= ====== ========= =========== =========
Ratio of earnings to fixed
charges(3)..................... -- -- -- -- --
OTHER DATA:
Pro forma average monthly
programming revenue per
subscriber..................... n/a n/a n/a n/a $ 38.89
Operating Cash Flow(1)(4)........ $(1,593) $ (279) $ 470 $ (3,902) 649
Number of subscribers at end of
period......................... 19,659 4,094 93,801 84,014 93,801
Number of households at end of
period......................... 382,833 97,272 1,500,262 1,500,262 1,500,262
Household penetration at end of
period......................... 5.14% 4.21% 6.25% 5.60% 6.25%
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------
HISTORICAL PRO FORMA
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable investment
securities(5).......................................... $ 1,875 $ 31,892
Total assets............................................ 150,349 223,434
Total debt (including current portion).................. 100,585 174,257
Members' equity......................................... 36,456 36,456
</TABLE>
33
<PAGE> 41
- ------------------------------
(1) Pro forma other income amounts do not include interest income which will be
recognized on amounts included in the Interest Escrow Account. If such
interest income was included, the pro forma net loss for the period from
January 1 to December 31, 1996 and for the six months ended June 30, 1997
would be approximately $40.2 million and $18.2 million, respectively. In
addition, operating cash flow would increase approximately $1.8 million and
$1.0 million, respectively, for the same periods.
(2) The Company is a limited liability company and is not required to pay United
States federal income taxes.
(3) Earnings were insufficient to cover fixed charges by approximately
$4,353,000 and $65,058,000 for the period from January 30, 1996 (date of
inception) to December 31, 1996 and pro forma for the year ended December
31, 1996 and $598,000, $14,637,000 and $31,009,000 for the period from
January 30, 1996 (date of inception) to June 30, 1996, for the six months
ended June 30, 1997 and pro forma for the six months ended June 30, 1997,
respectively. The ratio of earnings to fixed charges is calculated by adding
(i) earnings (loss) before income taxes plus (ii) fixed charges, with the
resulting sum divided by fixed charges. Fixed charges consist of interest on
all indebtedness, amortization of debt issuance costs, plus that portion of
operating lease rentals representative of the interest factor.
(4) "Operating Cash Flow" represents earnings before interest expense, other
income (expense), taxes, depreciation and amortization. Operating Cash Flow
is presented because it is a widely accepted financial measure in the
communications industry and is similar to one of the financial measures used
to calculate whether the Company is in compliance with certain covenants
under the Indenture. Operating Cash Flow is not intended to be a substitute
for a measure of performance in accordance with generally accepted
accounting principles and should not be relied on as such.
(5) Excludes approximately $36.2 million placed in the Interest Escrow Account
to fund, together with the proceeds from the investment thereof, the first
four semi-annual interest payments on the Notes.
34
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides an assessment of the historical and pro
forma consolidated results of operations and liquidity and capital resources of
the Company and its wholly-owned subsidiaries. This discussion should be read in
conjunction with the unaudited pro forma combined financial statements of the
Company, the unaudited financial statements of the Company, the audited
consolidated financial statements of the Company and the audited financial
statements of certain businesses acquired or expected to be acquired, and the
related notes thereto, appearing elsewhere in this Prospectus. As a result of
the growth of the Company through the 1996 Acquisitions and the 1997
Acquisitions and the continued growth as a result of possible future
acquisitions, the historical audited financial information of the Company may
not be indicative of the financial position or results of operations to be
reported in the future.
OVERVIEW
The Company was formed on January 30, 1996, to acquire, own and manage
rights to distribute DIRECTV Services to residential households and commercial
establishments in the Rural DirecTv Markets. As of December 31, 1996, the
Company had acquired the rights to provide DIRECTV Services to approximately
383,000 households for approximately $33.7 million or $88 per household,
excluding adjustments recorded to reflect the discount of certain of the
Company's seller notes at the 9% interest rate under the Existing Credit
Facility at December 31, 1996. Of the total purchase price, approximately $9.3
million was paid in cash and approximately $24.2 million was financed through
the issuance of promissory notes of the Company in favor of the sellers. During
the first half of 1997, the Company acquired the rights to provide DIRECTV
Services to an additional 1,117,000 households for approximately $108.1 million
or $97 per household, excluding adjustments recorded to reflect the discount of
certain of the Company's seller notes at a rate of 9%. Of the total purchase
price, approximately $93.1 million was paid in cash and $15.5 million was paid
through the issuance of promissory notes of the Company in favor of certain of
the sellers. See "Business -- Acquisitions by the Company." The following table
presents information regarding completed acquisitions as of May 9, 1997.
<TABLE>
<CAPTION>
SUBSCRIBERS
SUBSCRIBERS AT AT
SYSTEM LOCATION(1) DATE ACQUIRED(1) ACQUISITION DATE JUNE 30, 1997
<S> <C> <C> <C>
1996 Acquisitions -- 8 Rural DirecTv Markets:
New Mexico(2)........................................... March 1, 1996 404 837
California.............................................. April 1, 1996 3,385 5,780
New Mexico(2)........................................... August 28, 1996 2,931 4,305
New York................................................ August 28, 1996 3,970 4,560
South Carolina.......................................... November 26, 1996 5,759 7,187
------- ------
Subtotal -- 1996 Acquisitions.................... 16,449 22,669
------- ------
1997 Acquisitions -- 8 Rural DirecTv Markets:
Kentucky................................................ January 2, 1997 19,908 21,286
Kansas.................................................. January 31, 1997 11,520 12,294
Vermont................................................. February 18, 1997 20,500 23,025
Georgia................................................. May 9, 1997 14,409 14,527
------- ------
Subtotal -- 1997 Acquisitions.................... 66,337 71,132
------- ------
Totals.................................................... 82,786 93,801
======= ======
</TABLE>
- ---------------
(1) See "Business -- Acquisitions by the Company."
(2) These systems are combined under the New Mexico cluster for purposes of the
chart on page 38 of this Prospectus.
The Company generates revenues by providing DIRECTV Services to its
subscribers. DIRECTV Services consist of programming purchased in a monthly or
annual subscription, additional premium programming available on an a la carte
basis, sports programming available under a monthly, yearly or seasonal
subscription, and movies and events programming available on a pay per view
basis.
35
<PAGE> 43
Although the majority of DSS(R) equipment is sold to subscribers through
independent dealers, the Company also generates revenue from the direct sale,
rental and installation of satellite receivers and related equipment. During
1996, the Company offered price subsidies on DSS(R) equipment to further
stimulate the demand for DIRECTV Services. The retail sales price of DSS(R)
equipment ranged from $199 to $599 during 1996 and the first six months of 1997,
depending upon the type of equipment sold. These sales prices were approximately
$50 to $135 below the Company's cost for such equipment. The Company offers
installation services at prices ranging from $99 to $199.
The Company's major cost of providing DIRECTV Services to its subscribers
is the direct wholesale cost of purchasing related program offerings from
DirecTv, which averaged approximately 52% and 48% of programming revenues during
1996 and for the six months ended June 30, 1997, respectively. Additionally, the
Company purchases other contract services from DirecTv through the NRTC. These
costs consist of recurring monthly subscriber maintenance fees, including
security fees, ground services fees, system authorization fees and fees for
subscriber billing.
Since inception through June 30, 1997, the Company has invested significant
working capital to implement extensive distribution networks and promotional
programs to stimulate the acquisition of new subscribers. Costs associated with
subscriber acquisition are a significant component of the Company's operating
expenses. These expenses include variable commission expenses, fixed and
variable promotional expenses and marketing salaries and benefits. As discussed
above, the Company also subsidizes the cost of DSS(R) equipment to the
subscriber, thereby incurring a loss on the sale of satellite receivers and
related equipment sold. The Company's policy is to expense all subscriber
acquisition costs at the time the sale is made or, in the case of cash back
promotions on annual subscriptions, to amortize the promotion expense over 12
months. During 1996 and through the six months ended June 30, 1997, subscriber
acquisition costs, including the loss on DSS(R) equipment sales, averaged
approximately $235 for each new subscriber addition. The Company anticipates
that it will continue to incur a significant level of subscriber acquisition
costs in conjunction with the growth of its subscriber base, and that these
costs could increase as a result of increased competition and a downward
pressure on the retail price of satellite equipment sold.
General and administrative costs include administrative costs associated
with the Company's sales and subscriber service operations, as well as
accounting and general administration. Although these expenses will continue to
increase as the Company's scope of operations increases, such expenses are
primarily fixed in nature and, accordingly, should not increase directly in
proportion to the future increase to the Company's subscriber base.
During May and June 1997, the Company experienced an increase in subscriber
disconnects as compared to prior periods. The Company believes that this
increase was primarily the result of two non-recurring factors, the tightening
by the Company of its account treatment policies and the disconnection of
services by DirecTv of all subscribers who had not converted to DirecTv's
current security protocol by replacing their system access cards. The Company
has distributed new access cards to these subscribers in order to reconnect
their DIRECTV Services. The Company expects subscriber disconnects to stabilize
to historical levels during the second half of 1997.
The Company has yet to achieve positive operating cash flow due to cash
expended in implementing its sales and administrative infrastructure, marketing
expenses associated with adding new subscribers and interest and other debt
servicing costs associated with financing activities. The Company expects to
continue its focus on increasing its subscriber base which is expected to have a
negative impact on short-term operating results. In addition, a changing
competitive environment may increase the marketing expenditures necessary to
acquire new subscribers. See "Risk Factors -- Competition and Technological
Change." There can be no assurance that the Company's subscriber base and
revenues will continue to increase or that the Company will be able to achieve
or sustain profitability or positive operating cash flow.
36
<PAGE> 44
DIGITAL TELEVISION SERVICES, LLC
Six Months Ended June 30, 1997 and Inception (January 30, 1996) to June 30,
1996
The Company completed its initial two acquisitions of the rights to provide
DIRECTV Services to approximately 97,000 households during March and April 1996.
Programming revenue generated during the six month period ended June 30, 1996
consisted of DIRECTV Services provided to the approximately 4,100 subscribers
associated with these acquisitions for the four month period. Programming
revenue was approximately $17,013,000 for the six month period ended June 30,
1997 (the "1997 Period") compared to approximately $553,000 for the period from
inception (January 30, 1996) to June 30, 1996. This increase resulted primarily
from revenue generated from the approximately 79,000 subscribers acquired in
conjunction with the Company's acquisitions and the addition of approximately
10,700 net subscribers added during the twelve month period ended June 30, 1997.
During the 1997 Period, the Company added approximately 7,400 net subscribers
consisting of approximately 12,550 new subscribers offset by approximately 5,150
disconnects. Average monthly programming revenue per subscriber on a blended
basis was approximately $39.70 for the 1997 Period.
Equipment sales and installation revenue totaled approximately $1,481,000
during the 1997 Period compared to approximately $50,000 during the period from
inception to June 30, 1996. This increase resulted from the sale of DSS
equipment and related installations to new subscribers added during the 1997
Period.
Costs directly associated with providing programming, equipment sales and
installation revenue totaled approximately $11,567,000 during the 1997 Period
compared with approximately $419,000 during the period from inception to June
30, 1996. These costs increased in direct proportion to the increase in the
number of subscribers subscribing to DIRECTV Services. For the 1997 Period, the
gross profit on programming revenue after recurring service fees was
approximately 42%. During the 1997 Period, the Company sold DSS equipment
installed at average prices of approximately 11% below the Company's cost. The
Company expects to continue to subsidize the cost of DSS equipment.
The Company incurred direct selling expenses of approximately $2,844,000
during the 1997 Period. These costs included advertising and promotion expenses,
sales commissions to both the Company's employee and dealer distribution
channels, and marketing salaries and benefits. Including subsidies on DSS
equipment sales, the Company incurred approximately $240 of selling expenses for
each new subscriber added during the 1997 Period.
General and administrative expenses totaled approximately $3,613,000 during
the 1997 Period or 20% of revenues. These expenses consisted primarily of
salaries and expenses associated with customer services operations, general
office expenses, and other general administrative expenses. General and
administrative expenses are expected to continue to decline as a percent of
total revenues in 1997 as the majority of these expenses are fixed in nature.
Depreciation expense totaled approximately $190,000 for the 1997 Period and
has increased in conjunction with the addition of general office assets and the
purchase of installation service vehicles. Amortization expense totaled
approximately $6,362,000 for the 1997 Period. Of this amount, approximately
$5,766,000 relates to the acquisition of contract rights by the Company,
approximately $103,000 relates to fees incurred in connection with the formation
of the Company and Subsidiaries and approximately $493,000 relates to
capitalized subscriber acquisition costs.
The Company generated an Operating Cash Flow surplus (as defined in the
Indenture) of approximately $470,000 for the 1997 Period. The Company expects to
incur an Operating Cash Flow deficit during the remainder of 1997 as a result of
selling expenses associated with subscriber growth and general administrative
costs associated with growth of customer service operations.
Interest expense for the 1997 Period, including amortization of debt
discount and debt issuance costs, totaled approximately $4,308,000. The Company
incurred interest costs in conjunction with seller financing and borrowings
under installment loans and the Amended and Restated Credit Facility.
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Inception (January 30, 1996) to December 31, 1996
Programming revenue was approximately $3,085,000 for the period from
inception to December 31, 1996 (the "1996 Period"). The majority of this revenue
was generated from the approximately 16,450 subscribers acquired in conjunction
with the Company's acquisitions. In addition, during the 1996 Period the Company
added approximately 3,200 net subscribers subsequent to the closing of
acquisitions, consisting of approximately 4,000 new subscribers offset by
approximately 800 disconnects. Average monthly programming revenue per
subscriber on a blended basis was approximately $38 for the period. Programming
revenue is typically seasonal in nature with average monthly programming revenue
per subscriber ranging from $35 to $42 during the 1996 Period. Equipment sales
and installation revenue of approximately $324,000 resulted from the sale of
DSS(R) equipment and related installations to new subscribers.
The Company incurred approximately $1,872,000 of expenses during the 1996
Period directly associated with providing programming revenue, including
approximately $1,596,000 of programming costs and approximately $276,000 of
service fees. These costs are directly attributable to the program revenues
generated and the number of subscribers subscribing to DIRECTV Services. For the
1996 Period, the gross profit on programming revenue after recurring service
fees was approximately 39%. During the 1996 Period, the Company sold DSS(R)
equipment installed at average prices of approximately 23% below the Company's
cost.
The Company incurred direct selling expenses of approximately $778,000 in
connection with the addition of approximately 4,000 new subscribers during the
1996 Period. These costs included advertising and promotion expenses, sales
commissions to both the Company's employee and dealer distribution channels, and
marketing salaries and benefits. Including subsidies on DSS(R) equipment sales,
the Company incurred approximately $224 of selling expenses for each new
subscriber added during the 1996 Period.
General and administrative expenses totaled approximately $1,954,000 for
the 1996 Period or 57% of total revenues. These expenses related to the opening
of the Company's general office and retail locations, the recruiting and hiring
of personnel, salaries and expenses associated with customer service operations,
and other general administrative expenses. Such expenses were incurred as the
Company implemented administrative and customer service infrastructure to
support its rapid subscriber growth. General and administrative expenses are
expected to decline as a percent of total revenues in 1997 with added systems
and additional subscribers.
Depreciation expense totaled approximately $48,000 for the 1996 Period in
connection with the addition of general office assets, leasehold improvements
associated with the build-out of office space and the purchase of installation
vehicles. Amortization expense totaled approximately $1,100,000. Of this amount,
approximately $1,022,000 relates to the Company's acquired contract rights,
approximately $36,000 relates to fees incurred in connection with the formation
of the Company and Subsidiaries and approximately $42,000 relates to capitalized
subscriber acquisition costs.
The Company incurred an Operating Cash Flow deficit (as defined in the
Indenture) of approximately $1,593,000 for the 1996 Period. This operating cash
loss resulted from selling expenses associated with subscriber growth and
general administrative costs associated with implementation of customer service
and administrative infrastructure to support subscriber growth.
Interest expense for the 1996 Period, including amortization of the debt
discount and debt issuance costs, totaled approximately $818,000. The Company
incurred interest costs in conjunction with seller financing and borrowings
under installment loans and the Existing Credit Facility.
Pro Forma Results of Operations
The pro forma combined results of operations reflect the operations of the
Company as if the Transactions had occurred on January 1, 1996 and the pro forma
results of operations for the six months ended June 30, 1997 reflect the
operations of the Company as if the Transactions had occurred on January 1,
1997. These pro forma combined results of operations are not intended to be
indicative of the Company's future combined results of operations nor the
combined results of operations if the Transactions had occurred on January 1,
1996 or January 1, 1997.
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Consistent with the Company's operations, the acquisitions included in the
pro forma combined results generate revenues by providing DIRECTV Services to
their subscribers. In addition, the major cost for the acquired companies to
provide DIRECTV Services to its subscribers is the direct variable wholesale
cost of purchasing related program offerings from DirecTv. Furthermore, the
acquired companies purchase other contract services through the NRTC from
DirecTv. These costs consist of recurring monthly subscriber maintenance fees,
including security fees, ground services fees, system authorization fees and
fees for subscriber billing.
Pro Forma Six Months Ended June 30, 1997
Programming revenue generated on a pro forma basis totaled approximately
$20,746,000 for the six months ended June 30, 1997. Pro forma subscribers
increased from 84,014 to 93,801, or 11.7%. Average monthly pro forma programming
revenue per subscriber was approximately $39.00. The Company also generated
approximately $2,302,000 of revenues from the sale of DSS(R) equipment and
related accessories, and from installation services.
The Company incurred approximately $22,399,000 of operating expenses
(excluding depreciation and amortization) on a pro forma basis for the six
months ended June 30, 1997. These expenses consisted largely of the cost of
wholesale programming and services. Direct costs of programming, including
service fees, totaled approximately $12,146,000, resulting in a gross margin of
approximately 41%. Selling expenses totaled approximately $3,469,000 for the pro
forma period ended June 30, 1997, consisting primarily of sales commissions,
marketing salaries and benefits, advertising and promotional expenses. The
Company expects future selling expenses on a pro forma basis to increase with
the addition of direct distribution and further promotions on satellite
equipment sales in the markets acquired on a pro forma basis. General and
administrative expenses totaled $4,543,000 on a pro forma basis for the six
months ended June 30, 1997, consisting of salaries and benefits for general
administrative and subscriber service personnel, and general office expenses.
The Company believes these pro forma expenses are higher than what can be
expected in the future as a percentage of revenue due to the elimination of
certain redundant administrative functions, personnel and related costs.
Depreciation and amortization expense totaled approximately $8,205,000 on a
pro forma combined basis for the six months ended June 30, 1997. Amortization
expense, totaling approximately $7,784,000, includes approximately $7,188,000 of
amortization associated with the Company's purchase of contract rights,
approximately $103,000 associated with costs incurred in connection with the
Company's formation, and approximately $493,000 associated with capitalized
subscriber acquisition costs.
Interest expense for the six months ended June 30, 1997 on a pro forma
combined basis totaled approximately $11,757,000, including approximately
$10,212,000 of interest on the proceeds from the Offering and amortization of
debt issuance costs and approximately $1,545,000 of interest expense associated
with seller financing, installment notes and financings under the Existing
Credit Facility.
Pro Forma January 1, 1996 to December 31, 1996
The Company generated revenues of approximately $36,436,000 on a pro forma
basis for the year ended December 31, 1996. Of this amount, $29,685,000 resulted
from programming revenue generated on 70,609 average subscribers. The Company
also generated approximately $6,751,000 of revenues from the sale of DSS(R)
equipment and related accessories, and from installation services. Pro forma
subscribers increased from 51,618 to 84,014, or 63% for the year ended December
31, 1996.
The Company incurred approximately $40,338,000 of operating expenses
(excluding depreciation and amortization) on a pro forma basis for the year
ended December 31, 1996, consisting largely of the cost of wholesale programming
and services. Direct costs of programming, including service fees, totaled
approximately $18,012,000, resulting in a gross profit margin on programming of
approximately 39%. Selling expenses, totaling approximately $5,470,000 consisted
primarily of advertising expenses, promotional expenses, commissions and
salaries and benefits of marketing employees. Selling expenses of the
acquisitions or pending acquisitions typically were lower in 1996 as many of the
companies did not deploy the same marketing strategy of the Company.
Accordingly, the Company expects future selling expenses on a pro forma combined
basis to increase
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with the addition of direct distribution and satellite equipment subsidies.
General and administrative expenses totaled approximately $11,652,000,
consisting of allocated corporate expenses, salaries and benefits for general
administrative and subscriber service personnel, and general administrative
costs. The Company believes these expenses to be higher than what can be
expected in the future due to the elimination of certain duplicative
administrative infrastructure costs.
Depreciation and amortization expenses totaled approximately $14,957,000 on
a pro forma combined basis for the year ended December 31, 1996. Amortization
expense, totaling approximately $14,278,000 includes approximately $14,200,000
of amortization associated with the Company's purchase of contract rights,
approximately $36,000 of amortization associated with costs incurred in
conjunction with the Company's formation and approximately $42,000 related to
capitalized subscriber acquisition costs.
Interest expense for the year ended December 31, 1996 on a pro forma
combined basis totaled approximately $23,115,000, including approximately
$20,279,000 of interest on the proceeds from the Offering and amortization of
debt issuance costs and approximately $2,836,000 of interest expense associated
with seller financing, installment notes and financings under the Existing
Credit Facility.
LIQUIDITY AND CAPITAL RESOURCES
The Company has required significant capital since its formation in order
to acquire the rights to provide DIRECTV Services and for the start up of its
operations. The Company has financed acquisitions and its other capital needs
through the proceeds received from the private sale of equity securities, the
issuance of seller notes and through borrowings under the Existing Credit
Facility. Cash flows from financing activities during the 1996 Period totaled
approximately $27,873,000, including $9,400,000 borrowed under the Existing
Credit Facility, approximately $32,000 from the issuance of installment notes,
and approximately $18,441,000 from the sale of Class B Units. In addition, the
Company issued approximately $24,156,000 of seller notes during the 1996 Period
to finance a portion of the purchase price for certain Rural DirecTv Markets
which the Company acquired. Cash flows from financing activities for the six
months ended June 30, 1997 totaled approximately $91,706,000, including
$69,769,000 borrowed under the Existing Credit Facility, approximately $304,000
from the issuance of installment notes, and $31,879,000 from the sale of the
1997 Equity.
The Company used proceeds from the financings during the 1996 Period (i) to
consummate the 1996 Acquisitions for approximately $33,700,000, excluding
adjustments recorded to reflect the discount of certain of the Company's seller
notes at the 9% interest rate under the Existing Credit Facility at December 31,
1996, (ii) to pay approximately $3,150,000 in deposits toward the purchase of
the 1997 Acquisitions, (iii) to pay certain fees totaling approximately
$3,516,000 incurred in conjunction with the Company's formation and fees
associated with the Existing Credit Facility, (iv) to repay approximately
$9,047,000 of seller notes and other notes payable, (v) for capital expenditures
totaling approximately $386,000, and (vi) for operating cash needs totaling
approximately $634,000. The Company used proceeds from the financings during the
six months ended June 30, 1997 (i) to consummate the 1997 Acquisitions for
approximately $88,819,000, (ii) to pay certain fees and expenses totaling
approximately $3,658,000 associated with the Offering, (iii) to repay
approximately $6,028,000 of seller notes and other notes payable, (iv) for
capital expenditures totaling approximately $856,000, (v) expenses incurred in
connection with the Company's formation totaling approximately $560,000 and (vi)
for operating cash needs totaling approximately $1,752,000.
In conjunction with the acquisitions of the exclusive rights to provide
DIRECTV Services in certain areas of California, New Mexico, Colorado, New York,
South Carolina and Georgia, the Company issued promissory notes totaling
approximately $39,680,000 in favor of the sellers. The promissory notes accrue
interest at per annum rates ranging from 3% to 15%. Notes with interest rates
below 9% have been discounted to reflect the 9% interest rate under the Existing
Credit Facility. One of the promissory notes carries a contingent payment
amount, which is dependent upon the number of subscribers in the Company's
California system at October 1, 1998. The amount due under the terms of the
contingent note was approximately $4,223,000 at December 31, 1996.
In July 1997, in connection with the Initial Offering, the Company amended
and restated its Existing Credit Facility to provide for a revolving credit
facility in the amount of $70.0 million, with a $50.0 million sublimit for
letters of credit, and a $20.0 million term loan facility. The proceeds of the
Restated Credit Facility may be used
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<PAGE> 48
(i) to refinance certain existing indebtedness, (ii) prior to December 31, 1998,
to finance the acquisition of certain Rural DirecTv markets and related costs
and expenses, (iii) to finance capital expenditures of the Company and its
Subsidiaries and (iv) for the general corporate purposes and working capital
needs of the Company and its Subsidiaries.
The $20.0 million term loan facility must be drawn within 12 months of the
closing of the Restated Credit Facility and any amounts not so drawn by that
date will be cancelled. The term loan shall be repaid in 20 consecutive
quarterly installments of $200,000 each commencing September 30, 1998 with the
remaining balance due on July 30, 2003. Borrowings under the revolving credit
facility established pursuant to the Restated Credit Facility will be available
to the Company until July 31, 2003; however, if the then unused portion of the
commitments exceeds $10.0 million on December 31, 1998, the commitments will be
reduced on such date by an amount equal to the unused portion of such
commitments minus $10.0 million. Thereafter, the commitments thereunder will
reduce quarterly commencing on September 30, 1999 at a rate of 3.50% through
1999, 5.75% in 2000, 7.0% in 2001, 9.0% in 2002 and 3.0% until June 30, 2003.
All of the loans outstanding will be repayable on July 31, 2003. The making of
each loan under the Restated Credit Facility will be subject to the satisfaction
of certain conditions, including not exceeding a certain "borrowing base" based
on the number of paying subscribers and households within the Rural DirecTv
Markets served by the Company, maintaining minimum subscriber penetration and
Annualized Contribution (as defined therein) per paying subscriber, and
maintaining maximum ratio of total debt to equity and a maximum ratio of total
debt to annualized operating cash flow and a ratio of senior debt to annualized
operating cash flow. In addition, the Restated Credit Facility provides that the
Company will be required to make mandatory prepayments of the Restated Credit
Facility from, subject to certain exceptions, the net proceeds of certain sales
or other dispositions by the Company or any of its subsidiaries of material
assets and with 50% of any excess operating cash flow with respect to any fiscal
year after the fiscal year ending December 31, 1998.
Borrowings by the Company under the Restated Credit Facility are
unconditionally guaranteed by each of the Company's direct and indirect
subsidiaries, and such borrowings are secured by (i) an equal and ratable pledge
of all of the equity interests in the Company's subsidiaries, (ii) a first
priority security interest in all of their assets, and (iii) a collateral pledge
of the Company's NRTC Member Agreements.
The Restated Credit Facility provides that the Company may elect that all
or a portion of the borrowings under the Restated Credit Facility bear interest
at a rate per annum equal to either (i) the CIBC Alternate Base Rate plus the
Applicable Margin or (ii) the Eurodollar Rate plus the Applicable Margin. When
applying the CIBC Alternate Base Rate with respect to borrowings pursuant to the
revolving credit facility, the Applicable Margin will be (w) 2.25% per annum
(when the Leverage Ratio (as defined in the Credit Facility) is greater than or
equal to 6.75 to 1.00), (x) 2.00% (when the Leverage Ratio is less than 6.75 to
1.00 but greater than or equal to 6.25 to 1.00), (y) 1.50% (when the Leverage
Ratio is less than 6.25 to 1.00 but greater than or equal to 5.75 to 1.00) or
(z) 1.25% (when the Leverage Ratio is less than 5.75 to 1.00). When applying the
Eurodollar Rate with respect to borrowings pursuant to the revolving credit
facility, the Applicable Margin will be (w) 3.50% per annum (when the Leverage
Ratio is greater than or equal to 6.75 to 1.00), (x) 3.25% (when the Leverage
Ratio is less than 6.75 to 1.00 but greater than or equal to 6.25 to 1.00), (y)
2.75% (when the Leverage Ratio is less than 6.25 to 1.00 but greater than or
equal to 5.75 to 1.00) or (z) 2.50% (when the Leverage Ratio is less than 5.75
to 1.00). The Applicable Margin for borrowings pursuant to the term loan
facility will be the Applicable Margin for borrowings pursuant to the revolving
credit facility, plus 0.25%. As used herein, "CIBC Alternate Base Rate" means
the higher of (i) CIBC's prime rate and (ii) the federal funds effective rate
from time to time plus 1/2% per annum. As used herein, "Eurodollar Rate" means
the rate at which eurodollar deposits for one, two, three and six months (as
selected by the Company) are offered to CIBC in the interbank eurodollar market.
The Restated Credit Facility will also provide that at any time when the Company
is in default in the payment of any amount due thereunder, the principal of all
loans made under the Restated Credit Facility will bear interest at 2% per annum
above the rate otherwise applicable thereto and overdue interest and fees will
bear interest at a rate of 2% per annum over the CIBC Alternative Base Rate. See
"Description of Certain Indebtedness -- Restated Credit Facility."
Pursuant to a recent amendment to the NRTC Member Agreements, the Company
and all other NRTC Members whose monthly obligations to the NRTC have exceeded
$500,000 in the past six months are required to keep and maintain in full force
and effect a standby letter of credit in favor of the NRTC to secure their
respective
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payment obligations to the NRTC under the NRTC Member Agreements. The amount of
the letter of credit issued at the request of the Company pursuant to the
Restated Credit Facility, is equal to three times the Company's single largest
monthly invoice from the NRTC, exclusive of amounts payable for DSS(R) equipment
purchased by the Company from the NRTC, or $6.28 million, and must be increased
as the Company makes additional acquisitions of Rural DirecTv Markets and when
the Company's obligations to the NRTC exceed the amount of the original letter
of credit by 167%.
The Company's cash and financing needs for 1997 and beyond will be
dependent on the Company's level of subscriber growth and the related marketing
costs to acquire new subscribers, and the working capital needs necessary to
support such growth. The Company has principal repayment obligations on its
seller and installment notes, and commitments under various operating leases for
office space and equipment. The Company plans to fund these obligations and
operating cash requirements using proceeds from the Initial Offering, $32.1
million of proceeds from the sale of Class A and Class B Units in January and
February 1997 and cash generated from operations. In addition, the Company has
$90.0 million of borrowing availability under the Restated Credit Facility, of
which $56.5 million is immediately available. Such availability will be used to
finance acquisitions, to cover debt service and for operations. The Company's
business strategy contemplates additional acquisitions of Rural DirecTv Markets
which will require additional capital. The Company's operations do not currently
generate positive cash flow. While the Company anticipates funding any
additional acquisitions through borrowings under the Restated Credit Facility,
seller financing in connection with such acquisitions, additional debt and/or
equity offerings and cash from operations, there can be no assurance that such
funding would be available at the time of such acquisitions or available on
favorable terms.
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BUSINESS
GENERAL
The Company is a leading independent provider of DBS television services
offered by DirecTv. DirecTv is the leading provider of DTH satellite television
in the United States, offering over 175 program channels to approximately 2.6
million subscribers. The Company has the exclusive right to provide DIRECTV
Services within certain rural territories in the United States encompassing
approximately 1.5 million households. The Company has approximately 93,000
subscribers representing a household penetration rate of approximately 6.2%. The
Company believes that rural territories such as those served by the Company are
the most attractive market for DTH services because such territories generally
are underserved or are not served by cable systems and offer limited access to
entertainment alternatives. The relative attractiveness of DBS in these rural
areas is evidenced by DirecTv's penetration, which is over three times its
penetration in all other areas of the United States.
The Company believes that DBS and medium power DTH satellite service
provides the lowest cost, highest quality platform for distributing television
programming to households and commercial locations. As of May 31, 1997, there
were approximately 5.0 million subscribers to such satellite services in the
United States. Kagan estimates that there will be approximately 14.6 million DBS
and medium power DTH subscribers by the year 2002, for a compounded annual
growth rate from December 31, 1996, of approximately 23%. A December 1996
Nielsen survey of 17,000 households measuring satisfaction levels with current
pay television services revealed that on a 1-5 scale (with 5 being the most
satisfied), 80% of DBS and medium power DTH satellite users responded with a 4
or 5. Only 45% of cable subscribers indicated a similar level of satisfaction.
DBS is the fastest growing segment of DTH satellite television because,
among other factors, it offers subscribers higher channel capacity and
programming variety, superior video and audio quality and the ability to receive
transmission on an 18 inch dish as compared to a 27 inch to six foot dish
required by other DTH providers. Consumer acceptance of DBS is evidenced by the
high level of sales of DSS(R) equipment which is used to receive DIRECTV
Services. DSS(R) equipment, which was introduced in 1994, is widely regarded as
the most successful launch of a major consumer electronics product in United
States history, eclipsing the television, the VCR and the compact disc player.
DSS(R) equipment is now produced by major manufacturers under the brand names
RCA, GE, ProScan, Sony, Hughes, Panasonic, Hitachi, Toshiba, Uniden, Magnavox,
Sanyo, Samsung, Daewoo and Memorex. DSS(R) equipment is currently sold through
over 25,000 retail outlets throughout the United States for prices typically
ranging from $199 to $599, depending upon the generation of the equipment, the
level of features and the retail outlet. Prices for DSS(R) equipment have
declined consistently since introduction and have declined by over 50% in the
last year alone, thereby further stimulating demand for DIRECTV Services.
The Company believes that DIRECTV Services are superior to those provided
by other DTH service providers. The Company believes that DirecTv's extensive
programming, including up to 60 channels of pay per view movies and events,
various sports packages and the exclusive NFL Sunday Ticket(TM), will continue
to contribute to the growth of DirecTv's subscriber base and DirecTv's market
share for DTH services in the future. In addition, the Company believes that
DirecTv's national marketing campaign (budgeted at approximately $150 million in
1996) and its alliances with significant strategic partners such as AT&T and
Microsoft provide the Company with significant marketing advantages over other
DTH competitors. DirecTv's share of current DBS and medium power DTH subscribers
was approximately 51% as of May 31, 1997, and DirecTv obtained approximately 50%
of all new subscribers to DBS and medium power DTH services for each calendar
quarter in 1996, despite the entrance of two new competitors in the DTH
marketplace. During the first five months of 1997, DirecTv again added more new
subscribers (37%) than any other DBS or medium power DTH provider. Although
DirecTv's share of new subscribers can be expected to decline as existing and
new DTH providers aggressively compete for new subscribers, the Company expects
DirecTv to remain one of the leading providers of DBS and medium power DTH
services in an expanding market.
The Company owns the exclusive right to distribute DIRECTV Services in its
territories pursuant to the NRTC Member Agreements with the NRTC, an
organization the members of which are engaged in the distribution of
telecommunications and other services in predominantly rural areas of the United
States. The
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NRTC acquired in 1992 the exclusive right to provide DIRECTV Services to
residential households and business establishments located in the Rural DirecTv
Markets under the Hughes Agreement. The Company believes that the approximately
eight million households and numerous business establishments located in the
Rural DirecTv Markets are the most attractive market for DBS services.
Generally, Rural DirecTv Markets are not served or are underserved by cable
systems and offer limited access to other entertainment alternatives, which
should enable the Company to maximize penetration levels and maintain high
customer retention.
The Company's objective is to be the leading provider of pay television
entertainment and information services in its Rural DirecTv Markets. To achieve
this objective, the Company pursues the following strategy:
- Capitalize on DirecTv Brand Name and Programming. The Company will build
on the recognition of DirecTv and DSS(R) brand names. In addition, the
Company believes that it can continue to capitalize on DirecTv's extensive
programming, unique and exclusive sports packages and large selection of
pay per view movies and events to broaden the Company's subscriber base in
its Rural DirecTv Markets. Management also believes that competitively
priced DSS(R) equipment, which is sold in more retail outlets within its
Rural DirecTv Markets than any other DTH product, provides the Company
with a competitive advantage over other DTH providers.
- Emphasize Direct Marketing. The Company plans to complement the
extensive marketing efforts of DirecTv and its other national distribution
partners through targeted local and regional marketing. The Company has
established or is establishing a direct sales force and Company-owned full
service retail stores in each of its Rural DirecTv Markets. The Company
believes that it can increase penetration more rapidly through its direct
sales approach instead of relying, as some DTH providers have, upon the
consumer to take the initiative to purchase the product and services.
- Establish Strong Local Presence. Unlike a majority of traditional DTH
providers, the Company will continue to seek to maximize penetration and
customer satisfaction in its Rural DirecTv markets by establishing a
strong local presence within the communities it serves. The Company
provides a full range of services at the local level, including direct
sales, Company-owned retail stores, dealer support services, equipment
installation and customer service. The Company has managers in these
communities to oversee local marketing and customer service operations.
- Operate Regional Clusters. The Company operates in regional clusters
that generate the significant economies of scale of a larger operator and
offer quality centralized customer service to complement local customer
service. The Company believes that the clustering of its Rural DirecTv
Markets results in increased operating efficiencies, including lower
administrative costs as a percentage of revenues, better trained employees
and a higher level of customer service.
- Acquire Additional Rural DirecTv Markets. The Company believes that
consolidation of the Rural DirecTv Markets will continue over the next
three to five years. Beginning with its initial acquisition in March 1996,
the Company has systematically implemented a successful acquisition and
consolidation strategy focused on the Rural DirecTv Markets. The Company
believes that it has a significant opportunity to aggressively acquire
additional rights to provide DIRECTV Services to the approximately 4.0
million households in the approximately 200 Rural DirecTv Markets
currently owned by the original NRTC Members, the majority of which are
rural electric and telephone cooperatives. Management believes that the
Company's experience in completing 16 acquisitions will be instrumental in
identifying, negotiating, and integrating future acquisitions. In
addition, as the Company continues to grow as a leading independent
provider of DIRECTV Services in the Rural DirecTv Markets, "fill-in" and
contiguous acquisitions should become less attractive to other potential
acquirors as their ability to create significant clusters is reduced.
The Company believes its strategy, combined with the general
characteristics of the Company's business of marketing DIRECTV Services,
including relatively low administrative overhead and capital expenditure
requirements, strengthens the opportunity for the Company to generate operating
cash flows.
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OVERVIEW OF THE DTH INDUSTRY
DTH services encompass all types of television transmission from satellites
directly to the home. The FCC has authorized two types of satellite services for
transmission of television programming: Broadcast Satellite Services ("BSS,"
more commonly referred to as "DBS"), which operates at high power (120 to 240
watts per frequency channel) in the Ku-band, and Fixed Satellite Service ("FSS,"
more commonly referred to as low power and medium power DTH), which includes low
power services transmitting in the C-band, as well as medium power (20 to 100
watts per frequency channel) services transmitting in the Ku-band. Both DBS and
medium power DTH satellites are used for digital satellite television services.
DBS provides high quality video and audio signals and can be received by an
18-inch dish. Medium and low power DTH signals require home satellite dishes of
27 inches to six feet in diameter (depending on the geographical location of the
dish and wattage per frequency channel). Of the eight orbital positions
allocated for DBS service in the United States, only the 101 degrees W.L., 110
degrees W.L. and 119 degrees W.L. positions provide complete coverage throughout
the continental United States ("CONUS"). See "-- DirecTv." DirecTv, USSB and
EchoStar are the only current domestic providers of DBS services. All other DTH
domestic satellite television providers currently provide medium or low power
DTH services. See "-- Competition."
A DBS system consists of an uplink center, one or more orbiting satellites
and the subscribers' receiving equipment. The uplink center collects programming
from on-site video equipment and from the direct feeds of programmers. Through
antennae located at the uplink center, the operator transmits, or uplinks, the
programming to transponders located on its geostationary satellite. The
transponders receive and amplify the digital signal and transmit it to receiving
dishes within the area covered by the satellite. The digital signal is then
transmitted via coaxial cable to the subscribers' receiver, where it is
converted into an analog signal which allows it to be received by the
subscribers' televisions. System security is maintained through the use of
reprogrammable access cards that must be inserted into each subscriber's decoder
box to unscramble programming signals.
DBS providers are afforded technological and regulatory advantages over
medium and low power DTH services. The FCC requires the satellites used to
provide DBS services to be spaced at greater intervals than medium and low power
DTH satellites (nine degree orbital spacing over North America compared to two
degree orbital spacing). The greater orbital spacing is intended to ensure that
the signals transmitted by DBS providers can be received by a small dish, free
of interference from adjacent satellites. The closer medium and low power DTH
satellite orbital spacing requires the use of a larger, 27-inch to six foot dish
to eliminate interference from nearby satellites. See "-- Competition -- Medium
Power DTH Providers." In addition, DBS satellites are allowed to broadcast with
much higher power levels than medium and low power DTH satellites. The
combination of greater orbital spacing and higher power enables providers of DBS
services to obtain an optimal balance of small dish size, signal quality in
adverse weather conditions and increased channel capacity.
DIRECTV
DirecTv is the leading DBS provider in the United States, with
approximately 2.6 million subscribers. DirecTv's share of the current DBS and
medium power DTH subscribers was approximately 51% as of May 31, 1996 and
approximately 50% of the new subscribers to DBS and medium power DTH services
during each of the four calendar quarters of 1996 subscribed to DirecTv despite
the entrance of new competitors in the DTH marketplace. During the first five
months of 1997, DirecTv again added more new subscribers (37%) than any other
DBS or medium power DTH provider. Although DirecTv's share of new subscribers
can be expected to decline as existing and new DTH providers aggressively
compete for new subscribers, the Company expects DirecTv to remain one of the
leading providers of DBS and medium power DTH services in an expanding market.
Of the eight orbital positions allocated for DBS service, only the 101
degrees W.L., 110 degrees W.L. and 119 degrees W.L. positions provide full CONUS
coverage. DirecTv has 27 licensed channel frequencies in operation in the 101
degrees W.L. full CONUS orbital position. DirecTv's over 175 program channels
are transmitted via three satellites in this orbital position. DirecTv's
satellites also provide full redundancy on all critical components, including
additional transponders with a sophisticated switching system. The Company
believes that such redundancy substantially lowers the risk of interruption in
service to its subscribers.
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<PAGE> 53
In January 1996, DirecTv entered into a strategic relationship with AT&T
pursuant to which AT&T has the right to market DIRECTV Services directly to all
of its residential customers. AT&T invested $137.5 million for a 2.5% equity
interest in DirecTv with rights to purchase up to a 30% equity interest in
DirecTv based on subscriber acquisition performance. In May 1996, AT&T began to
offer DIRECTV Services to its customers via a nationwide marketing campaign
meant to complement the existing DirecTv distribution channels. Although AT&T
does not receive any payments from the Company with respect to subscriber
activations in its Rural DirecTv Markets, the Company believes that AT&T's
nationwide campaign will enhance customer awareness in the Company's Rural
DirecTv Markets. Additionally, DirecTv has recently announced plans to launch a
joint venture with Microsoft by the end of 1997 to offer a new interactive
personal computer with integrated DSS(R) technology. Consumers with the
DSS(R)-enabled personal computers will be able to subscribe to all of the video
and audio programming currently offered by DirecTv, plus a variety of new data
and multimedia services, including specially developed multimedia magazines,
enhanced video programming, games, children's programming and World Wide Web
content.
DirecTv programming includes (i) cable networks, broadcast networks and
audio services available for purchase in tiers for a monthly subscription fee,
(ii) premium services available a la carte or in tiers for a monthly
subscription fee, (iii) sports programming (major professional league sports
packages, including the exclusive NFL Sunday Ticket(TM) , regional sports
networks and seasonal college sports packages) available for a yearly, seasonal
or monthly subscription fee and (iv) movies from all major Hollywood studios and
special events available for purchase on a pay-per-view basis. Satellite and
premium services available a la carte or for a monthly subscription are priced
comparably to cable. Pay per view movies are generally $2.99 per movie. Pay per
view movies are generally available for viewing on multiple channels at
staggered starting times so that a viewer does not have to wait more than 30
minutes to view a particular pay-per-view movie. DirecTv is constantly adjusting
its programming packages to provide the best channel mix possible at various
price points. The following is a summary of some of the more popular DirecTv
programming packages currently available from the Company:
Total Choice(TM): Package of 45 video channels, 31 CD audio channels,
two Disney channels, an in-market regional sports network and access to up
to 60 channels of pay per view movies and events, which retails for $29.99
per month. Total Choice(TM) is DirecTv's most popular offering. Total
Choice(TM) Platinum, Gold, Silver and Plus Encore offer additional
programming at greater retail prices.
Economy or Select Choice: Two packages of 19 to 33 video channels and
access to up to 60 channels of pay per view movies and events, which retail
for between $16.95 and $19.99 per month. The Economy service is available
only in the Rural DirecTv Markets.
Plus DIRECTV: Package of 16 video channels, 31 CD audio channels and
access to up to 60 channels of pay per view movies and events, which
retails for $14.99 per month. Plus DIRECTV consists of channels not
typically offered on most cable systems and is intended to be sold to
existing cable subscribers to augment their cable or other satellite
services.
NFL Sunday Ticket(TM): All out-of-market NFL Sunday games for $159.00
per season. NFL Sunday Ticket(TM) is exclusive to DirecTv through at least
the end of the 1997-1998 football season.
Encore Multiplex: Seven theme movie services (Love Stories, Westerns,
Mystery, Action, True Stories, WAM! and Encore) for $4.00 per month.
STARZ! Package: Package including STARZ! (East and West) and the
Independent Film Channel for $5.00 per month.
Playboy: Adult service available monthly for $12.99.
Prime Time 24 Network Package: ABC (East and West), NBC (East and
West), CBS (East and West), Fox and PBS available individually for $1.00
per month or collectively for $4.99 per month (available only to
subscribers unable to receive networks over-the-air and who have not
subscribed to cable in the last 90 days).
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<PAGE> 54
Sports Choice: Package of 24 channels (including over 18 regional
sports networks) and five general sports networks (the Golf channel,
NewSport, Speedvision, Classic Sports Network and Outdoor Life) for $12.00
per month on a stand alone basis.
NBA League Pass(SM): Approximately 800 out-of-market NBA games for
$149.00 per season.
NHL Center Ice(SM): Approximately 500 out-of-market NHL games for
$129.00 per season.
MLB Extra Innings: Approximately 800 out-of-market major league
baseball games for $139.00 per season.
Some of the channels provided in the Total Choice package include:
<TABLE>
<S> <C>
A&E....................................... Cultural and entertainment programming
AMC....................................... American Movie Classics
BET....................................... Black Entertainment Television
Cartoon Network........................... Programming from the Hanna Barbera
cartoon library
CNBC...................................... Late breaking market news and personal
finance information
CNN....................................... In-depth news and commentary
CNN International......................... International news, sports and weather
CNN fn.................................... Comprehensive business and financial
news
CMT (Country Music Television)............ Contemporary country music hits
Court TV.................................. News from courtrooms around the world
C-SPAN.................................... Coverage of U.S. congressional events
and public affairs
Discovery Channel......................... Non-fiction entertainment and
documentaries
The Disney Channel (East & West).......... Animated Disney classics, original
series, entertainment specials and
movies
E! Entertainment Television............... Programming from the world of
celebrities and entertainment
ESPN...................................... Wide variety of sports programming
including the NFL, NHL and MLB
ESPN 2.................................... Differentiated sports programming
targeting younger viewers, including the
NHL
The Family Channel........................ Family-oriented entertainment
Headline News............................. Concise, fast-paced 30 minute news
updates
HGTV...................................... Home and Garden Television
TLC (The Learning Channel)................ Diverse mix of how-to, cooking, science,
history and educational shows
Music Choice.............................. 31 channels
Sci-Fi Channel............................ Science fiction, fantasy, classic horror
and factual science programming
Superstation TBS.......................... Movies, documentaries, comedies,
children's shows and sports, including
the NBA and Atlanta Braves baseball
TNT (Turner Network Television)........... Classic and original movies, NFL and
comprehensive NBA schedule
The Travel Channel........................ Video visits and travel information and
advice
TCM (Turner Classic Movies)............... Movies, special features and
entertainment
USA Network............................... Original series, movies, high profile
sports and animated children's
programming
The Weather Channel....................... Local, national and international
weather
</TABLE>
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USSB owns five transponders on DirecTv's first satellite and offers a
programming service separate from DirecTv's service, with over 25 channels of
premium video programming not available from DirecTv, including HBO(R), Showtime
Network(R), MTV(R) and Comedy Central(R). USSB's selection of programming
services (and its use of transponders on the same satellite used by DirecTv,
which enables subscribers to receive both DirecTv and USSB signals with a single
dish) allows it to be marketed as complementary programming to DirecTv. The
Company is a dealer of USSB and receives a one-time commission for each
activation of a subscriber to USSB programming. As of March 31, 1997,
approximately 56% of DirecTv's 2.5 million subscribers receive USSB programming.
DirecTv does not generally provide local broadcast programming via
satellite. However, seamless switching between satellite and broadcast
programming provided by other sources is possible with all DSS(R) units. In
addition, DirecTv provides programming from affiliates of the national broadcast
networks to subscribers who are unable to receive networks over the air and do
not subscribe to cable.
To receive DIRECTV Services, subscribers must purchase DSS(R) equipment,
which consists of an 18 inch satellite dish, an integrated DSS(R) receiver unit
(similar in size and appearance to a VCR) and a remote control, all of which are
used with standard television sets. Each DSS(R) receiver includes an access card
which is uniquely addressed to it. The access card, which can be removed from
the receiver, prevents unauthorized reception of DIRECTV Services and retains
billing information on pay-per-view usage. The small size of the dish makes it
more acceptable to housing communities and organizations that prohibit the
installation of larger dishes due to their appearance. The DSS(R) receiver
captures and translates the signal and interfaces with an easy to use on-screen
electronic program guide with a parental locking/ratings control function.
DSS(R) equipment is currently sold through over 25,000 retail outlets
throughout the United States for prices typically ranging from $199 to $599,
depending upon the generation of the equipment, the level of features and the
retail outlet. Prices for DSS(R) equipment have declined consistently since
introduction and have declined by over 50% in the last year alone thereby
further stimulating demand for DIRECTV Services. Typically, consumers can
purchase home installation kits for approximately $75 or receive professional
installation for approximately $150.
The DSS(R) equipment used to receive DIRECTV Services is manufactured by
several large manufacturers under the brand names RCA, GE, ProScan, Sony,
Hughes, Panasonic, Hitachi, Toshiba, Uniden, Magnavox, Sanyo, Samsung, Daewoo
and Memorex. The Company believes that the brand names and reputations of the
DSS(R) manufacturers in the consumer electronics industry offers DirecTv and the
Company a significant competitive advantage relative to other DTH providers
because consumers value the quality and service reputation of these brand names
when purchasing home electronics and television products.
MARKET POTENTIAL FOR DBS AND MEDIUM POWER DTH SERVICES
The Company believes that DBS and medium power DTH satellite service
provides the lowest cost, highest quality platform for distributing television
programming to households and commercial locations. As of May 31, 1997, there
were approximately 5.0 million subscribers to such satellite services in the
United States. Kagan estimates that there will be approximately 14.6 million DBS
and medium power DTH subscribers by the year 2002, for a compounded annual
growth rate from December 31, 1996 of approximately 23%. A December 1996 Nielsen
survey of 17,000 households measuring satisfaction levels with current pay
television services revealed that on a 1-5 scale (with 5 being the most
satisfied), 80% of DBS and medium power DTH satellite users responded with a 4
or 5. Only 45% of cable subscribers indicated a similar level of satisfaction.
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The following chart illustrates historical and projected growth of the
number of subscribers to DBS and medium power DTH services.
(bar chart)
PROJECTED GROWTH OF DBS AND MEDIUM POWER DTH SUBSCRIBERS
- ------------------------------
Source: Paul Kagan Associates, Inc.
The Company believes that the following factors will contribute to the
market growth of the DSS(R) system:
DOMINANCE OF NATIONAL MARKET BY DIRECTV
DirecTv's commercial service was launched approximately two years prior to
the launch of the next DBS service. Estimates by Kagan indicate that DirecTv
subscribers accounted for over 51% of the subscribers to DBS and medium power
DTH services as of May 31, 1997. Kagan also estimates that approximately 50% of
the new subscribers to DBS and medium power DTH services during each of the four
calendar quarters of 1996 subscribed to DirecTv, despite the entrance of other
DTH providers into the market. During the first five months of 1997, DirectTv
again added more new subscribers (37%) than any other DBS or medium power DTH
provider. The Company expects DirecTv to remain one of the leading providers of
DBS and medium power DTH services in an expanding market, even though DirecTv's
share of new subscribers can be expected to decline as existing and new DBS
providers aggressively compete for new subscribers.
DEMAND FOR INCREASED TELEVISION PROGRAMMING AND BETTER QUALITY PICTURE AND
SOUND
Prior to the growth of cable television services, television viewers were
offered a relatively limited number of channels. As the number of channels
increased, consumer demand for more programming choices also increased. The
Company expects that, as this trend continues, consumers will desire higher
quality programming choices than are available through cable. In addition to its
wide array of programming packages, DirecTv offers subscribers access to up to
60 channels of pay-per-view movies, sports and live special events, which is
significantly greater than that offered by other pay television providers. In
addition, DirecTv's comprehensive major league sports packages, such as NFL
Sunday Ticket(TM), NBA League Pass(SM) and MLB Extra Innings, offer subscribers
viewing options currently available only through DirecTv. The Company believes
consumers are also increasingly demanding improved signal quality compared to
what has historically been offered by over-the-air VHF and UHF broadcasters and
by cable. The Company believes that the DSS(R) system is well-positioned to
benefit from these growing demands.
DISSATISFIED CABLE SUBSCRIBERS
Research by Nielsen shows that a substantial number of current cable
subscribers are dissatisfied with the level of service and value generally
provided by cable operators. The DSS(R) system provides greater choice and, the
Company believes, more reliable broadcast service at prices competitive with
cable for an improved level of programming. A December 1996 Nielsen survey of
17,000 households measuring satisfaction levels with current
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<PAGE> 57
pay television services revealed that on a 1-5 scale (with 5 being the most
satisfied), 80% of DBS and medium power DTH satellite users responded with 4 or
5. Only 45% of cable subscribers indicated a similar level of satisfaction.
MARKET POTENTIAL IN RURAL DIRECTV MARKETS
The Company believes the approximately eight million households and
numerous business establishments the NRTC estimates to be located in the Rural
DirecTv Markets are the most attractive markets for DBS services because they
generally are not served or are underserved by cable systems and offer limited
access to other entertainment alternatives. The relative attractiveness of DBS
in rural areas is evidenced by DirecTv's penetration, which is over three times
its penetration in all other areas of the United States. The Company also
believes that as the cost of DSS(R) equipment continues to decline, consumers in
the Rural DirecTv Markets will increasingly be willing to incur the cost of
purchasing such equipment to obtain programming which is unavailable to them
through other sources.
Approximately 35 to 40 million households in the United States are not
served or are underserved by cable systems. An area is considered to be
"underserved" based on to the number of channels provided, the quality of the
programming, the quality of the signal and the number of households within the
area which are passed by the cable system. There are approximately 11,000 cable
systems in the United States, many of which are located in areas where the cost
to upgrade these systems on a per subscriber basis would be greater than in more
densely populated areas. Even in areas where it is economically feasible, cable
system upgrades may not occur in the near future. Areas unserved or underserved
by cable are an important target market for the Company. Compared to 8% of the
households in the United States that are not passed by cable, approximately
26.6% of the households in the Company's Rural DirecTv Markets are not passed by
cable.
ACQUISITIONS BY THE COMPANY
The Company has acquired the exclusive right to provide DIRECTV Services in
16 Rural DirecTv Markets since it began implementing its acquisition strategy.
When the Company purchases the exclusive right to provide DIRECTV Services in a
Rural DirecTv Market, it acquires the NRTC Member Agreement and related
agreements providing for the exclusive right to provide DIRECTV Services within
such Rural DirecTv Market, all assets related to the provision of DIRECTV
Services in such market and any residual rights to provide DBS services which
the NRTC may grant the owner of such Rural DirecTv Market after the termination
or expiration of the NRTC Member Agreement.
Management believes that the Company's experience in completing 16
acquisitions will be instrumental in identifying, negotiating and integrating
future acquisitions. In addition, the Company has created operating efficiencies
in its Rural DirecTv Markets since they were acquired, including lower
administrative costs as a percentage of revenues, better trained employees and a
higher level of customer care. The Company has also opened its own full service
retail outlets in three markets and has recruited direct sales forces and
independent dealer networks. As markets are consolidated, the Company plans to
implement in all of its Rural DirecTv Markets direct sales forces to expand its
subscriber base.
The Company completed its first two acquisitions of the exclusive right to
provide DIRECTV Services in Rural DirecTv Markets from NRTC Members in the first
half of 1996. In the second half of 1996, the Company completed the six
additional acquisitions of such rights in Rural DirecTv Markets in New York,
Colorado, New Mexico and South Carolina. In the first quarter of 1997, the
Company completed four acquisitions in Kentucky, Kansas and Vermont. In May
1997, the Company completed four acquisitions in Georgia and, as a result
thereof, became a leading NRTC Member based on the number of households within
its Rural DirecTv Markets with
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<PAGE> 58
approximately 1.5 million households and approximately 93,000 subscribers. The
Company has the exclusive right to distribute DIRECTV Services in 16 Rural
DirecTv Markets in the following locations:
<TABLE>
<CAPTION>
PERCENTAGE
OF HOMES
NOT PASSED
LOCATION HOUSEHOLDS BY CABLE SUBSCRIBERS(1) PENETRATION(2)
<S> <C> <C> <C> <C>
Kentucky(3)....................... 368,445 31.23% 21,205 5.76%
Kansas(4)......................... 299,423 19.17% 12,111 4.04%
Georgia(5)........................ 240,229 28.89% 14,490 6.03%
Vermont(6)........................ 209,332 34.80% 22,567 10.78%
South Carolina(7)................. 164,314 31.66% 7,056 4.29%
New Mexico(8)..................... 84,920 16.06% 4,977 5.86%
California(9)..................... 84,006 3.84% 5,660 6.74%
New York(10)...................... 49,593 30.52% 4,579 9.23%
--------- ----- ------ -----
Total................... 1,500,262 26.58% 92,645 6.18%
========= ===== ====== =====
</TABLE>
- ------------------------------
(1) Reflects actual subscribers at May 31, 1997.
(2) Represents the percentage of households which subscribe to DIRECTV Services
in the Company's Rural DirecTv Markets.
(3) Cluster consists of a Rural DirecTv Market acquired in January 1997 which
includes households located in portions of Jefferson County, Kentucky and
in all or portions of 37 surrounding counties in Kentucky.
(4) Cluster consists of Rural DirecTv Markets acquired in January 1997 which
include households located in the following counties in Kansas: Clay,
Cowley, Ellis, Greenwood, Harvey, Lyon and Sumner, and in portions of 58
additional counties in Kansas.
(5) Cluster consists of Rural DirecTv Markets acquired in May 1997 which
include households located in the following counties in Georgia: Baker,
Baldwin, Burke, Calhoun, Colquitt, Decatur, Early, Glascock, Grady, Greene,
Hancock, Jasper, Jefferson, Jenkins, Johnson, Lamar, Miller, Mitchell,
Monroe, Morgan, Putnam, Seminole, Screven, Sumter, Terrell, Thomas, Tift,
Turner, Warren, Washington, Wilkinson and Worth, and in portions of the
following counties in Georgia: Dougherty, Jones, Lee and Twiggs.
(6) Cluster consists of a Rural DirecTv Market acquired in February 1997 which
includes households in the following counties in Vermont: Addison,
Bennington, Caledonia, Essex, Franklin, Lamoille, Orange, Orleans, Rutland,
Washington, Windham and Windsor and in Cheshire County, New Hampshire and
Sullivan County, New Hampshire.
(7) Cluster consists of Rural DirecTv Markets acquired in November 1996 which
include households located in the following counties in South Carolina:
Clarendon, Chesterfield, Darlington, Dillon, Georgetown, Lee, Marion,
Marlboro and Williamsburg, and in portions of Florence County, South
Carolina.
(8) Cluster consists of Rural DirecTv Markets acquired in March 1996 and August
1996 which include households located in the following counties in New
Mexico: Colfax, Los Alamos, Rio Arriba, Santa Fe and Taos, and in Chaffee
County, Colorado and Saguache County, Colorado.
(9) Cluster consists of Rural DirecTv Market acquired in April 1996 which
includes households located in San Luis Obispo County, California.
(10) Cluster consists of Rural DirecTv Markets acquired in August 1996 which
include households located in the following counties in New York: Cortland,
Schuyler and Yates, and in portions of Madison County, New York and Oneida
County, New York.
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CONSOLIDATION OF RURAL DIRECTV MARKETS
The Company believes that consolidation of the Rural DirecTv Markets will
continue over the next three to five years. The following chart illustrates the
current ownership of the households in the Rural Direct Markets:
(Pie Chart)
OWNERSHIP OF HOUSEHOLDS IN RURAL DIRECTV MARKETS
- ------------------------------
Source: National Rural Telecommunications Cooperative
SALES AND DISTRIBUTION
The Company offers DIRECTV Services to consumer and business segments in
its Rural DirecTv Markets through two separate but complementary sales and
distribution channels.
COMPANY CONTROLLED CHANNELS
The Company employs both a direct sales force and an extensive indirect
dealer network, which includes major retailers, mass merchandisers and consumer
electronics stores, in its Rural DirecTv Markets.
The Company has direct sales forces in all but one of its market clusters,
and plans to establish a direct sales force in that cluster by the end of the
third quarter of 1997. The Company's direct sales force is supported by an
active lead generation call center which sets appointments during which outside
sales agents provide in-home demonstrations of DIRECTV Services. The Company
also has Company-owned full service retail stores located in three of its Rural
DirecTv Markets and has plans to open additional stores in its other markets.
The Company has increased, and continues to increase, the number of quality
independent dealers in its Rural DirecTv Markets. The Company seeks to develop
close relationships with these dealers and provides marketing, subscriber
authorization, installation and customer service support to enhance subscriber
additions from such dealers. Whenever possible, the Company attempts to achieve
exclusivity with its dealers network by paying higher commissions to dealers who
do not sell competing DTH Services. In connection with the sale of a DSS(R) unit
and a subscription to DIRECTV Services offered by the Company, a dealer retains
the proceeds from the sale of the equipment and earns a one-time commission paid
by the Company. The Company retains the ongoing monthly subscription revenue
from the subscriber. For certain equipment sold through the indirect dealer
network, the Company provides a subsidy, thus lowering the price of the
equipment for the consumer.
NON-COMPANY CONTROLLED CHANNELS
DIRECTV Services are also offered to potential subscribers in the Company's
Rural DirecTv Markets by sources which the Company does not control. Such
sources include (i) national retailers selected by DirecTv, (ii) consumer
electronics dealers authorized by DirecTv to sell DIRECTV Services, (iii)
satellite dealers and consumer electronics dealers authorized by five regional
sales management agents ("SMAs") selected by DirecTv and (iv) AT&T, which has
the right to market DIRECTV Services to its residential customers. Similar to
the Company's indirect dealer network, the Company pays a one-time commission to
these distribution channels for the sale of DIRECTV Services to a subscriber
located in the Company's Rural DirecTv Markets and the Company receives all
monthly programming revenues associated therewith.
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MARKETING
In its marketing efforts, the Company emphasizes the DirecTv and DSS(R)
brand names, promoting the superior DirecTv programming as the new standard in
television. The Company reinforces the marketing efforts of DirecTv and its
other national distribution partners, including AT&T, with local print and radio
advertising to promote general market acceptance of DIRECTV Services. In 1996,
DirecTv budgeted to spend approximately $150 million on its national advertising
campaigns. In addition, the Company implements support advertising programs for
its indirect distribution channels. The Company's marketing efforts emphasize
the value of premium subscription plan offerings in order to maximize revenues
per customer. Specific promotions, such as offering new subscribers an initial
month's service at no charge, have been implemented to motivate customers to
purchase such plans, and the Company has incentive-based sales compensation for
both the direct and dealer sales forces to promote and sell premium subscription
plans. The Company has established or plans to establish a direct sales force
and Company-owned full service retail stores in each of its Rural DirecTv
Markets. The Company believes that it can increase penetration more rapidly
through its direct sales approach instead of relying as some DTH providers have
upon the consumer to take the initiative to purchase the product and services.
A key element of the Company's marketing strategy is to offer value-priced
DSS(R) equipment and installation through the use of subsidies on direct sales
of equipment and installations. The Company offers various types of DSS(R)
equipment and accessories through its direct sales force and retail locations.
The Company is able to take advantage of volume discounts in purchasing this
equipment from the NRTC. In addition, dealers are motivated to lower the prices
at which they offer DSS(R) equipment and installation by the Company's volume-
based commission structure.
CUSTOMER SERVICE
Quality installations and ongoing customer care are critical elements to
customer satisfaction and low customer churn. The Company has established
centralized customer care facilities and maintains customer service technicians
in each of its market clusters. The market clusters are responsible for the
processing of subscription authorizations, assisting the customers through the
installation and initial service period and handling customer inquiries and
service complaints that require customer contact. Centralized customer service
handles customer inquiries and complaints, billing issues and service questions,
proactive customer service programs and customer account treatment. The Company,
through its customer care department, currently provides customer service from
8:00 a.m. EST to 1:00 a.m. EST each day, seven days a week. The staff is highly
trained with on-line access to the DirecTv billing and authorization system.
RELATIONSHIP WITH THE NRTC AND DIRECTV
In 1992, the NRTC acquired pursuant to the Hughes Agreement the exclusive
right to provide DIRECTV Services to residential households and commercial
establishments located in the Rural DirecTv Markets. The NRTC subdivided its
rights to provide such services into approximately 250 geographically based
Rural DirecTv Markets, with the smallest Rural DirecTv Market consisting of
approximately 150 households and the largest (which is owned by the Company)
consisting of approximately 370,000 households. The NRTC then sold individual
Rural DirecTv Markets to NRTC Members pursuant to the NRTC Member Agreements.
The DIRECTV Services offered by the Company to its subscribers in its Rural
DirecTv Markets are acquired pursuant to NRTC Member Agreements, which were
assigned to the Company with the consent of the NRTC and DirecTv when the
Company acquired such Rural DirecTv Markets.
Both the Hughes Agreement and the NRTC Member Agreements expire when Hughes
removes its current satellites from their assigned orbital locations. According
to Hughes and USSB, the DirecTv satellites have estimated orbital lives of at
least 15 years from their respective launches in December 1993 and 1994. The
NRTC has advised the Company that the Hughes Agreement provides the NRTC with a
right of first refusal to obtain DBS Services (other than programming services)
in substantially the same form as such DBS Services are provided under the
existing Hughes Agreement in the event that Hughes elects to launch one or more
successor satellites upon the removal of the present satellites from their
assigned orbital locations. The NRTC Member
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Agreements do not expressly provide an equivalent right of first refusal for the
NRTC Members to acquire DBS Services through the NRTC should the NRTC exercise
its right of first refusal under the Hughes Agreement. The NRTC Member
Agreements do provide, however, that the Company has substantial proprietary
interests in and rights to information other than with respect to subscribers to
"non-select" services with respect to the Company's subscribers. The Company
shares with DirecTv such interests and rights with respect to subscribers to
both DIRECTV Services and "non-select" services. Moreover, the Company (through
the Subsidiaries) is an affiliate of the NRTC. While affiliates have no vote,
they do have an interest in the NRTC in proportion to their prior patronage.
Thus, given the Company's rights in the subscriber information and its interest
in the NRTC, the Company believes that if the NRTC exercises its rights of first
refusal under the Hughes Agreement, such rights will be made available by the
NRTC to the Company. See "Risk Factors -- Ability to Acquire DBS Services from
the NRTC and DirecTv after Expiration of Term of NRTC Member Agreements."
Pursuant to the NRTC Member Agreements, the Company has the exclusive right
in its Rural DirecTv Markets to market, sell and retain all of the revenues from
subscribers derived from the sale of programming (other than that designated as
"non-select" programming) transmitted by the DirecTv satellites over the 27
frequencies owned by Hughes. The Company pays the NRTC for the wholesale cost of
the programming and a fee to DirecTv based upon 5% of the programming revenue.
Programming is designated as "non-select" if the provider of such programming to
DirecTv requires payment of minimum subscriber guarantees, advance payments or
other similar commitments and the NRTC determines not to make such payments.
Currently, such "non-select" services include, for example, NFL Sunday
Ticket(TM). The NRTC and the Company have the right to select these services as
new agreements are entered into between DirecTv and the content provider. The
Company retains 5% of the revenues from "non-select" services purchased by its
subscribers and remits the balance to DirecTv.
Pursuant to the NRTC Member Agreements, the Company is obligated to
promote, market and sell DIRECTV Services, to authorize new subscribers through
DirecTv's "Conditional Access Management Center" and to take all reasonable
steps to ensure that DIRECTV Services are not received at any unauthorized
locations or in any unauthorized manner. The Company also purchases customer
authorization, billing services and centralized remittance processing services
from the NRTC pursuant to the NRTC Member Agreements. The NRTC Member Agreements
also contain customary provisions regarding payment terms, compliance with laws
and indemnification and provide that both the NRTC and DirecTv must consent
prior to the assignment or transfer by the NRTC Member party thereto of its
rights or obligations under the NRTC Member Agreements, which consent shall not
be unreasonably withheld. The NRTC Member Agreements also contain termination
provisions which allow the NRTC to terminate such agreements (i) as a result of
a breach by Hughes, with the NRTC remaining responsible for paying to the
Company its pro rata portion of any refunds that the NRTC receives from Hughes
under the Hughes Agreement, (ii) if the Company fails to make any payment due to
the NRTC or otherwise breaches a material obligation of the NRTC Member
Agreement and such failure or breach continues for more than 30 days after
written notice from the NRTC, or (iii) if the Company fails to keep and maintain
any letter of credit required to be provided to the NRTC in full force and
effect or to adjust the amount of the letter of credit as required by the NRTC
Member Agreement.
COMPETITION
The Company faces competition from a broad range of companies offering
communications and entertainment services, including cable operators, other
satellite service providers, wireless cable operators, telephone companies,
television networks and home video product companies. Many of the Company's
competitors have greater financial and marketing resources than the Company, and
the business of providing subscription and pay television programming is highly
competitive. The Company believes that quality and variety of programming,
signal quality and service and cost will be the key bases of competition. See
"Risk Factors -- Competition and Technological Change."
CABLE TELEVISION
Cable operators in the United States serve approximately 64 million
subscribers, representing over 65% penetration of television households passed
by cable systems. Cable operators typically offer 25 to 78 channels of
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programming at an average monthly subscription price of approximately $35. While
cable companies currently serve a majority of the U.S. television market, the
Company believes many may not be able to provide the quality and variety of
programming offered by DirecTv until they significantly upgrade their coaxial
systems. Many cable television providers are in the process of upgrading their
systems and other cable operators have announced their intentions to make
significant upgrades. Many proposed upgrades, such as conversion to digital
format, fiber optic cabling, advanced compression technology and other
technological improvements, when fully completed, will permit cable companies to
increase channel capacity, thereby increasing programming alternatives, and to
deliver a better quality signal. However, although cable systems with adequate
channel capacity may offer digital service without major rebuilds, the Company
believes that other cable systems that have limited channel capacity like those
in most of the Rural DirecTv Markets will have to be upgraded to add bandwidth
in order to provide digital service. The Company believes that such upgrades
will require substantial investments of capital and time to complete
industry-wide. As a result, the Company believes that there will be a
substantial delay before cable systems in the Rural DirecTv Markets can offer
programming services equivalent to digital DBS providers and that some cable
systems in those markets may never be upgraded, subject to advances in digital
compression technology currently under development.
The Company expects to encounter a number of challenges in competing with
cable television providers. First, cable operators have an entrenched position
in the marketplace. The Company believes that its current strategy of targeting
for acquisition Rural DirecTv Markets which are not served by cable or are
underserved by cable partially offsets the cable industry's position in the
consumer marketplace. Second, the upfront costs to the consumer associated with
purchasing and installing DSS(R) equipment are higher than the upfront costs for
installation of cable television. However, as a result of the lowering of the
price of the DSS(R) unit in 1996, the Company realized a substantial growth in
its subscriber base. Third, current DBS systems, unlike cable, do not provide
local broadcast programming via satellite, although seamless switching between
satellite and broadcast programming from other sources is possible with all
DSS(R) units. In addition, DirecTv provides programming from affiliates of the
national broadcast networks to subscribers who are unable to receive networks
over the air and do not subscribe to cable. The Company believes that the
significant capital costs of upgrading cable systems to provide similar
services, combined with the marketing strength of DBS providers such as DirecTv,
presents DBS providers with an opportunity to take substantial market share for
pay television services from cable in the Rural DirecTv Markets.
OTHER DBS PROVIDERS
EchoStar commenced national broadcasting of programming in March 1996 and
currently broadcasts over 120 video channels and 30 audio channels. EchoStar has
21 licensed channel frequencies at the 119 degrees W.L. full CONUS orbital
position and has 69 frequencies in other partial CONUS orbital locations.
EchoStar reported approximately 545,000 subscribers at May 31, 1997,
representing a 10% market share of high and medium power DTH subscribers. The
Company believes that it can successfully compete with EchoStar in the DBS
market because of DirecTv's brand name and its significantly larger distribution
networks and greater number of manufacturers of the equipment used to receive
DTH services.
USSB owns and operates five transponders on DirecTv's first satellite and
offers a programming service separate from DirecTv's service, with over 25
channels of premium video programming not available from DirecTv, including
HBO(R), Showtime Network(R), MTV(R) and Comedy Central(R). USSB's programming
(and its use of transponders on the same satellite used by DirecTV, which
enables subscribers to receive both DirecTv and USSB signals with a single dish)
allows it to be marketed as complementary to DirecTv. As of March 31, 1997,
approximately 56% of DirecTv's 2.6 million subscribers received USSB
programming. In addition, USSB has three licensed channel frequencies at the 110
degrees W.L. full CONUS orbital position and eight at the 148 degrees W.L.
partial CONUS position.
MEDIUM POWER DTH PROVIDERS
PrimeStar, owned primarily by a consortium of cable companies including
TCI, launched the first digital DTH satellite television service in 1994. As a
result of the successful launch and operation of a new satellite in early 1997,
PrimeStar increased its medium-power programming services to approximately 150
channels. This
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new satellite will potentially enable PrimeStar to reduce its dish size to
approximately 29 inches for most subscribers within the continental United
States. In addition, PrimeStar is expected to have access to significant DBS
capacity via TSAT's DBS satellite, which is capable of providing full-CONUS
service. PrimeStar has announced plans to use such satellite to provide a mix of
sports, multichannel movie services, pay-per-view services and popular cable
networks to traditional broadcast television, basic cable and other analog
programming customers. As of May 31, 1997, PrimeStar had approximately 1.9
million subscribers.
On June 11, 1997, PrimeStar announced that it had entered into an agreement
to combine its assets with American Sky Broadcasting ("ASkyB"). According to
press releases, each of PrimeStar's cable company partners will contribute its
PrimeStar customers and partnership interests into the newly formed entity.
ASkyB has announced that it will contribute two satellites under construction
and 28 full-CONUS frequencies at the 110 degrees W.L. orbital location. This
proposed transaction requires certain federal regulatory approvals. In addition,
Tempo Satellite, Inc. has a license for a satellite using 11 full-CONUS
frequencies at the 119 degrees W.L. orbital location, and recently launched a
satellite to that location.
Tee-Comm Electronics, Inc., a supplier of C-band hardware in North America,
entered the medium power DTH marketplace in mid-1996 with its AlphaStar Digital
Network ("AlphaStar"). AlphaStar offers approximately 150 digital video and
audio channels. The AlphaStar service generally utilizes 36-inch dishes, rather
than the 18-inch dish utilized by DirecTv subscribers. AlphaStar reported
approximately 51,000 subscribers at May 31, 1997, representing less than 1% of
the market for DBS and medium power DTH satellite subscribers. On May 27, 1997,
AlphaStar filed for bankruptcy protection under Chapter 11.
OTHER COMPETITORS
Low power C-band operators reported approximately 2.2 million subscribers
representing 31% of the total market for DTH satellite services at May 31, 1997.
The C-band/TVRO market has been built primarily on subscribers who live in
markets not served by cable television. C-band equipment, including the six to
eight foot dish necessary to receive the low power signal, currently costs
approximately $2,000 and is distributed by local TVRO satellite dealers. The
Company believes that high and medium power DTH services have significant
advantages over low power C-band service in equipment cost, dish size and range
of programming packages. The number of C-band subscribers declined by
approximately 100,000 during 1996 and early 1997 to 2.2 million as of May 31,
1997.
There are approximately 175 wireless cable systems in the United States,
serving approximately 1.2 million subscribers. These systems (which are usually
analog) typically offer only 20 to 40 channels of programming, which may include
local programming. Wireless cable requires a direct line of sight from the
receiver to the transmitter, which creates the potential for substantial
interference from terrain, buildings and foliage in the line of sight. However,
while it is expected that most large wireless operators (especially certain of
those backed by local telephone companies) will upgrade to digital technology
over the next several years, such upgrades will require the installation of new
digital decoders in customers' homes and modifications to transmission
facilities, at a potentially significant cost.
Certain regional telephone companies and other long distance companies
could become significant competitors in the future, as they have expressed an
interest in becoming subscription television providers. Furthermore, legislation
recently passed by Congress removes barriers to entry which previously inhibited
telephone companies from competing, or made it more difficult for telephone
companies to compete, in the provision of video programming and information
services. Certain telephone companies have received authorization to test market
video and other services in certain geographic areas using fiber optic cable and
digital compression over existing telephone lines. Estimates for the timing of
wide-scale deployment of such multichannel video service vary, as several
telephone companies have pushed back originally announced deployment schedules.
As more telephone companies begin to provide subscription programming and
other information and communications services to their customers, additional
significant competition for subscribers will develop. Among other things,
telephone companies have an existing relationship with substantially every
household in
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their service area, substantial financial resources, and an existing
infrastructure and may be able to subsidize the delivery of programming through
their position as the sole source of telephone service to the home.
Most areas of the U.S. are covered by traditional territorial over-the-air
VHF/UHF broadcasters. Consumers can receive from three to ten channels of
over-the-air programming in most markets. These stations provide local, network
and syndicated programming free of charge, but each major market is generally
limited in the number of programming channels. Congress is expected to consider
the release of additional digital spectrum for use by VHF/UHF broadcasters later
this year.
REGULATION
Unlike a common carrier, such as a telephone company, or a cable operator,
DBS operators such as DirecTv are free to set prices and serve customers
according to their business judgment, without rate of return or other regulation
or the obligation not to discriminate among customers. However, there are laws
and regulations that affect DirecTv and, therefore, affect the Company. As an
operator of a privately owned United States satellite system, DirecTV is subject
to the regulatory jurisdiction of the FCC, primarily with respect to (i) the
licensing of individual satellites (i.e., the requirement that DirecTv meet
minimum financial, legal and technical standards), (ii) avoidance of
interference with radio stations and (iii) compliance with rules that the FCC
has established specifically for DBS satellite licenses. As a distributor of
television programming, DirecTv is also affected by numerous other laws and
regulations. The Telecommunications Act of 1996 (the "1996 Act") clarifies that
the FCC has exclusive jurisdiction over DTH satellite services and that criminal
penalties may be imposed for piracy of DTH satellite services. The 1996 Act also
offers DTH operators relief from private and local government-imposed
restrictions on the placement of receiving antennae. In some instances, DTH
operators have been unable to serve areas due to laws, zoning ordinances,
homeowner association rules, or restrictive property covenants banning the
installation of antennae on or near homes. The FCC recently promulgated rules
designed to implement Congress' intent by prohibiting any restriction, including
zoning, land use or building regulation, or any private covenant, homeowners'
association rule, or similar restriction on property within the exclusive use or
control of the antenna user where the user has a direct or indirect ownership
interest in the property, to the extent it impairs the installation, maintenance
or use of a DBS receiving antenna that is one meter or less in diameter or
diagonal measurement, except where such restriction is necessary to accomplish a
clearly defined safety objective or to preserve a recognized historic district.
Local governments and associations may apply to the FCC for a waiver of this
rule based on local concerns of a highly specialized or unusual nature. The FCC
also issued a further notice of proposed rulemaking seeking comment on whether
the 1996 Act applies to restrictions on property not within the exclusive use or
control of the viewer and in which the viewer has no direct or indirect property
interest. The 1996 Act also preempted local (but not state) governments from
imposing taxes or fees on DTH services, including DBS. Finally, the 1996 Act
required that multichannel video programming distributors such as DTH operators
fully scramble or block channels providing indecent or sexually explicit adult
programming. If a multi-channel video programming distributor cannot fully
scramble or block such programming, it must restrict transmission to those hours
of the day when children are unlikely to view the programming (as determined by
the FCC). On March 24, 1997, the U.S. Supreme Court let stand a lower court
ruling that allows enforcement of this provision pending a constitutional
challenge. In response to this ruling, the FCC declared that its rules
implementing the scrambling provision would become effective on May 18, 1997.
In addition to regulating pricing practices and competition within the
franchise cable television industry, the Cable Act was intended to establish and
support existing and new multi-channel video services, such as wireless cable
and DTH, to provide subscription television services. DirecTv and the Company
have benefited from the programming access provisions of the Cable Act and
implementing rules in that DirecTv has been able to gain access to previously
unavailable programming services and, in some circumstances, has obtained
certain programming services at reduced cost. Any amendment to, or
interpretation of, the Cable Act or the FCC's rules that would permit cable
companies or entities affiliated with cable companies to discriminate against
competitors such as DirecTv in making programming available (or to discriminate
in the terms and conditions of such programming) could adversely affect
DirecTv's ability to acquire programming on a cost-effective basis, which would
have an adverse impact on the Company. Certain of the restrictions on
cable-affiliated programmers will expire in 2002 unless the FCC extends such
restrictions.
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The Cable Act also requires the FCC to conduct a rulemaking that will
impose public interest requirements for providing video programming on DTH
licensees, including, at a minimum, reasonable and non-discriminatory access by
qualified candidates for office and the obligation to set aside four to seven
percent of the licensee's channel capacity for non-commercial programming of an
educational or informational nature. Within this set-aside requirement, DTH
providers must make capacity available to "national educational programming
suppliers" at below-cost rates. The FCC is conducting a rulemaking to implement
this statutory provision.
While DTH operators like DirecTv currently are not subject to the "must
carry" requirements of the Cable Act, the cable industry has argued that DTH
operators should be subject to these requirements. In the event the "must carry"
requirements of the Cable Act are revised to include DTH operators, or to the
extent that new legislation of a similar nature is enacted, DirecTv's future
plans to provide local programming will be adversely affected, and such
must-carry requirements could cause the displacement of possibly more attractive
programming.
The Satellite Home Viewer Act (the "SHVA") establishes a "compulsory"
copyright license that allows a DTH operator, for a statutorily-established fee,
to retransmit network programming to subscribers for private home viewing so
long as that retransmission is limited to those persons in unserved households.
In general, an "unserved household" is one that cannot receive, through the use
of a conventional outdoor rooftop antenna, a sufficient over-the-air network
signal, and has not, within 90 days prior to subscribing to the DTH service,
subscribed to a cable service that provides that network signal. Although
DirecTv and the Company have implemented guidelines to safeguard against
violations of the SHVA, certain subscribers within the Company's Rural DirecTv
Markets receive network programming despite their misrepresentation that they
are unserved households. Although not mandated by law, DirecTv and the Company
presently disconnect such subscribers which any local network affiliate
maintains are not unserved households. Pending Congressional action or
administrative rulemaking, the inability of DirecTv and the Company to provide
network programming to subscribers in Rural DirecTv Markets could adversely
affect the Company's average programming revenue per subscriber and subscriber
growth.
FACILITIES
The Company is headquartered in approximately 6,400 square feet of leased
space in Roswell, Georgia and maintains offices in Louisville, Kentucky; Hays,
Kansas; Sante Fe, New Mexico; Burlington, Vermont; Cortland, New York; Florence,
South Carolina; San Luis Obispo, California; and Albany, Georgia. The Company
expects these facilities to be adequate for its needs in the foreseeable future.
The Company also maintains full-service retail stores in Florence, South
Carolina; Sante Fe, New Mexico and San Luis Obispo, California. Management
believes that the Company will be able to lease office and retail space in its
Rural DirecTv Markets as needed on acceptable terms.
MANAGEMENT AND EMPLOYEES
The Company has assembled an experienced management team to execute its
business strategy. Certain members of the senior management team have
significant experience working together at Sterling Cellular, a multi-system
cellular operator serving rural markets comparable to the Rural DirecTv Markets.
The Company's executive team brings to the Company extensive business
acquisition experience in the telecommunications industry, as well as experience
in the sales and delivery of a full array of communications services to
customers in rural America. As of June 21, 1997, the Company had approximately
187 employees. The Company is not a party to any collective bargaining agreement
and considers its relations with its employees to be good.
LEGAL PROCEEDINGS
The Company is not currently party to any legal proceedings.
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MANAGEMENT
MANAGERS AND EXECUTIVE OFFICERS
In a limited liability company such as the Company, which is managed by a
manager, there is no board of directors. Pursuant to the terms of the LLC
Agreement (as defined herein), management of the Company is vested in DTS
Management as the sole manager. DTS Management is managed by a board of managers
(the "Board"), which has in turn appointed certain persons as executive officers
responsible for the day-to-day affairs of the Company and DTS Management. DTS
Management's executive officers and managers and their positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Douglas S. Holladay, Jr.............. 50 President, Chief Executive Officer and Manager
Earle A. MacKenzie................... 44 Chief Operating Officer
William J. Dorran.................... 40 Senior Vice President
Donald A. Doering.................... 40 Vice President and Chief Financial Officer
Michael C. Brooks.................... 52 Manager
Harry F. Hopper III.................. 43 Manager
William Laverack, Jr................. 40 Manager
David P. Mixer....................... 45 Manager
James B. Murray...................... 50 Manager
Riordon B. Smith..................... 36 Manager
</TABLE>
BACKGROUND OF MANAGERS AND EXECUTIVE OFFICERS
Douglas S. Holladay, Jr. Mr. Holladay has been President and Chief
Executive Officer of DTS Management since April 1996 and a manager since June
1996; the LLC Agreement provides that the Chief Executive Officer shall serve as
a Manager. From 1990 to April 1996, Mr. Holladay was President and Chief
Operating Officer of Sterling Cellular, a multi-system rural cellular operator
formed in 1989.
Earle A. MacKenzie. Mr. MacKenzie has been Chief Operating Officer of DTS
Management since March 1997. From June 1991 to March 1997, Mr. MacKenzie was
President of Essex Communications Consulting and its predecessor, which are
providers of consulting services to the wireless telecommunications industry.
Prior to June 1991, he held various executive positions with Contel Cellular, a
leading wireless provider in rural and midsize markets.
William J. Dorran. Mr. Dorran has been Senior Vice President of DTS
Management since April 1996. From 1990 to April 1996, Mr. Dorran served in
various positions with the NRTC, most recently as its Chief Operating Officer.
He was involved in negotiating and structuring the NRTC's investment in DirecTv
licenses and in developing and launching the NRTC's DirecTv operations.
Donald A. Doering. Mr. Doering has been Vice President and Chief Financial
Officer of DTS Management since April 1996. From May 1995 to April 1996 Mr.
Doering served as a consultant to the wireless communications industry. From
1989 to May 1995 Mr. Doering served in various capacities with Sterling
Cellular, most recently as Vice President and Chief Financial Officer.
Michael C. Brooks. Mr. Brooks has been a manager of DTS Management since
February 1997 and serves in such capacity as a designee of Whitney pursuant to
the LLC Agreement. He has been a general partner of J.H. Whitney & Co., a
venture capital partnership ("Whitney"), since January 1985 and currently serves
as Managing Partner. Mr. Brooks is also a director of SunGard Data Systems,
Inc., DecisionOne Holdings Corp., Nitinol Medical Technologies, Inc. and several
private companies.
Harry F. Hopper III. Mr. Hopper has been a manager of DTS Management since
June 1996 and serves in such capacity as a designee of the holders of the Class
B Units pursuant to the LLC Agreement. Mr. Hopper has been a Managing Director
of Columbia since January 1997. From January 1994 to January 1997, Mr. Hopper
was a Senior Vice President of Columbia. Prior to January 1994, he was an
Executive Vice President of the corporate general partners of Bachtel Cellular
Liquidity, LP and Paul S. Bachow Co-investment Fund, LP.
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William Laverack, Jr. Mr. Laverack has been a manager of DTS Management
since February 1997 and serves in such capacity as a designee of Whitney
pursuant to the LLC Agreement. Mr. Laverack has been a general partner of
Whitney since joining the firm in May 1993. From 1991 to 1993, he was a Managing
Director of Gleacher & Co., Inc., a mergers and acquisitions advisory firm. From
1985 to 1991 he was employed by Morgan Stanley & Co. Incorporated in its
Merchant Banking Group. Mr. Laverack is also a director of Steel Dynamics, Inc.
and several private companies.
David P. Mixer. Mr. Mixer has been a manager of DTS Management since June
1996 and serves in such capacity as the designee of the holders of the Class B
Units, Class C Units and Class D Units pursuant to the LLC Agreement. Since
Columbia's inception in March 1989, Mr. Mixer has been a Managing Director of
Columbia. Since 1988, Mr. Mixer has also been the President of Bay Cellular, a
cellular communications company. Mr. Mixer is a member of the Board of Directors
of each of Saville Systems PLC ("Saville Systems"), a producer of customized
billing systems for service providers in the telecommunications industry, and
Telular Corporation.
James B. Murray, Jr. Mr. Murray has been a manager of DTS Management since
June 1996 and serves in such capacity as a designee of the holders of the Class
B Units pursuant to the LLC Agreement. Since Columbia's inception in March 1989,
Mr. Murray has been a Managing Director of Columbia. From January 1990 to
January 1993, Mr. Murray was also the President of Randolph Cellular Corp., a
cellular communications company. Mr. Murray is a member of the Board of
Directors of Saville Systems, Advanced Radio TeleCom Corp., a wireless broadband
telecommunications company, and of several privately-held telecommunications
companies, including GO Communications Corporation, Merrick Tower Corporation,
and Contact New Mexico, Inc.
Riordon B. Smith. Mr. Smith has been a manager of DTS Management since
February 1997 and serves in such capacity as the designee of Chisholm Partners
III, L.P. pursuant to the LLC Agreement. Mr. Smith is a Senior Vice President of
Fleet Venture Resources, Inc., which he joined in 1990. Fleet Venture Resources,
Inc. is a private equity fund with an investment focus in media and information,
telecommunications services, healthcare services, industrial manufacturing,
business services and consumer products and services.
BOARD OF MANAGERS
All managers hold office by virtue of their designation by certain holders
of Units (as defined) pursuant to the terms of the LLC Agreement. There are no
family relationships between any of the managers or executive officers of the
Company. See "Limited Liability Company Agreement -- Governance."
MANAGER COMPENSATION
Managers do not receive compensation, but are entitled to reimbursement of
expenses incurred in connection with their attendance at Board meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a compensation committee. Compensation
arrangements for key employees are determined by the Board without the
participation of Mr. Holladay, the only member of the Board who serves as an
executive officer of DTS Management.
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EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation of DTS Management's Chief Executive Officer and DTS Management's
other employees whose total salary and bonus exceeded $100,000 during the year
ended December 31, 1996 (the "Named Executives"), as well as the total
compensation earned by the Named Executives during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION(1) COMPENSATION
---------------------------- ---------------- ------------
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER CLASS C UNITS(#)
<S> <C> <C> <C> <C> <C>
Douglas S. Holladay, Jr......... $120,171 $50,000 $0 40,111(2) $ 1,932(3)
President and Chief Executive
Officer
William J. Dorran............... $113,531(4) $25,000 $0 26,882(5) $ 0
Senior Vice President
Donald A. Doering............... $ 83,139 $40,000 $0 20,056(6) $ 792(3)
Vice President and Chief
Financial Officer
</TABLE>
- ------------------------------
(1) No market exists for the Class C Units. The Company estimates that the
dollar value of the Class C Units at date of grant and as of December 31,
1996 was zero.
(2) Issued as of November 19, 1996 pursuant to the Holladay Employment Agreement
(as defined below) and the LLC Agreement. Mr. Holladay's 40,111 Class C
Units (as defined) vest according to the following schedule: one-third on
the date on which the number of households served by the Company first
reaches 250,000; two-thirds on the date on which such number first reaches
500,000; and the remainder on the date on which such number first reaches
750,000. As of the date hereof, Mr. Holladay's Class C Units were fully
vested. All of Mr. Holladay's Class C Units are owned by the Holladay Family
Limited Partnership, a Georgia limited partnership (the "Holladay Family
LP"), of which Mr. Holladay is the sole general partner and Mr. Holladay,
his wife, and their children are the limited partners.
(3) Represents the premiums paid during 1996 by DTS Management with respect to
term life insurance for the benefit of such Named Executive Officers.
(4) The Company paid Mr. Dorran approximately $25,000 of his total 1996 salary
and reimbursed Columbia for the balance.
(5) Issued as of November 19, 1996 pursuant to the Dorran Employment Agreement
(as defined below) and the LLC Agreement. Mr. Dorran's 26,882 Class C Units
will vest according to the following schedule: 40% on the date on which the
number of households served by Company first reaches 200,000; 40% on
September 1, 1996; and 20% on September 1, 1997. As of the date hereof,
21,506 of Mr. Dorran's Class C Units were vested and the remaining 5,376
Class C Units will vest upon the earliest to occur of (i) the date upon
which the Company completes a public offering of its equity securities, (ii)
the date upon which Columbia and its officers, directors, stockholders and
employees cease to own, directly or indirectly, in the aggregate at least
50% of the equity interests of the Company held by them on November 19, 1996
and (iii) September 1, 1997, provided that Mr. Dorran remains employed by
DTS Management or the Subsidiaries through such date. The remaining unvested
5,376 Class C Units will also become vested if Mr. Dorran's employment is
terminated by DTS Management without cause.
(6) Issued as of November 19, 1996 pursuant to the Doering Employment Agreement
(as defined below) and the LLC Agreement. Mr. Doering's 20,056 Class C Units
will vest according to the following schedule: one-third on March 31, 1997;
one-third on March 31, 1998; and one-third on March 31, 1999. As of the date
hereof, 6,685.33 of Mr. Doering's Class C Units were vested. Any Class C
Units that have not vested prior to the earliest to occur of (i) the date
upon which the Company completes a public offering of its equity securities,
(ii) the date upon which Columbia and its officers, directors, stockholders
and employees cease to own, directly or indirectly, in the aggregate at
least 50% of the equity interests of the Company held by them on
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November 19, 1996 and (iii) March 31, 1999, shall become fully vested,
provided that Mr. Doering remains employed by DTS Management and its
Subsidiaries through such date. Mr. Doering's unvested Class C Units will
also become vested if Mr. Doering's employment is terminated by DTS
Management without cause.
EMPLOYMENT AGREEMENTS
DTS Management has entered into an employment agreement with each of Mr.
Holladay (the "Holladay Employment Agreement") and Mr. Dorran (the "Dorran
Employment Agreement"), which became effective on April 1, 1996, an employment
agreement with Mr. Doering (the "Doering Employment Agreement"), which became
effective on April 15, 1996, and an employment agreement with Mr. MacKenzie (the
"MacKenzie Employment Agreement"), which became effective on March 24, 1997
(collectively, the "Employment Agreements"). The Holladay, Dorran and Doering
Employment Agreements expire on March 31 of each year and are automatically
renewed for successive one-year terms unless the Company gives notice of
nonrenewal or the employee gives notice of resignation on or prior to January 31
preceding the expiration date. The MacKenzie Employment Agreement expires on
March 23 of each year and is automatically renewed for successive one-year terms
unless terminated by either Mr. MacKenzie or the Company. The Company may
terminate any of the Employment Agreements prior to the end of their terms with
or without cause. In the event of the termination of the Employment Agreements
by the Company without cause prior to the end of their respective terms, the
Company will be obligated to continue to provide to Messrs. Holladay and Doering
compensation and all other benefits under their Employment Agreements through
the remaining term of their agreements, to pay to Mr. Dorran an amount equal to
one year's base salary in 12 equal monthly installments and to pay to Mr.
MacKenzie an amount equal to six months base salary in bi-weekly installments.
The Holladay Employment Agreement provides that Mr. Holladay will be paid a
salary of $15,000 per month from January 1, 1997 through March 31, 1998. The
Board will determine by January 31, 1998 whether to increase such salary
effective April 1, 1998. The Employment Agreements provide that each of Mr.
Dorran and Mr. Doering will be paid a salary not less than $120,000 per year,
which salary shall be reviewed not less often than annually by the Board to
determine whether such salary should be increased. The MacKenzie Employment
Agreement provides that Mr. MacKenzie will be paid a salary of $6,731 bi-weekly,
which salary shall be reviewed on each successive March 24 by the Chief
Executive Officer of DTS Management and the Board to determine whether such
salary should be increased. During the term of the applicable Employment
Agreement, each of Messrs. Holladay, Dorran and Doering will also be paid a
bonus on or before January 31 in an amount determined by the Board in its sole
discretion in light of his performance during the prior fiscal year. Under the
MacKenzie Employment Agreement, Mr. MacKenzie will also be paid a bonus of
$50,000 per year, if the financial and operating objectives of the Company are
met as of the end of the applicable calendar year, which amount may be increased
in the sole discretion of DTS Management if such objectives are materially
exceeded.
Pursuant to their respective Employment Agreements and the LLC Agreement,
the Company issued 40,111, 26,882 and 20,056 Class C Units to Messrs. Holladay,
Dorran and Doering, respectively. See "-- Executive Compensation" and "Limited
Liability Company Agreement -- Units." Their Employment Agreements also
permitted Messrs. Holladay, Dorran and Doering to purchase Class B Units (as
defined) at a price of $10.00 per Unit. Pursuant to these rights, Mr. Holladay
has purchased 46,000 Class B Units, Mr. Dorran has purchased 37,000 Class B
Units and Mr. Doering has purchased 17,500 Class B Units. All of Mr. Holladay's
Class B Units are held by the Holladay Family LP. Although there is no market
for the Class B Units, the Company believes that the $10.00 per Class B Unit
purchase price was no less than the fair market value of such Units on the dates
they were purchased. To enable Messrs. Holladay, Dorran and Doering to purchase
a portion of these Class B Units, Columbia loaned them $160,000, $190,000 and
$80,000, respectively. Each such loan is secured by a pledge of 20,000 Class B
Units in the case of Mr. Holladay and Mr. Dorran, and 10,000 Class B Units in
the case of Mr. Doering, and is evidenced by a promissory note bearing interest
at a rate of 10% per annum, payable in full at maturity and maturing upon the
earlier to occur of (i) April 1, 2001 and (ii) receipt by Mr. Holladay, Mr.
Dorran or Mr. Doering, as the case may be, of the proceeds from the sale of all
of his Class B Units (including, in the case of Mr. Holladay, the Class B Units
held by the Holladay Family LP). The notes are subject to mandatory prepayment
equal to (i) 100% of all cash distributions, other than distributions to pay
taxes,
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received by Mr. Holladay, Mr. Dorran or Mr. Doering, as the case may be, from
the Company with respect to the Class B Units, plus (ii) 60% of the cash
proceeds received from Mr. Holladay, Mr. Dorran or Mr. Doering, as the case may
be, from a sale of less than all of the Class B Units.
Their Employment Agreements provide that the Company has the option to
repurchase all of the Class C Units held by Mr. Holladay (or by the Holladay
Family LP), Mr. Dorran or Mr. Doering, as the case may be, that have vested and
all of such executive's Class B Units at fair market value if such executive's
employment with DTS Management is terminated for cause by DTS Management or if
such executive resigns prior to April 1, 1998 with respect to Mr. Holladay and
Mr. Dorran or April 1, 1999 with respect to Mr. Doering. After April 1, 1998
with respect to Mr. Holladay and Mr. Dorran or April 1, 1999 with respect to Mr.
Doering, none of their Class B Units or Class C Units is subject to repurchase
under the Employment Agreements. At such time as employment is terminated, all
unvested Class C Units held by Mr. Dorran or Mr. Doering, as the case may be,
shall be forfeited, except that if such executive's employment is terminated by
DTS Management other than for cause, such executive's Class C Units will become
fully vested.
EMPLOYEE UNIT PLAN
In March 1997 DTS Management adopted an Employee Unit Plan (the "Employee
Unit Plan") pursuant to which up to 180,000 Class D Units (as defined) (or such
larger number of Units as may be approved by the Company and the holders of at
least 70% of the Class A Units (as defined)) may be issued to employees or
independent contractors of DTS Management or the Subsidiaries at prices equal to
the market value thereof as of the date of issuance and pursuant to such terms
and conditions (including vesting) as the Company shall determine. The Class D
Units are not entitled to vote on any matter. As of July 15, 1997, 104,000 Class
D Units have been issued pursuant to the Employee Unit Plan, of which 45,000
Class D Units were issued to Mr. MacKenzie. Mr. MacKenzie's 45,000 Class D Units
will vest one-fourth on March 24, 1998; one fourth on March 24, 1999; one-fourth
on March 24, 2000; and one fourth on March 24, 2001, subject to acceleration
under certain circumstances. The remaining 59,000 Class D Units issued and
outstanding as of July 15, 1997 have been issued to various other employees and
consultants and are subject to certain vesting requirements.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH COLUMBIA
Columbia provides financial, managerial and other services to the Company.
The Company has formulated its business plan in reliance upon market research,
financial analysis and recommendations, some of which have been provided by
Columbia. The Company paid Columbia approximately $322,000 in 1996 for such
services. Columbia formed the Company in 1996. See "Offering Memorandum Summary"
and "Business -- General." Columbia and its affiliates own 311,111 Class A Units
and 1,949,500 Class B Units, representing approximately 62% of all classes of
the Company's ownership securities. Messrs. Hopper, Mixer and Murray are
principals of Columbia and managers of DTS Management.
RELATIONSHIP WITH FLEET
Fleet National Bank ("Fleet") is the documentation agent under the Existing
Credit Facility and will act as documentation agent under the Restated Credit
Facility. Fleet is, under the Existing Credit Facility, and will be, under the
Restated Credit Facility, a lender. Fleet is an affiliate of Fleet Venture
Resources, Inc. and Fleet Equity Partners VI, L.P., which in the aggregate own
349,425.05 Class A Units, representing approximately 10% of all classes of the
Company's ownership securities.
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<PAGE> 72
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 1, 1997,
regarding beneficial ownership of (i) the Company's equity securities by all
managers of DTS Management and all Named Executives, and all managers and
executive officers of DTS Management as a group, and (ii) the Company's voting
securities by persons or entities known to the Company to be the beneficial
owner of more than five percent of any class of such securities.
<TABLE>
<CAPTION>
PERCENT OF
CLASS A UNITS CLASS B UNITS CLASS C UNITS ALL UNITS
----------------------- ---------------------- ---------------------- CONSIDERED
NAME AND ADDRESS NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE NUMBER PERCENTAGE AS A SINGLE
OF BENEFICIAL OWNER UNITS OF UNITS UNITS OF UNITS OF UNITS OF UNITS CLASS(17)
<S> <C> <C> <C> <C> <C> <C> <C>
WEP Intermediate Corp.(1)......... 577,778 43.34% -- -- -- -- 16.65%
Fleet Venture Resources,
Inc.(2)......................... 444,444 33.33% -- -- -- -- 12.81%
Fleet Equity Partners VI,
L.P.(2)......................... 444,444 33.33% -- -- -- -- 12.81%
Chisholm Partners III, L.P.(2).... 444,444 33.33% -- -- -- -- 12.81%
Kennedy Plaza Partners(2)......... 444,444 33.33% -- -- -- -- 12.81%
Columbia Capital
Corporation(3)(4)............... 311,111 23.33% 1,949,500 95.11% -- -- 63.38%
Columbia DBS Class A Investors,
LLC(3)(5)....................... 311,111 23.33% -- -- -- -- 8.96%
Columbia DBS Investors,
L.P.(3)(6)...................... -- -- 1,937,579 94.52% -- -- 54.32%
Harry F. Hopper III(3)(7)......... -- -- -- -- -- -- --
David P. Mixer(8)(9).............. -- -- -- -- -- -- --
James B. Murray, Jr.(9)........... -- -- -- -- -- -- --
William Laverack, Jr.(10)......... 577,778 43.34% -- -- -- -- 16.65%
Michael C. Brooks(11)............. 577,778 43.34% -- -- -- -- 16.65%
Riordon B. Smith(12).............. 444,444 33.33% -- -- -- -- 12.81%
Douglas S. Holladay,
Jr.(13)(14)..................... -- -- 46,000 2.24% 40,111 46.08% 2.41%
Earle A. MacKenzie(13)(15)........ -- -- -- -- -- -- --
William J. Dorran(16)............. -- -- 37,000 1.80% 26,882 30.89% 1.79%
Donald A. Doering(13)............. -- -- 17,500 0.85% 20,056 23.03% 1.05%
All managers and executive
officers as a group (10
Persons)........................ 1,022,222 76.67% 100,500 4.90% 87,049 100.00% 34.86%
</TABLE>
- ---------------------------
(1) The address of this person is 177 Broad Street, Stamford, Connecticut
06901.
(2) Includes 349,425.05 Class A Units held by Fleet Venture Resources, Inc. and
Fleet Equity Partners VI, L.P. (together, the "Fleet Entities") and
88,888.80 Class A Units held by Chisholm Partners III, L.P., and 6,130.150
Class A Units held by Kennedy Plaza Partners. The address of this person is
50 Kennedy Plaza, RI MO F12C, Providence, Rhode Island 02903.
(3) The address of this person is 201 N. Union Street, Suite 300, Alexandria,
Virginia 22314-2642.
(4) Includes 311,111 Class A Units held by Columbia DBS Class A Investors, LLC,
1,937,579 Class B Units held by Columbia DBS Investors, L.P. and 11,921
Class B Units held by Columbia DBS, Inc. Columbia Capital Corporation is
the sole general partner of Columbia DBS Investors, L.P. and as such has
sole investment and voting power over the Class B Units held by Columbia
DBS Investors, L.P. The same persons who serve as directors of Columbia
Capital Corporation also serve as directors of Columbia DBS, Inc. and have
a majority of the voting power of Columbia DBS Class A Investors, LLC.
Columbia Capital Corporation disclaims beneficial ownership of such Units,
except the Units held by Columbia DBS Investors, L.P.
(5) Excludes 1,937,579 Class B Units held by Columbia DBS Investors, L.P., and
11,921 Class B Units held by Columbia DBS, Inc. The same persons who have a
majority of the voting power of Columbia DBS Class A Investors, LLC also
serve as directors of each of Columbia Capital Corporation and Columbia
DBS, Inc. Columbia Capital Corporation is the sole general partner of
Columbia DBS Investors, L.P. and as such has sole investment and voting
power over the Class B Units held by Columbia DBS Investors, L.P. Columbia
DBS Class A Investors, LLC disclaims beneficial ownership of all Units
except those Units held directly by it.
(6) Excludes 311,111 Class A Units held by Columbia DBS Class A Investors, LLC
and 11,921 Class B Units held by Columbia DBS, Inc. Columbia Capital
Corporation is the sole general partner of Columbia DBS
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<PAGE> 73
Investors, L.P. and as such has sole investment and voting power over the
Class B Units held by Columbia DBS Investors, L.P. The same persons who
serve as directors of Columbia Capital Corporation also serve as directors
of Columbia DBS, Inc. and have a majority of the voting power of Columbia
DBS Class A Investors, LLC. Columbia DBS Investors, L.P. disclaims
beneficial ownership of all Units except those Units held directly by it.
(7) Excludes 1,937,579 Class B Units held by Columbia DBS Investors, L.P. and
11,921 Class B Units held by Columbia DBS, Inc. Mr. Hopper is a shareholder
of Columbia Capital Corporation and Columbia DBS, Inc. and a limited
partner of Columbia DBS Investors, L.P. Mr. Hopper disclaims beneficial
ownership of the Class B Units held by Columbia DBS Investors, L.P. and
Columbia DBS, Inc.
(8) The address of this person is 5586 Post Road, Suite 110, East Greenwich,
Rhode Island 02818.
(9) Excludes 311,111 Class A Units held by Columbia DBS Class A Investors, LLC,
1,937,579 Class B Units held by Columbia DBS Investors, L.P. and 11,921
Class B Units held by Columbia DBS, Inc. Messrs. Mixer and Murray are
members of Columbia DBS Class A Investors, LLC, limited partners of
Columbia DBS Investors, L.P., and shareholders of Columbia Capital
Corporation (the sole general partner of Columbia DBS Investors, L.P.) and
Columbia DBS, Inc. Messrs. Mixer and Murray disclaim beneficial ownership
of the Units held by Columbia DBS Class A Investors, LLC, Columbia DBS
Investors, L.P., and Columbia DBS, Inc. The address of this person is 0
Court Square, P.O. Box 1465, Charlottesville, Virginia 22901.
(10) Includes 577,778 Class A Units held by WEP Intermediate Corp. Mr. Laverack
has shared voting and investment power over such Units with the managing
members of the general partner of Whitney Equity Partners, L.P., the sole
stockholder of WEP Intermediate Corp. and disclaims beneficial ownership of
such Units. The address of this person is 177 Broad Street, Stamford, CT
06901.
(11) Includes 577,778 Class A Units held by WEP Intermediate Corp. Mr. Brooks
has shared voting and investment power over such Units with the managing
members of the general partner of Whitney Equity Partners, L.P., the sole
stockholder of WEP Intermediate Corp. and disclaims beneficial ownership of
such Units. The address of this person is 177 Broad Street, Stamford, CT
06901.
(12) Includes 349,425.05 Class A Units held by the Fleet Entities and 88,888.80
Class A Units held by Chisholm Partners III, L.P., and 6,130.150 Class A
Units held by Kennedy Plaza Partners. Mr. Smith, a member of the Board, is
a Senior Vice President of each of the managing general partners of Fleet
Equity Partners VI, L.P., is a Senior Vice President of Fleet Venture
Resources, Inc., is a Senior Vice President of the corporation that is the
general partner of the partnership that is the general partner of Chisholm
Partners III, L.P., and a partner of Kennedy Plaza Partners. As Senior Vice
President of Fleet Growth Resources II, Inc. and Silverado IV Corp. (the
two general partners of Fleet Equity Partners VI, L.P.) and as a Senior
Vice President of Fleet Venture Resources, Inc. and Silverado III Corp.
(the general partner of the partnership (Silverado III, L.P.) which is the
general partner of Chisholm Partners III, L.P.), Mr. Smith may be
considered to share investment and voting power with Robert M. Van Degna
and Habib Y. Gorgi, the Chairman and CEO, and President, respectively, of
the aforementioned entities. As a partner of Kennedy Plaza Partners, Mr.
Smith may be considered to share investment and voting power with Mr. Van
Degna and Mr. Gorgi, the Managing General Partners of Kennedy Plaza
Partners. Mr. Smith disclaims beneficial ownership of all shares held
directly by Fleet Venture Resources, Inc. and all shares held directly by
Fleet Equity Partners VI, L.P., Chisholm Partners III, L.P. and Kennedy
Plaza Partners, except for his pecuniary interest therein. The address of
this person is 50 Kennedy Plaza, RI MO F12C, Providence, Rhode Island
02903.
(13) The address of this person is Building C-200, 880 Holcomb Bridge Road,
Roswell, Georgia 30076.
(14) All of Mr. Holladay's Class B Units and Class C Units are held by the
Holladay Family LP.
(15) Mr. MacKenzie was issued 45,000 Class D Units on March 24, 1997 pursuant to
the Employee Unit Plan. Mr. MacKenzie beneficially owns 1.26% of the Class
A, B, C and D Units issued and outstanding as of July 1, 1997.
(16) The address of this person is 2808 Octavia Street, San Francisco,
California 94123.
(17) Excludes 104,000 nonvoting Class D Units, issued and outstanding as of the
date hereof.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
RESTATED CREDIT FACILITY
The Company is a party to the Second Amended and Restated Credit Agreement
dated as of July 30, 1997 (the "Restated Credit Facility") by and among the
Company, the banks and other lenders party from time to time thereto (the
"Lenders"), CIBC, as Administrative Agent, CIBC Wood Gundy Securities Corp.
("CIBCWG"), as Arranger, Morgan, as Syndication Agent, and Fleet, as
Documentation Agent, which provides for a revolving credit facility in the
amount of $70.0 million, with a $50.0 million sublimit for letters of credit,
and a $20.0 million term loan facility. The proceeds of the Restated Credit
Facility may be used (i) to refinance certain existing indebtedness, (ii) prior
to December 31, 1998, to finance the acquisition of certain Rural DirecTv
Markets and related costs and expenses, (iii) to finance capital expenditures of
the Company and its subsidiaries and (iv) for the general corporate purposes and
working capital needs of the Company and its subsidiaries.
The $20.0 million term loan facility must be drawn within 12 months of the
closing of the Restated Credit Facility and any amounts not so drawn by that
date will be cancelled. The term loan shall be repaid in 20 consecutive
quarterly installments of $200,000 each commencing September 30, 1998 with the
remaining balance due July 31, 2003. Borrowings under the revolving credit
facility established pursuant to the Restated Credit Facility will be available
to the Company until July 31, 2003; however, if the then unused portion of the
commitments exceeds $10.0 million on December 31, 1998, the commitments will be
reduced on such date by an amount equal to the unused portion of such
commitments minus $10.0 million. Thereafter, the commitments thereunder will
reduce quarterly commencing on September 30, 1999 at a rate of 3.50% through
1999, 5.75% in 2000, 7.0% in 2001, 9.0% in 2002 and 3.0% until June 30, 2003.
All of the loans outstanding will be repayable on July 31, 2003. The making of
each loan under the Restated Credit Facility is subject to the satisfaction of
certain conditions, including not exceeding a certain "borrowing base" based on
the number of paying subscribers and households within the Rural DirecTv Markets
served by the Company, maintaining minimum subscriber penetration and Annualized
Contribution (as defined therein) per paying subscriber, and maintaining maximum
ratio of total debt to equity and a maximum ratio of total debt to annualized
operating cash flow and a ratio of senior debt to annualized operating cash
flow. In addition, the Restated Credit Facility provides that the Company will
be required to make mandatory prepayments of the Restated Credit Facility from,
subject to certain exceptions, the net proceeds of certain sales or other
dispositions by the Company or any of its subsidiaries of material assets and
with 50% of any excess operating cash flow with respect to any fiscal year after
the fiscal year ending December 31, 1998.
Borrowings by the Company under the Restated Credit Facility are
unconditionally guaranteed by each of the Company's direct and indirect
subsidiaries, and such borrowings are secured by (i) an equal and ratable pledge
of all of the equity interests in the Company's subsidiaries, (ii) a first
priority security interest in all of their assets, and (iii) a collateral pledge
of the Company's NRTC Member Agreements.
The Restated Credit Facility provides that the Company may elect that all
or a portion of the borrowings under the Restated Credit Facility bear interest
at a rate per annum equal to either (i) the CIBC Alternate Base Rate plus the
Applicable Margin or (ii) the Eurodollar Rate plus the Applicable Margin. When
applying the CIBC Alternate Base Rate with respect to borrowings pursuant to the
revolving credit facility, the Applicable Margin will be (w) 2.25% per annum
(when the Leverage Ratio (as defined in the Credit Facility) is greater than or
equal to 6.75 to 1.00), (x) 2.00% (when the Leverage Ratio is less than 6.75 to
1.00 but greater than or equal to 6.25 to 1.00), (y) 1.50% (when the Leverage
Ratio is less than 6.25 to 1.00 but greater than or equal to 5.75 to 1.00) or
(z) 1.25% (when the Leverage Ratio is less than 5.75 to 1.00). When applying the
Eurodollar Rate with respect to borrowings pursuant to the revolving credit
facility, Applicable Margin will be (w) 3.50% per annum (when the Leverage Ratio
is greater than or equal to 6.75 to 1.00), (x) 3.25% (when the Leverage Ratio is
less than 6.75 to 1.00 but greater than or equal to 6.25 to 1.00), (y) 2.75%
(when the Leverage Ratio is less than 6.25 to 1.00 but greater than or equal to
5.75 to 1.00) or (z) 2.50% (when the Leverage Ratio is less than 5.75 to 1.00).
The Applicable Margin for borrowings pursuant to the term loan facility will be
the Applicable Margin for borrowings pursuant to the revolving credit facility,
plus 0.25%. As used herein, "CIBC Alternate Base Rate" means the higher of (i)
CIBC's prime rate and (ii) the federal funds effective rate from time to time
plus 1/2% per annum. As used herein, "Eurodollar Rate" means the rate at which
eurodollar deposits for one, two, three and six months (as selected by the
Company) are offered to CIBC in the interbank eurodollar market. The Restated
Credit Facility
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<PAGE> 75
will also provide that at any time when the Company is in default in the payment
of any amount due thereunder, the principal of all loans made under the Restated
Credit Facility will bear interest at 2% per annum above the rate otherwise
applicable thereto and overdue interest and fees will bear interest at a rate of
2% per annum over the CIBC Alternative Base Rate.
The Restated Credit Facility also contains a number of significant
covenants that, among other things, limit the ability of the Company and its
subsidiaries to incur additional indebtedness and guaranty obligations, create
liens and other encumbrances, make certain payments, investments, loans and
advances, pay dividends or make other distributions in respect of its equity
interests, sell or otherwise dispose of assets, make capital expenditures, merge
or consolidate with another entity, make amendments to its organizational
documents or transact with affiliates. In addition, the Restated Credit Facility
will require the maintenance of certain specified financial and operating
covenants, including minimum interest coverage ratios and limits on general and
administrative expenses as a percentage of revenue.
The Company will pay a commitment fee on the unused amounts under the
Restated Credit Facility calculated at 0.5% per annum, payable quarterly in
arrears.
Pursuant to a recent amendment to the NRTC Member Agreements, the Company
and all other NRTC Members whose monthly obligations to the NRTC have exceeded
$500,000 in the past six months are required to keep and maintain in full force
and effect a standby letter of credit in favor of the NRTC to secure their
respective payment obligations to the NRTC under the NRTC Member Agreements. The
amount of the letter of credit issued at the request of the Company pursuant to
the Restated Credit Facility, is equal to three times the Company's single
largest monthly invoice from the NRTC, exclusive of amounts payable for DSS(R)
equipment purchased by the Company from the NRTC, or $6.28 million, and must be
increased as the Company makes additional acquisitions of Rural DirecTv Markets
and when the Company's obligations to the NRTC exceed the amount of the original
letter of credit by 167%.
THE SELLER NOTES
In connection with the acquisition of the Company's California Rural
DirecTv Market, one of the Subsidiaries, Digital Television Services of
California, LLC ("DTS California"), issued a promissory note dated April 1,
1996, as modified as of December 31, 1996 (as so modified, the "DTS California
Note"), in favor of Pacific Coast DBS, Inc. ("Pacific"). Pursuant to the DTS
California Note, DTS California is obligated to pay to Pacific the sum of (i)
$480,000, payable in 24 equal monthly installments commencing May 1, 1996, and
(ii) an amount payable on October 1, 1998 (or on April 1, 1998 at Pacific's sole
option if Pacific notifies DTS California prior to October 1, 1997) equal to the
greater of $4.0 million or the Contingent Payment Amount. The Contingent Payment
Amount is determined by multiplying the number of subscribers to DIRECTV
Services in DTS California's Rural DirecTv Market as of October 1, 1998 by
certain dollar amounts. The obligations of DTS California pursuant to the DTS
California Note are secured by a $7,000,000 irrevocable letter of credit (the
"DTS California Letter of Credit") issued in favor of Pacific pursuant to the
Restated Credit Facility. The stated amount of the DTS California Letter of
Credit will increase so that it will at all times be at least equal to 110% of
the Contingent Payment Amount. As of June 30, 1997, the aggregate principal
amount outstanding with respect to the DTS California Note was $4.2 million. The
DTS California Note contains certain covenants which will remain in effect so
long as the DTS California Note remains due and payable, including affirmative
covenants requiring the delivery of financial statements by DTS California, the
use of good faith efforts to maximize the number of subscribers prior to the
payment of the Contingent Payment Amount, and the maintenance of insurance on
the property, business and assets of DTS California, and negative covenants
prohibiting, with certain exceptions, the payment of dividends or other
distributions by DTS California and payments by DTS California to Columbia. A
failure to make any payment due under the DTS California Note will allow Pacific
to draw under the DTS California Letter of Credit.
In connection with the acquisition of one of the Company's Rural DirecTv
Markets in South Carolina (the "South Carolina Rural DirecTv Markets"), one of
the Subsidiaries, Digital Television Services of South Carolina I, LLC ("DTS
South Carolina I"), issued a promissory note dated as of November 26, 1996 (the
"South Carolina Note") payable to Pee Dee Electricom, Inc. ("Pee Dee") in the
amount of $7.955 million. As of
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June 30, 1997, the aggregate principal amount outstanding with respect to the
South Carolina Note was $4.7 million. The principal amount of the South Carolina
Note is payable on January 2, 1998 and bears interest at a rate of 4% per annum.
The obligations of DTS South Carolina I with respect to the South Carolina Note
are secured by an irrevocable letter of credit issued pursuant to the Restated
Credit Facility (the "South Carolina Letter of Credit") issued in favor of Pee
Dee. The South Carolina Note does not contain any affirmative or negative
covenants regarding the Company, DTS South Carolina I or the operation of the
South Carolina Rural DirecTv Markets; however, a failure to make any payment due
under the South Carolina Note will allow Pee Dee to draw under the South
Carolina Letter of Credit.
In connection with the acquisition of the Company's Rural DirecTv Markets
in Georgia (the "Georgia Rural DirecTv Markets"), one of the Subsidiaries,
Digital Television Services of Georgia, LLC ("DTS Georgia"), issued three
promissory notes, each of which represents a portion of the purchase price for
one of the Georgia Rural DirecTv Markets. DTS Georgia issued (i) a promissory
note dated May 9, 1997 (the "Planters Notes") payable to Planters Electric
Membership Corporation ("Planters") in the amount of approximately $850,000,
(ii) a promissory note dated May 9, 1997 (the "Mitchell Note") payable to
Mitchell Electric Membership Corporation ("Mitchell") in the amount of
approximately $9.4 million and (iii) a promissory note dated May 9, 1997 (the
"Washington Note") payable to Washington Electric Membership Corporation
("Washington") in the amount of approximately $5.2 million. The principal amount
of the Planters Note is payable on January 2, 1998 and bears interest at a rate
of 3% per annum; provided that if DTS Georgia acquires a certain Rural DirecTv
Market, the interest rate will increase as of the date of such acquisition to
3 1/2% per annum. The principal amount of each of the Mitchell Note and the
Washington Note is payable on January 2, 2001 and bears interest at a rate of 3%
per annum until May 9, 2000 and at a rate of 3 1/2% per annum thereafter;
provided that if DTS Georgia acquires a certain Rural DirectTv Market, the
interest rate will increase as of the date of such acquisition to 3 1/2% per
annum, until May 9, 2000, and to 4% thereafter. The obligations of DTS Georgia
with respect to the Georgia Notes are secured by three irrevocable letters of
credit issued pursuant to the Restated Credit Facility (the "Georgia Letters of
Credit"), each of which has been issued for the benefit of one of Planters,
Mitchell and Washington. The Georgia Notes do not contain any affirmative or
negative covenants regarding the Company, DTS Georgia or the operation of the
Georgia Rural DirecTv Markets; however, a failure to make any payment due under
a Georgia Note will allow the payee of such Georgia Note to draw under the
applicable Georgia Letter of Credit.
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LIMITED LIABILITY COMPANY AGREEMENT
The following is a summary of certain provisions of the Amended and
Restated Limited Liability Company Agreement of the Company (the "LLC
Agreement"). The following discussion is qualified in its entirety by reference
to the LLC Agreement, copies of which are available upon request.
IN GENERAL
The Company is a limited liability company organized under the Delaware
Limited Liability Company Act (the "LLC Act") and successor to DBS Holdings,
L.P., a Delaware limited partnership, originally formed on January 30, 1996. On
November 19, 1996, the limited partnership was converted into the limited
liability company under the applicable provisions of the LLC Act and Delaware
limited partnership laws.
GOVERNANCE
The Company's internal affairs are governed by the LLC Act and the LLC
Agreement. The Company is managed by DTS Management, which as a general matter
has complete authority and exclusive control over the business and affairs of
the Company. The size, composition and voting procedure of the Board are
specified in the LLC Agreement. Under the LLC Agreement, the Board consists of
(i) two individuals designated by Whitney, (ii) one individual designated by
Fleet, (iii) the chief executive officer of DTS Management; (iv) two individuals
elected by the holders of the Class B Units pursuant to a noncumulative, one
unit -- one vote election with each individual so elected entitled to two votes,
and (v) one individual elected by a vote of the holders of the Class B Units and
the Class C Units, with each such holder being entitled to cast that number of
votes equal to the number of such Units held by such holder.
The size of the Board may be increased from seven to nine upon the
concurrence of Columbia, Whitney and Fleet, with the two additional seats filled
by individuals who are unaffiliated with (but approved by) Columbia, Whitney and
Fleet and who are elected by a majority vote of the Class A, B and C Units. In
the event the Board is thus expanded, all Board members shall have one vote.
Board action is by majority vote.
The following matters require a vote of the holders of 70% of the Class A
Units (as defined below): (i) changing the rights of the Class A Units, (ii)
creating any new class of Units senior or pari passu to the Class A Units, (iii)
taking certain actions resulting in a merger, reorganization, change of control
or sale of substantially all of the assets of the Company; (iv) issuing equity
of the Company or any Subsidiary other than in connection with a Qualified IPO
(an underwritten offering of at least $25.0 million satisfying certain pricing
conditions) or a Qualified Financing (issuance of at least $50.0 million of debt
and equity constituting no more than 5% of the outstanding Units) or under the
Employee Unit Plan, (v) repurchasing any interest in the Company other than in
connection with terminating employees or certain other persons, (vi) engaging in
certain transactions with affiliates; (vii) making distributions other than tax
distributions, distributions of the Preferred Return (as defined herein) or
liquidating distributions; (viii) changing the size or composition of the Board;
(ix) increasing the number of Class D Units authorized to be issued under the
Employee Unit Plan, (x) engaging in any business other than the holding of
rights to distribute DirecTv broadcast satellite services, programming and
products, and (xi) electing on IRS Form 8832 to be treated as a corporation for
federal tax purposes.
In addition, the acquisition of Rural DirecTv Markets at a price per
household greater than $120 or for an aggregate purchase price in excess of
$25.0 million requires a vote of 50% of the Class A Units. This provision does
not apply to acquisitions currently under contract and expires on February 10,
1999. Certain fundamental changes in the Company require a vote of the holders
of the majority of the Class A, B and C Units, as well as a vote of the holders
of 70% of the Class A Units. These transactions include amendments to the LLC
Agreement, distributions other than cash and the conversion of the Company to a
corporation by merger or otherwise, other than certain specified conversions.
See "-- Corporate Conversions."
LIMITATION ON LIABILITY AND INDEMNIFICATION
The LLC Agreement provides that no manager or member of the Company or
member of the Board shall be liable in damages for any act or failure to act,
except for (i) acts or omissions such person knew at the time of the
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acts or omissions were clearly in conflict with the interest of the Company,
(ii) any transaction from which such person derived an improper personal
benefit, (iii) a willful breach of the LLC Agreement, or (iv) gross negligence,
recklessness, willful misconduct, or knowing violation of law. In addition, each
member of the Company, each member of the Board, their affiliates and each
member, partner, shareholder, director, officer, trustee, employee and agent of
any of the foregoing will be indemnified and held harmless by the Company from
and against any liability for damages and expenses, including reasonable
attorney's fees and disbursements and amounts paid in settlement, resulting from
any threatened, pending or completed action, suit or proceeding relating to the
business of the Company or the performance by such person of any of such
person's responsibilities under the LLC Agreement, except to the extent that
such damages or expenses resulted from gross negligence, recklessness or
intentional misconduct, fraud or a knowing violation or breach of the LLC
Agreement.
UNITS
There are four classes of equity interests in the Company, denominated as
"Class A Units," "Class B Units," "Class C Units" and "Class D Units." The
classes have different voting and distribution rights as summarized herein.
Class A Units are held by Whitney, Fleet and Columbia. Each Class A Unit
represents the contribution by its holder of $22.50 to the Company. Class A
Units constitute approximately 37% of the Units outstanding (assuming issuance
of 180,000 Class D Units pursuant to the Employee Unit Plan). In addition to the
special voting rights described above, the Class A Unit holders are entitled to
certain preemptive rights and protection against dilution. The Class A Units
rank senior to the other classes of Units with respect to interim and
liquidating distributions.
Class B Units are held by Columbia DBS, Inc., Columbia and certain senior
executives. Each Class B Unit represents an interest in the Company received in
exchange for the contribution of $10.00. Class B Units constitute approximately
56% of the Units outstanding (assuming issuance of 180,000 Class D Units
pursuant to the Employee Unit Plan). Class B Units are entitled to certain
preemptive rights, and rank senior with respect to interim and liquidating
distributions to the Class C and Class D Units, and junior to the Class A Units.
Class C Units are held by certain senior executives and, pursuant to the
Employment Agreements, are subject to certain vesting requirements related to
their employment and the Company's performance. See "Management -- Employment
Agreements." Each Class C Unit represents a restricted interest in the Company
received in exchange for the performance of services. Class C Units constitute
approximately 2% of the Units outstanding (assuming issuance of 180,000 Class D
Units pursuant to the Employee Unit Plan). Class C Units are entitled to certain
preemptive rights. The Class C Units rank senior to the Class D Units with
respect to interim and liquidating distributions, and junior to the Class A and
Class B Units.
Class D Units are issuable at the discretion of DTS Management pursuant to
the Employee Unit Plan to employees or independent contractors of the Company or
its Subsidiaries. Pursuant to the LLC Agreement, the Company may issue up to
180,000 Class D Units, or such larger number of Class D Units as may be approved
by DTS Management and the holders of at least 70% of the Class A Units. If
180,000 Class D Units were issued, Class D Units would constitute approximately
5% of the Units outstanding. The Class D Units rank junior with respect to
interim and liquidating distributions to all other Units. The Class D Units are
not entitled to vote on any matter.
DISTRIBUTIONS
TAX DISTRIBUTIONS
The Indenture generally limits the Company's ability to pay cash
distributions to its members other than distributions in amounts approximately
equal to the income tax liability of the members resulting from the pass-through
of taxable income to the members ("Tax Distributions"). Tax Distributions are
made four times per year in an amount equal to the Company's estimate of the
increase of the net positive tax income over the preceding tax estimation period
multiplied by the combined effective marginal tax rate (the sum of the highest
rates of federal, state and local income taxes applicable to 5% or more of the
Company's total distributive share of items of partnership income under the
Code, giving effect to applicable deductions). The determination of the combined
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effective marginal tax rate shall be made by DTS Management and is binding on
the members of the Company. On or before March 15 each year the Tax
Distributions with respect to the previous fiscal year are adjusted to conform
with the Company's income tax return for such fiscal year.
OTHER INTERIM DISTRIBUTIONS
The holders of the Class A Units are entitled to a cumulative compounded
annual rate of return equal to 8% applied to their Class A Capital (defined as
the aggregate capital contributions by holders of Class A Units less aggregate
distributions in return of such capital) (the "Preferred Return").
Once the holders of Class A Units have received their Preferred Return, the
holders of the Class A and Class B Units are entitled to distributions in
proportion to such Units held by them until they have received cumulative
distributions equal to $10.00 per such Unit. Distributions are then made to the
holders of the Class A Units, Class B Units and Class C Units in proportion to
such Units held by them until they have received cumulative distributions equal
to $12.50 per such Unit. Finally, distributions are made to all members in
proportion to the number of Units held.
CLASS A UNIT LIQUIDATION PREFERENCE AND DISSOLUTION RIGHT
Upon the dissolution of the Company after distributions are made to the
Company's creditors in satisfaction of liabilities of the Company, distributions
in liquidation are made first to the holders of the Class A Units in an amount
equal to the remaining balance of their Class A Capital and accumulated unpaid
Preferred Return. Any remaining amounts available for distribution to the
members are distributed in the same manner as interim distributions.
If after February 6, 2003, $7.5 million or more of the Class A Capital
remains unreturned, then upon the vote of the holders of at least a majority of
the Class A Units then outstanding, the Company shall be dissolved. If such a
dissolution will result in an event of default under any existing indebtedness
of the Company or any Subsidiary with an outstanding balance of $10.0 million or
more, then such a vote will not cause the dissolution of the Company, but will
rather be considered a notice by the holders of the Class A Units to DTS
Management that the holders desire that DTS Management promptly arrange for the
sale of the Company (including its Subsidiaries) or sale of all or substantially
all of its assets. If the Company has not entered into a definitive agreement
for the sale or other disposition of substantially all of its equity interests
or assets on or prior to the date that is six months after the date of such
notice, or has not consummated such sale within nine months after such date,
then at any time thereafter the holders of the Class A Units acting by a vote of
the holders of a majority of such Class A Units may increase the size of the
Board by four members and fill the vacancies thus created with the result that
such four individuals will, together with the two individuals designated by
Whitney and the one individual designated by Fleet, have a majority of the votes
on the Board of DTS Management.
CORPORATE CONVERSIONS
Under the LLC Agreement, the Board has the authority by majority vote to
convert the Company from a Delaware limited liability company into a Delaware
corporation in connection with the consummation of a Qualified IPO. In such a
case, all of the equity interests of the Company would be converted into common
stock in amounts specified in the LLC Agreement. The Board also has authority to
convert the Company from a Delaware limited liability company to a Delaware
corporation other than in connection with the consummation of a Qualified IPO.
In such case, the Class A Units would be converted into convertible
payment-in-kind preferred stock, with relative terms, rights, privileges and
obligations substantially similar to the Class A Units, and the other Units
would be converted into common stock in amounts specified in the LLC Agreement.
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DESCRIPTION OF THE NOTES
The Exchange Notes will be issued under an Indenture dated as of July 30,
1997 (the "Indenture") among the Issuers, the Guarantors and The Bank of New
York, as trustee (the "Trustee"). The terms of the Exchange Notes include those
stated in the Indenture and those made a part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") as in
effect on the date of the Indenture. The form and terms of the Exchange Notes
are identical in all material respects to the form and terms of the Private
Notes (which they replace) except that (i) the Exchange Notes bear a Series B
designation, (ii) the Exchange Notes have been registered under the Securities
Act and, therefore, will not bear legends restricting the transfer thereof, and
(iii) the holders of Exchange Notes will not be entitled to certain rights under
the Registration Rights Agreement, including the provisions providing for an
increase in the interest rate on the Private Notes in certain circumstances
relating to the timing of the Exchange Offer, which rights will terminate when
the Exchange Offer is consummated. The Exchange Notes are subject to all such
terms, and holders of the Exchange Notes are referred to the Indenture and the
Trust Indenture Act for a statement of them. The following is a summary of the
material terms and provisions of the Exchange Notes, the Indenture, the
Registration Rights Agreement dated July 30, 1997 (the "Registration Rights
Agreement") among the Issuers, the Guarantors and the Initial Purchasers and the
Security Agreement (the "Security Agreement") dated July 30, 1997 among the
Issuers and the Trustee, for the benefit of the holders of the Notes. Such
summary is qualified in its entirety by reference to the complete text of such
agreements, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part. See "Available Information."
Definitions relating to certain capitalized terms used above or in the following
summary are set forth below under "-- Certain Definitions." Capitalized terms
that are used but not otherwise defined herein have the meanings assigned to
them in the Indenture and such definitions are incorporated herein by reference.
The Private Notes and the Exchange Notes are sometimes referred to herein
collectively as the "Notes." References in this "Description of the Notes"
section to "the Company" mean only DTS and not any of its Subsidiaries.
GENERAL
The Notes will be issued only in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. The Issuers will
appoint The Bank of New York to serve as registrar and paying agent under the
Indenture at its offices at New York, New York. No service charge will be made
for any registration of transfer or exchange of the Notes, except for any tax or
other governmental charge that may be imposed in connection therewith.
RANKING
The Notes are joint and several obligations of the Company and Capital and
will be unsecured except for a first priority security interest to be granted by
the Issuers in the Interest Escrow Account. In serving as a co-issuer of the
Notes, Capital is acting as an agent of the Company. Capital has nominal assets,
does not conduct any operations, and will not provide additional security for
the Notes. The Notes will rank junior to, and be subordinated in right of
payment to, all existing and future Senior Indebtedness of the Issuers, pari
passu in right of payment with all senior subordinated Indebtedness of the
Company and senior in right of payment to all Subordinated Indebtedness. As of
June 30, 1997, the Company had approximately $21.4 million of Senior
Indebtedness outstanding on a pro forma basis after giving effect to the Initial
Offering and the Transactions. The Company has up to $90.0 million of borrowing
availability under the Credit Facility, of which $56.5 million is immediately
available, and is permitted by the Indenture to incur up to $75.0 million of
indebtedness thereunder. The Credit Facility is guaranteed by all of the
Subsidiaries of the Company and is secured by a security interest in
substantially all of the assets of the Company and the Subsidiaries of the
Company. Secured creditors of the Company and its Subsidiaries will have a claim
on the assets which secure such obligations prior to claims of the holders of
the Notes against those assets. Pursuant to the Indenture, the Company will not
be permitted to incur any debt that is both subordinated in right of payment to
any Senior Indebtedness of the Company and senior in right of payment to the
Notes.
The Notes will be unconditionally guaranteed, on a senior subordinated
basis, as to payment of principal, premium, if any, and interest, jointly and
severally, by all Restricted Subsidiaries of the Company (the
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"Guarantors"). No Guarantor will be permitted to incur any debt that is both
subordinated in right of payment to its Guarantor Senior Indebtedness and senior
in right of payment to its Guaranty.
MATURITY, INTEREST AND PRINCIPAL OF THE NOTES
The Notes were issued in an aggregate principal amount of $155.0 million
and will mature on August 1, 2007. Interest on the Notes will accrue at the rate
per annum set forth on the cover page of this Offering Memorandum and will be
payable semi-annually in cash on each August 1 and February 1, commencing on
February 1, 1998, to the holders of record of the Notes at the close of business
on July 15 and January 15, respectively, immediately preceding such interest
payment date. Interest will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of issuance.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Issuers, in whole or in
part, at any time on or after August 1, 2002, at the redemption prices
(expressed as a percentage of principal amount) set forth below, plus accrued
and unpaid interest (including Additional Interest, if any) thereon, if any, to
the redemption date, if redeemed during the 12-month period beginning on August
1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
<S> <C>
2002........................................................ 106.250%
2003........................................................ 104.167%
2004........................................................ 102.083%
2005 and thereafter......................................... 100.000%
</TABLE>
In addition, prior to August 1, 2000, the Company may, other than in any
circumstance resulting in a Change of Control, redeem up to 35% of the
originally issued principal amount of the Notes at a redemption price equal to
112.50% of the principal amount of the Notes so redeemed, plus accrued and
unpaid interest (including Additional Interest, if any) thereon, if any, to the
redemption date, with the net cash proceeds of (a) one or more Public Equity
Offerings of common equity of the Company or (b) a sale or series of related
sales of Qualified Equity Interests of the Company to Strategic Equity
Investors, in any such case resulting in gross cash proceeds to the Company of
at least $25.0 million in the aggregate; provided, however, that at least 65% of
the originally issued principal amount of the Notes would remain outstanding
immediately after giving effect to any such redemption (excluding any Notes
owned by the Company or any of its Affiliates). Notice of any such redemption
must be given within 90 days after the date of the consummation of such Public
Equity Offering or such sale of Qualified Equity Interests.
MANDATORY REDEMPTION; SINKING FUND
Except as set forth under "-- Certain Covenants -- Disposition of Proceeds
of Asset Sales" and "-- Offer to Purchase Upon Change of Control" below, neither
the Company nor Capital is required to purchase or make mandatory redemption
payments or sinking fund payments with respect to the Notes.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time
pursuant to an optional redemption, selection of such Notes for redemption will
be made by the Trustee in compliance with the requirements of the national
securities exchange, if any, on which such Notes are listed or, if such Notes
are not then listed on a national securities exchange, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be redeemed
in part; provided further, however, that if a partial redemption is made with
the proceeds of a Public Equity Offering or sale or series of related sales of
Qualified Equity Interests of the Company to Strategic Equity Investors,
selection of the Notes or portions thereof for redemption shall be made by the
Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of The Depository Trust Company), unless
such method is otherwise prohibited. Notice of redemption shall be mailed by
first-class mail at least 30 but not more
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than 60 days before the redemption date to each Holder of Notes at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption as long
as the Issuers have deposited with the paying agent for the Notes funds in
satisfaction of the redemption price pursuant to the Indenture.
SECURITY -- INTEREST ESCROW ACCOUNT
On the Closing Date, the Company deposited in an Interest Escrow Account a
portion of the net proceeds received from the sale of the Notes to be held by
the Escrow Agent and the Company has granted a first priority security interest
to the Trustee as security for the benefit of the holders of the Notes. Such
amount has been invested by the Escrow Agent in Marketable Securities and is
sufficient upon receipt of scheduled interest and principal payments of such
Marketable Securities to provide for payment in full of the first four scheduled
interest payments due on the Notes. The Company used approximately $36.2 million
of the net proceeds of the Initial Offering to fund the Interest Escrow Account.
The Company granted a first priority security interest in the Interest
Escrow Account to the Trustee for the benefit of the Holders of the Notes
pursuant to the Security Agreement. Pursuant to the Security Agreement,
immediately prior to an Interest Payment Date, the Company may either deposit
with the Escrow Agent from funds otherwise available to the Company cash
sufficient to pay the interest scheduled to be paid on such date or the Company
may direct the Escrow Agent to release from the Interest Escrow Account proceeds
sufficient to pay interest then due on the Notes. In the event the Company
exercises the former option, the Company may direct the Escrow Agent to release
a like amount of proceeds from the Interest Escrow Account. A failure to pay
interest on the Notes in a timely manner through the first four scheduled
interest payment dates will constitute an immediate Event of Default under the
Indenture, with no grace or cure period. The Interest Escrow Account also
secures the repayment of the principal amount and premium on the Notes.
Under the Security Agreement, once the Company makes the first four
scheduled interest payments on the Notes, the remaining assets held in the
Interest Escrow Account, if any, will be released and thereafter the Notes will
be unsecured.
SUBORDINATION OF THE NOTES AND THE GUARANTIES
The payment of the principal of, premium, if any, and interest on the Notes
(other than payments from the Interest Escrow Account) is subordinated in right
of payment, to the extent and in the manner provided in the Indenture, to the
prior payment and satisfaction in full in cash of all Senior Indebtedness of the
Company.
Upon any payment or distribution of assets or securities of either of the
Issuers of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
payments from the Interest Escrow Account), upon any dissolution or other
winding-up or liquidation, rearrangement or reorganization of either of the
Issuers, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings or any general assignment for the benefit of
creditors or other marshalling of assets or liabilities of either Issuer (except
in connection with the merger or consolidation of either Issuer or liquidation
or dissolution following the transfer of substantially all of its assets, upon
the terms and conditions permitted under the circumstances described under
"Merger, Sale of Assets, Etc."), all Senior Indebtedness shall first be paid and
satisfied in full in cash before the Holders of the Notes or the Trustee on
behalf of such Holders shall be entitled to receive any payment by the Issuers
of the principal of, premium, if any, or interest on the Notes (other than
payments from the Interest Escrow Account), or any payment by the Issuers to
acquire any of the Notes for cash, property or securities, or any distribution
by the Issuers with respect to the Notes of any cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding payments from the Interest Escrow Account). Before any payment may be
made by, or on behalf of, the Issuers of the principal of, premium, if any, or
interest on the Notes (other than payments from the Interest Escrow Account)
upon any such dissolution or winding-up or liquidation, rearrangement or
reorganization, any
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payment or distribution of assets or securities of the Issuers of any kind or
character, whether in cash, property or securities (excluding any payment or
distribution of Permitted Junior Securities and excluding payments from the
Interest Escrow Account) to which the Holders of the Notes or the Trustee on
their behalf would be entitled, but for the subordination provisions of the
Indenture, shall be made by the Issuers or by any receiver, trustee in
bankruptcy, liquidation trustee, agent or other Person making such payment or
distribution, directly to the holders of the Senior Indebtedness (pro rata to
such holders on the basis of the respective amounts of Senior Indebtedness held
by such holders) or their representatives or to the trustee or trustees or agent
or agents under any agreement or indenture pursuant to which any of such Senior
Indebtedness might have been issued, as their respective interests may appear,
to the extent necessary to pay all such Senior Indebtedness in full in cash
after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness. In the
event that, notwithstanding the foregoing, the Trustee or any Holder of Notes
receives any payment or distribution of assets of either of the Issuers of any
kind, whether in cash, property or securities (excluding any payment or
distribution of Permitted Junior Securities and excluding payments from the
Interest Escrow Account), including, without limitation, by way of set-off or
otherwise, in respect of the Notes before all Senior Indebtedness of the Company
is paid and satisfied in full in cash, then such payment or distribution will be
held by the recipient in trust for the benefit of holders of Senior Indebtedness
and will be immediately paid over or delivered to the trustee in bankruptcy or
such other Person making payment or distribution of assets of the Company to the
extent necessary to make payment in full in cash of all Senior Indebtedness
remaining unpaid, after giving effect to any current payment or distribution, or
provision therefor, to or for the holders of Senior Indebtedness. By reason of
such subordination, in the event of liquidation or insolvency, creditors of the
Company who are holders of Senior Indebtedness may recover more, ratably, than
other creditors of the Company, and creditors of the Company who are not holders
of Senior Indebtedness or of the Notes may recover more, ratably, than the
holders of the Notes.
No payment or distribution of any assets or securities of either of the
Issuers or any Restricted Subsidiary of any kind or character (including,
without limitation, cash, property and any payment or distribution which may be
payable or deliverable by reason of the payment of any other Indebtedness of the
Company being subordinated to the payment of the Notes by the Company, but
excluding any payment or distribution of Permitted Junior Securities and
excluding payments from the Interest Escrow Account) may be made by or on behalf
of either of the Issuers or any Restricted Subsidiary, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes,
except from those funds held in trust for the benefit of Holders of any Notes
pursuant to the procedures set forth under "-- Satisfaction and Discharge of
Indenture; Legal Defeasance and Covenant Defeasance" below, or for or on account
of the purchase, redemption, defeasance or other acquisition of the Notes, and
neither the Trustee nor any Holder or owner of any Notes shall take or receive
from either of the Issuers or any Restricted Subsidiary, directly or indirectly
in any manner, payment in respect of all or any portion of the Notes following
the delivery by the representative of the holders of Designated Senior
Indebtedness under or in respect of the Credit Facility, for so long as there
shall exist any Designated Senior Indebtedness under or in respect of the Credit
Facility, and thereafter, the holders of Designated Senior Indebtedness (in
either such case, the "Representative") to the Trustee of written notice of (i)
the occurrence of a Payment Default on Designated Senior Indebtedness or (ii)
the occurrence of a Non-Payment Event of Default on Designated Senior
Indebtedness and the acceleration of the maturity of Designated Senior
Indebtedness in accordance with its terms and in any such event, such
prohibition shall continue until such Payment Default is cured, waived in
writing or ceases to exist or such acceleration has been rescinded or otherwise
cured. At such time as the prohibition set forth in the preceding sentence shall
no longer be in effect, subject to the provisions of the following paragraph,
the Issuers shall resume making any and all required payments in respect of the
Notes, including any missed payments.
Upon the occurrence of a Non-Payment Event of Default on Designated Senior
Indebtedness, no payment or distribution of any assets or securities of either
of the Issuers of any kind or character (including, without limitation, cash,
property and any payment or distribution which may be payable or deliverable by
reason of the payment of any other Indebtedness of either of the Issuers being
subordinated to the payment of the Notes by either of the Issuers, but excluding
any payment or distribution of Permitted Junior Securities and excluding
payments from the Interest Escrow Account) may be made by or on behalf of the
Company, including, without limitation, by way of set-off or otherwise, for or
on account of the Notes, or for or on account of the purchase, redemption,
defeasance or other acquisition of Notes, and neither the Trustee nor any Holder
or owner of any
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Notes shall take or receive from either of the Issuers, directly or indirectly
in any manner, payment in respect of all or any portion of the Notes, for a
period (a "Payment Blockage Period") commencing on the date of receipt by the
Trustee of written notice from the Representative of such Non-Payment Event of
Default unless and until (subject to any blockage of payments that may then be
in effect under the preceding paragraph) the earliest of (x) the date on which
more than 179 days shall have elapsed since receipt of such written notice by
the Trustee, (y) such Non-Payment Event of Default shall have been cured or
waived in writing or shall have ceased to exist or such Designated Senior
Indebtedness shall have been paid in full or (z) such Payment Blockage Period
shall have been terminated by written notice to the Company or the Trustee from
the Representative, after which, in the case of clause (x), (y) or (z), the
Issuers shall resume making any and all required payments in respect of the
Notes, including any missed payments. Notwithstanding any other provision of the
Indenture, (x) in no event shall a Payment Blockage Period commenced in
accordance with the provisions of the Indenture described in this paragraph
extend beyond 179 days from the date of the receipt by the Trustee of the notice
referred to above, (y) there shall be a period of at least 181 consecutive days
in each 360-day period when no Payment Blockage Period is in effect and (z) not
more than one Payment Blockage Period may be commenced with respect to the Notes
during any period of 360 consecutive days. Notwithstanding any other provision
of the Indenture, no event of default with respect to Designated Senior
Indebtedness which existed or was continuing on the date of the commencement of
any Payment Blockage Period initiated by the Representative shall be, or be
made, the basis for the commencement of any other Payment Blockage Period
initiated by the Representative, whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days.
The failure to make any payment or distribution for or on account of the
Notes by reason of the provisions of the Indenture described under this
"Subordination of the Notes and the Guaranties" heading will not be construed as
preventing the occurrence of any Event of Default in respect of the Notes. See
"-- Events of Default" below.
By reason of the subordination provisions described above, in the event of
insolvency of either of the Issuers, funds that would otherwise be payable to
Holders of the Notes will be paid to the holders of Senior Indebtedness to the
extent necessary to pay the Senior Indebtedness in full in cash, and the Issuers
may be unable to fully meet their obligations with respect to the Notes.
As of June 30, 1997, the Company had approximately $21.4 million of Senior
Indebtedness outstanding on a pro forma basis after giving effect to the Initial
Offering and the Transactions. In addition, the Company has up to $90.0 million
of borrowing availability under the Credit Facility, of which approximately
$56.5 million is immediately available, and is permitted by the Indenture to
incur up to $75.0 million of indebtedness thereunder. Subject to the
restrictions set forth in the Indenture, in the future the Issuers and the
Guarantors may issue additional Senior Indebtedness or Guarantor Senior
Indebtedness to refinance existing Indebtedness or for other corporate purposes.
Each Guaranty will, to the extent set forth in the Indenture, be
subordinated in right of payment to the prior payment in full of all Guarantor
Senior Indebtedness of the respective Guarantor, including obligations of such
Guarantor with respect to the Credit Facility (including any guaranty thereof),
and will be subject to the rights of holders of Designated Senior Indebtedness
of such Guarantor to initiate blockage periods, upon terms substantially
comparable to the subordination of the Notes to all Senior Indebtedness of the
Issuers.
If the Issuers or any Guarantor fail to make any payment on the Notes or
any Guaranty, as the case may be, when due or within any applicable grace
period, whether or not on account of payment blockage provisions, such failure
would constitute an Event of Default under the Indenture and would enable the
holders of the Notes to accelerate the maturity thereof. See "-- Events of
Default."
A holder of Notes by its acceptance of Notes agrees to be bound by the
provisions in the Indenture as described above and authorizes and expressly
directs the Trustee, on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the Indenture and
appoints the Trustee its attorney-in-fact for such purpose.
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OFFER TO PURCHASE UPON CHANGE OF CONTROL
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Issuers shall notify the
Holders of the Notes of such occurrence in the manner prescribed by the
Indenture and shall, within 20 days after the Change of Control Date, jointly
and severally make an Offer to Purchase all Notes then outstanding at a purchase
price in cash equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest (including Additional Interest, if any) thereon, if
any, to the Purchase Date. The Issuers' obligations may be satisfied if a third
party makes the Offer to Purchase in the manner, at the times and otherwise in
compliance with the requirements of the Indenture applicable to an Offer to
Purchase made by the Issuers and purchases all Notes validly tendered and not
withdrawn under such Offer to Purchase.
If a Change of Control occurs that also constitutes an event of default
under the Credit Facility, the lenders under the Credit Facility will be
entitled to exercise the remedies available to a secured lender under applicable
law and pursuant to the terms of the Credit Facility. Accordingly, any claims of
such lenders with respect to the assets of the Company will be prior to any
claim of the Holders of the Notes with respect to such assets.
If an Offer to Purchase is made following the occurrence of a Change of
Control, there can be no assurance that the Company will have available funds
sufficient to pay for all of the Notes that may be tendered by Holders of Notes
seeking to accept such Offer to Purchase. If the Company fails to repurchase all
of the Notes tendered for purchase upon the occurrence of a Change of Control,
such failure will constitute an Event of Default under the Indenture. See
"-- Events of Default" below.
If the Issuers make an Offer to Purchase, the Issuers will comply with all
applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable federal or state securities laws and regulations and any applicable
requirements of any securities exchange on which the Notes are listed, and any
violation of the provisions of the Indenture relating to such Offer to Purchase
occurring as a result of such compliance shall not be deemed an Event of Default
or an event that, with the passing of time or giving of notice, or both, would
constitute an Event of Default.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
CERTAIN COVENANTS
Limitation on Senior Subordinated Indebtedness. The Indenture will provide
that (i) the Issuers will not, directly or indirectly, Incur any Indebtedness
that by its terms would expressly rank senior in right of payment to the Notes
and expressly rank subordinate in right of payment to any Senior Indebtedness
and (ii) the Company will not permit any Guarantor to and no Guarantor will,
directly or indirectly, Incur any Indebtedness that by its terms would expressly
rank senior in right of payment to the Guaranty of such Guarantor and expressly
rank subordinate in right of payment to any Guarantor Senior Indebtedness of
such Guarantor.
Limitation on Restricted Payments. The Company shall not, and shall not
cause or permit any Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any
Equity Interests of the Company or any Restricted Subsidiary or make any
payment or distribution to the direct or indirect holders (in their
capacities as such) of Equity Interests of the Company or any Restricted
Subsidiary (other than any dividends, distributions and payments made to
the Company or any Wholly Owned Restricted Subsidiary and dividends or
distributions payable to any Person solely in Qualified Equity Interests of
the Company or in options, warrants or other rights to purchase Qualified
Equity Interests of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary (other than
any such Equity Interests owned by the Company or any Wholly Owned
Restricted Subsidiary);
(iii) purchase, redeem, defease or retire for value, or make any
principal payment on, prior to any scheduled maturity, scheduled repayment
or scheduled sinking fund payment, any Subordinated Indebtedness (other
than any Subordinated Indebtedness held by any Wholly Owned Restricted
Subsidiary); or
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(iv) make any Investment (other than Permitted Investments or
Permitted Acquisition Deposits) in any Person (other than in the Company,
any Restricted Subsidiary or a Person that becomes a Restricted Subsidiary,
or is merged with or into or consolidated with the Company or a Restricted
Subsidiary (provided the Company or a Restricted Subsidiary is the
survivor) as a result of or in connection with such Investment);
(such payments or any other actions (other than the exceptions thereto)
described in (i), (ii), (iii) and (iv) collectively, "Restricted Payments"),
unless
(a) no Default or Event of Default shall have occurred and be
continuing at the time or after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of Indebtedness (other than Permitted
Indebtedness) under the Debt to Operating Cash Flow Ratio of the first
paragraph of "-- Limitation on Indebtedness" below; and
(c) 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 (1) the
difference between (x) the Cumulative Operating Cash Flow determined at the
time of such Restricted Payment and (y) 150% of cumulative Consolidated
Interest Expense of the Company determined for the period commencing on the
Issue Date and ending on the last day of the most recent fiscal quarter
immediately preceding the date of such Restricted Payment for which
consolidated financial information of the Company is available, plus (2)
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 and sale (other than to a Restricted Subsidiary) of its Qualified
Equity Interests after the Issue Date (excluding (i) the net proceeds from
any issuance and sale of Qualified Equity Interests financed, directly or
indirectly, using funds borrowed from the Company or any Restricted
Subsidiary until and to the extent such borrowing is repaid and (ii) any
such proceeds to the extent that such proceeds were included at any time in
subparagraph (k) of "Limitation on Indebtedness"), plus (3) the principal
amount (or accrued or accreted amount, if less) of any Indebtedness of the
Company or any Restricted Subsidiary Incurred after the Issue Date that has
been converted into or exchanged for Qualified Equity Interests of the
Company, plus (4) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue Date, an
amount (to the extent not included in the computation of Cumulative
Operating Cash Flow) equal to the lesser of: (i) the return of capital with
respect to such Investment, (ii) the amount of such Investment that was
treated as a Restricted Payment, and (iii) the amount of cash received by
the Company or a Wholly Owned Restricted Subsidiary for such disposition or
in such repayment, less in any case, the cost of the disposition of such
Investment and net of taxes, plus (5) so long as the Designation thereof
was treated as a Restricted Payment made after the Issue Date, with respect
to any Unrestricted Subsidiary that has been redesignated as a Restricted
Subsidiary after the Issue Date in accordance with "-- Designation of
Unrestricted Subsidiaries" below, the Company's proportionate interest in
the lesser of the Fair Market Value and the net worth of any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after the
Issue Date in accordance with "-- Designation of Unrestricted Subsidiaries"
below not to exceed in any case the Designation Amount with respect to such
Restricted Subsidiary upon its Designation, plus (6) (to the extent not
included in the computation of Cumulative Operating Cash Flow) the amount
of cash dividends or cash distributions (other than to pay taxes) received
from any Unrestricted Subsidiary since the Issue Date, minus (7) the
greater of (i) $0 and (ii) the Designation Amount (measured as of the date
of Designation) with respect to any Subsidiary of the Company that has been
designated as an Unrestricted Subsidiary after the Issue Date in accordance
with "-- Designation of Unrestricted Subsidiaries" below.
The foregoing provisions will not prevent (i) the payment of any dividend
or distribution on, or redemption of, Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of formal
notice of such redemption, if at the date of such declaration or giving of
formal notice such payment or redemption would comply with the provisions of the
Indenture; (ii) the purchase, redemption, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the net cash proceeds
of the substantially concurrent issue and sale (other than to a Restricted
Subsidiary) of, Qualified Equity Interests of the Company; provided, however,
that any such net cash proceeds and the value of any Equity Interests issued in
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exchange for such retired Equity Interests are excluded from clause (c)(2) of
the preceding paragraph and subparagraph (k) of "Limitation on Indebtedness"
(and were not included therein at any time); (iii) the purchase, redemption,
retirement, defeasance or other acquisition of Subordinated Indebtedness, or any
other payment thereon, made in exchange for, or out of the net cash proceeds of,
a substantially concurrent issue and sale (other than to a Restricted
Subsidiary) of (x) Qualified Equity Interests of the Company; provided, however,
that any such net cash proceeds and the value of any Equity Interests issued in
exchange for Subordinated Indebtedness are excluded from clauses (c)(2) and
(c)(3) of the preceding paragraph and subparagraph (k) of "Limitation on
Indebtedness" (and were not included therein at any time) or (y) other
Subordinated Indebtedness having no stated maturity for the payment of principal
thereof prior to the final stated maturity of the Notes; (iv) any Investment to
the extent that the consideration therefor consists of the net cash proceeds of
the substantially concurrent issue and sale (other than to a Restricted
Subsidiary) of Qualified Equity Interests of the Company; provided, however,
that any such net cash proceeds are excluded from clause (c)(2) of the preceding
paragraph and subparagraph (k) of "Limitation on Indebtedness" (and were not
included therein at any time); (v) the purchase, redemption or other
acquisition, cancellation or retirement for value of Equity Interests, or
options, warrants, equity appreciation rights or other rights to purchase or
acquire Equity Interests (or distributions by any Restricted Subsidiary to the
Company to permit such purchase, redemption or other acquisition, cancellation
or retirement for value), of the Company or any Restricted Subsidiary, or
similar securities, held by officers or employees or former officers or
employees of the Company or any Restricted Subsidiary (or their estates or
beneficiaries under their estates), upon death, disability, retirement or
termination of employment, not to exceed $1.0 million in any calendar year; and
(vi) the payment of any dividend or distribution on Equity Interests of the
Company or any Restricted Subsidiary to the extent necessary to permit the
direct or indirect beneficial owners of such Equity Interests to pay federal,
state and local income tax liabilities arising from income of the Company or
such Restricted Subsidiary and attributable to them solely as a result of the
Company or such Restricted Subsidiary (and any intermediate entity through which
such holder owns such Equity Interests) being a partnership or a similar
pass-through entity, or ignored as an entity separate from its owner, for
federal, state or local income tax purposes; provided, however, that in the case
of each of clauses (ii), (iii) and (iv), no Default or Event of Default (and, in
the case of clause (v), no Default or Event of Default under clause (a), (b) or
(c) of "Events of Default") shall have occurred and be continuing or would arise
therefrom. For purposes of this paragraph, any Investment made in any Person
that subsequently becomes a Restricted Subsidiary shall be deemed not to be
outstanding so long as such Person is a Restricted Subsidiary.
In determining the amount of Restricted Payments permissible under this
covenant, amounts expended pursuant to clauses (i) and (v) of the immediately
preceding paragraph shall be included as Restricted Payments and amounts
expended pursuant to clauses (ii), (iii), (iv) and (vi) shall be excluded. The
amount of any non-cash Restricted Payment shall be deemed to be equal to the
Fair Market Value thereof at the date of the making of such Restricted Payment.
Limitation on Indebtedness. The Company shall not, and shall not cause or
permit any Restricted Subsidiary to, directly or indirectly, Incur any
Indebtedness (including Acquired Indebtedness) or issue any Disqualified Equity
Interests except for Permitted Indebtedness; provided, however, that the Company
or any Restricted Subsidiary may Incur Indebtedness and the Company or any
Restricted Subsidiary may issue Disqualified Equity Interests if, at the time of
and immediately after giving pro forma effect to such Incurrence of Indebtedness
or issuance of Disqualified Equity Interests and the application of the proceeds
therefrom, the Debt to Operating Cash Flow Ratio would be less than or equal to
6.5 to 1.0.
The foregoing limitations will not apply to the Incurrence by the Company
(or any Restricted Subsidiary with respect to clauses (a), (b), (d), (e), (f),
(g), (i), (j), (l) and, to the extent provided therein, clauses (h) and (k)
below of this paragraph) of any of the following (collectively, "Permitted
Indebtedness"), each of which shall be given independent effect:
(a) Indebtedness under the Notes, the Guaranties and the Indenture;
(b) Existing Indebtedness;
(c) Indebtedness of the Company under the Credit Facility in an
aggregate principal amount at any one time outstanding not to exceed the
sum of (A) $75.0 million, which amount shall be reduced by (x) any
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permanent reduction of commitments thereunder and (y) any other repayment
accompanied by a permanent reduction of commitments thereunder (other than
in connection with any refinancing thereof where the aggregate principal
amount outstanding and commitments thereunder immediately prior thereto are
not greater than such amounts immediately thereafter), plus (B) any amounts
outstanding under the Credit Facility that utilize subparagraph (l) of this
paragraph of this covenant;
(d) (x) Indebtedness of any Restricted Subsidiary owed to and held by
the Company or any Restricted Subsidiary and (y) Indebtedness of the
Company owed to and held by any Restricted Subsidiary that is unsecured and
subordinated in right of payment to the payment and performance of the
Company's obligations under any Senior Indebtedness, the Indenture and the
Notes (or pledged to secure any Senior Indebtedness); provided, however,
that an Incurrence of Indebtedness that is not permitted by this clause (d)
shall be deemed to have occurred upon (i) any sale or other disposition of
any Indebtedness of the Company or any Restricted Subsidiary referred to in
this clause (d) to a Person (other than the Company or any Restricted
Subsidiary), (ii) any sale or other disposition of Equity Interests of any
Restricted Subsidiary that holds Indebtedness of the Company or another
Restricted Subsidiary such that such Restricted Subsidiary ceases to be a
Restricted Subsidiary, or (iii) the designation of a Restricted Subsidiary
that holds Indebtedness of the Company or any other Restricted Subsidiary
as an Unrestricted Subsidiary;
(e) guarantees by any Restricted Subsidiary of Senior Indebtedness of
the Company or of Guarantor Senior Indebtedness of any Guarantor;
(f) Interest Rate Protection Obligations of the Company or any
Restricted Subsidiary relating to Indebtedness of the Company or such
Restricted Subsidiary (which Indebtedness (i) bears interest at fluctuating
interest rates and (ii) is otherwise permitted to be Incurred under this
covenant) and guarantees by the Company or any Restricted Subsidiary of
such Interest Rate Protection Obligations; provided, however, that the
notional principal amount of such Interest Rate Protection Obligations does
not exceed the principal amount of the Indebtedness to which such Interest
Rate Protection Obligations relate;
(g) Purchase Money Indebtedness and Capital Lease Obligations of the
Company or any Restricted Subsidiary that do not exceed $2.0 million in the
aggregate for the Company and all of its Restricted Subsidiaries at any one
time outstanding;
(h) Indebtedness or Disqualified Equity Interests to the extent
representing a replacement, renewal, refinancing or extension
(collectively, a "refinancing") of outstanding Indebtedness or Disqualified
Equity Interests Incurred in compliance with the Debt to Operating Cash
Flow Ratio of the first paragraph of this covenant or subparagraph (a),
(b), (i) or (k) of this paragraph of this covenant; provided, however, that
(i) any such refinancing shall not exceed the sum of the principal amount
(or, if such Indebtedness or Disqualified Equity Interests provide for a
lesser amount to be due and payable upon a declaration of acceleration
thereof at the time of such refinancing, an amount no greater than such
lesser amount) of the Indebtedness or Disqualified Equity Interests being
refinanced, plus the amount of accrued interest or dividends thereon, plus
the amount of any reasonably determined prepayment premium necessary to
accomplish such refinancing and such reasonable fees and expenses incurred
in connection therewith, (ii) Indebtedness representing a refinancing of
Indebtedness (other than Senior Indebtedness and Guarantor Senior
Indebtedness) shall have a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of the Indebtedness
being refinanced, (iii) Indebtedness that is pari passu with the Notes or a
Guaranty may only be refinanced with Indebtedness that is made pari passu
with or subordinate in right of payment to the Notes or such Guaranty, as
applicable, and Subordinated Indebtedness or Disqualified Equity Interests
may only be refinanced with Subordinated Indebtedness or Disqualified
Equity Interests, (iv) with respect to any refinancing of Indebtedness
Incurred pursuant to subparagraph (i) or (k) of this paragraph, such
refinancing pursuant to this subparagraph (h) shall also be deemed to be
Incurred pursuant to subparagraph (i) or (k), as the case may be, of this
paragraph (for the avoidance of doubt, the result of which is that a
refinancing does not create new debt Incurrence capacity under such
subparagraphs) and (v) Indebtedness of the Company Incurred under
subparagraph (b) or (k) of this paragraph may only be refinanced with
Indebtedness of the Company;
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(i) Indebtedness of the Company or any Restricted Subsidiary Incurred
to finance the acquisition of the exclusive right to distribute DirecTv(R)
Services within designated Rural DirecTv Markets; provided, however, that
such Indebtedness shall be Permitted Indebtedness under this subparagraph
(i) in an amount not greater than the face amount of any letter of credit
issued under the Credit Facility to support such Indebtedness, it being
understood that the issuance of such letter of credit constitutes a
reduction in the amount of Permitted Indebtedness available to be Incurred
under subparagraph (c) of this covenant description;
(j) indemnification obligations of the Company or any Restricted
Subsidiary and guarantees thereof under agreements providing for the
disposition of assets or one or more businesses or Restricted Subsidiaries;
provided, however, that such obligations do not exceed at any time the Fair
Market Value of the gross proceeds received by the Company and its
Restricted Subsidiaries for such disposition;
(k) Acquired Indebtedness of any Restricted Subsidiary Incurred upon
the Acquisition of such Restricted Subsidiary or substantially all of its
assets (other than Acquired Indebtedness incurred in connection with or in
anticipation of such Acquisition) and Indebtedness of the Company not to
exceed, in the aggregate, an amount equal to the product of two multiplied
by the sum of the aggregate net proceeds received in cash by the Company
(x) as capital contributions to the Company for which no Equity Interests
were issued after the Issue Date and (y) from the issue and sale (other
than to a Restricted Subsidiary) of its Qualified Equity Interests after
the Issue Date (excluding (i) the net proceeds from any issuance and sale
of Qualified Equity Interests financed, directly or indirectly, using funds
borrowed from the Company or any Restricted Subsidiary until and to the
extent such borrowing is repaid, (ii) any of such net proceeds to the
extent that such proceeds were at any time included in subparagraph (c)(2)
of the first paragraph or clause (ii), (iii) or (iv) of the second
paragraph of "Limitation on Restricted Payments" above based upon such
proceeds and (iii) the net proceeds from any issuance or sale of Qualified
Equity Interests to a seller or its Affiliates in connection with such
Acquisition); and
(l) in addition to the items referred to in subparagraphs (a) through
(k) above, Indebtedness of the Company or any of the Restricted
Subsidiaries (including any Indebtedness under the Credit Facility that
utilizes this subparagraph (l)) or any Restricted Subsidiaries having an
aggregate principal amount for the Company and all of its Restricted
Subsidiaries not to exceed $5.0 million at any time outstanding.
Indebtedness of any Person or any of its Subsidiaries existing at the time
such Person becomes a Restricted Subsidiary (or is merged into or consolidated
with the Company or any Restricted Subsidiary), whether or not such Indebtedness
was incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary (or being merged into or consolidated with the Company or
any Restricted Subsidiary), shall be deemed Incurred at the time any such Person
becomes a Restricted Subsidiary or merges into or consolidates with the Company
or any Restricted Subsidiary.
Limitations on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions to the Company or any other Restricted Subsidiary on its Equity
Interests or with respect to any other interest or participation in, or measured
by, its profits, or pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (b) make loans or advances to, or guarantee any
Indebtedness or other obligations of, the Company or any other Restricted
Subsidiary, or (c) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) the Credit Facility or any other agreement of
the Company or the Restricted Subsidiaries outstanding on the Issue Date, in
each case as in effect on the Issue Date, and any amendments, restatements,
renewals, replacements or refinancings thereof; provided, however, that any such
amendment, restatement, renewal, replacement or refinancing is no more
restrictive in the aggregate with respect to such encumbrances or restrictions
than those contained in the Credit Facility on the Issue Date; (ii) applicable
law; (iii) any instrument governing Indebtedness or Equity Interests of an
Acquired Person acquired by the Company or any Restricted Subsidiary as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred by such Acquired Person in connection with, as a result of or in
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contemplation of such acquisition); provided, however, that such encumbrances
and restrictions are not applicable to the Company or any Restricted Subsidiary,
or the properties or assets of the Company or any Restricted Subsidiary, other
than the Acquired Person; (iv) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices and non-assignment provisions in agreements between the Company or any
Restricted Subsidiary and the NRTC with respect to DBS services; (v) Purchase
Money Indebtedness for property acquired in the ordinary course of business that
only imposes encumbrances and restrictions on the property so acquired; (vi) any
agreement for the sale or disposition of the Equity Interests or assets of any
Restricted Subsidiary; provided, however, that such encumbrances and
restrictions described in this clause (vi) are only applicable to such
Restricted Subsidiary or assets, as applicable, and any such sale or disposition
is made in compliance with "-- Disposition of Proceeds of Asset Sales" below to
the extent applicable thereto; (vii) refinancing Indebtedness permitted under
subparagraph (h) of the second paragraph of "-- Limitation on Indebtedness"
above; provided, however, that the encumbrances and restrictions contained in
the agreements governing such Indebtedness are no more restrictive in the
aggregate than those contained in the agreements governing the Indebtedness
being refinanced immediately prior to such refinancing; (viii) the Indenture; or
(ix) any such customary encumbrance or restriction existing under any other
security agreement, instrument or document hereafter in effect; provided,
however, that the terms and conditions of any such encumbrance or restriction
are not more restrictive than those contained in the Credit Facility as in
effect on the Issue Date.
Designation of Unrestricted Subsidiaries. (a) The Company may designate
after the Issue Date any Subsidiary of the Company as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation;
(ii) at the time of and after giving effect to such Designation, the
Company could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Debt to Operating Cash Flow Ratio of the first
paragraph of "-- Limitation on Indebtedness" above; and
(iii) the Company would be permitted to make an Investment (other than
a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
"-- Limitation on Restricted Payments" above in an amount (the "Designation
Amount") equal to the Fair Market Value of the Company's proportionate
interest in the net worth of such Subsidiary on such date calculated in
accordance with GAAP.
Notwithstanding the above, no Subsidiary of the Company shall be designated
an Unrestricted Subsidiary if such Subsidiary (i) distributes, directly or
indirectly, DirecTv(R) Services or has any right, title or interest in the
revenue or profits in, or holds any Lien in respect of, such distribution or
(ii) conducts, directly or indirectly, the High Power Satellite Transmission
Business or the business of distributing high power DBS services to subscribers,
or has any interest in any such business or the right to receive the income or
profits therefrom.
Neither the Company nor any Restricted Subsidiary shall at any time (x)
provide credit support for, subject any of its property or assets (other than
the Equity Interests of any Unrestricted Subsidiary) to the satisfaction of, or
guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary, or (z) be directly or indirectly liable for any Indebtedness that
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, except, in the
case of clause (x) or (y), to the extent otherwise permitted under the terms of
the Indenture, including, without limitation, pursuant to "-- Limitation on
Restricted Payments" above and "-- Disposition of Proceeds of Asset Sales"
below, and except for any non-recourse guarantee given solely to support the
pledge by the Company or any Restricted Subsidiary of the Equity Interests of
any Unrestricted Subsidiary.
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(b) The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
Limitation on Liens. The Company shall not, and shall not cause or permit
any Restricted Subsidiary to, directly or indirectly, Incur any Liens of any
kind against or upon any of their respective properties or assets now owned or
hereafter acquired, or any proceeds therefrom or any income or profits
therefrom, to secure any Indebtedness unless contemporaneously therewith
effective provision is made to secure the Notes equally and ratably with such
Indebtedness with a Lien on the same properties and assets securing Indebtedness
for so long as such Indebtedness is secured by such Lien, except for (i) Liens
securing any Senior Indebtedness or any guarantee of Senior Indebtedness by any
Restricted Subsidiary and (ii) Permitted Liens.
Disposition of Proceeds of Asset Sales. (a) The Company shall not, and
shall not cause or permit any Restricted Subsidiary to, directly or indirectly,
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 assets sold or otherwise disposed of and
(ii) at least 80% of such consideration consists of (A) cash or Cash
Equivalents, (B) properties and capital assets to be used in distributing
DirecTv(R) Services, other services provided by DirecTv or other high-powered
DBS services, or (C) Equity Interests in one or more Persons that thereby become
Restricted Subsidiaries whose assets consist primarily of properties and capital
assets used in distributing DirecTv(R) Services, other services provided by
DirecTv or other high-powered DBS services; provided, however, that if the Fair
Market Value of the assets sold or otherwise disposed of exceeds $25.0 million,
the Company shall be required to obtain the written opinion from an Independent
Financial Advisor (and file such opinion with the Trustee) stating that the
terms of such Asset Sale are fair, from a financial point of view, to the
Company or the Restricted Subsidiary involved in such Asset Sale. The amount of
any (i) Indebtedness (other than any Subordinated Indebtedness) of the Company
or any Restricted Subsidiary that is actually assumed by the transferee in such
Asset Sale and from which the Company and the Restricted Subsidiaries are fully
released shall be deemed to be cash for purposes of determining the percentage
of cash consideration received by the Company or the Restricted Subsidiaries and
(ii) notes or other similar obligations received by the Company or the
Restricted Subsidiaries from such transferee that are immediately converted,
sold or exchanged (or are converted, sold or exchanged within thirty days of the
related Asset Sale) by the Company or the Restricted Subsidiaries into cash
shall be deemed to be cash, in an amount equal to the net cash proceeds realized
upon such conversion, sale or exchange for purposes of determining the
percentage of cash consideration received by the Company or the Restricted
Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may (i)
apply the Net Cash Proceeds of any Asset Sale within 365 days of receipt thereof
to repay Senior Indebtedness and permanently reduce any related commitment, (ii)
commit in writing to acquire, construct or improve properties and capital assets
to be used in distributing DirecTv(R) Services, other services provided by
DirecTv or other high-powered DBS services at such time and so apply such Net
Cash Proceeds within 365 days after the receipt thereof, or (iii) apply the Net
Cash Proceeds of any Asset Sale within 365 days after receipt thereof to the
making of any Investment that is permitted to be made under "-- Limitation on
Restricted Payments" above.
To the extent that all or part of the Net Cash Proceeds of any Asset Sale
are not applied within 365 days of such Asset Sale as described in clause (i),
(ii) or (iii) of the immediately preceding paragraph (such Net Cash Proceeds,
the "Unutilized Net Cash Proceeds"), the Company shall, within 20 days after
such 365th day, make an Offer to Purchase all outstanding Notes up to a maximum
principal amount of Notes equal to the Securities Portion of Unutilized Net Cash
Proceeds, at a purchase price in cash equal to 100% of the principal amount of
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Notes, plus accrued and unpaid interest (including Additional Interest, if any)
thereon, if any, to the Purchase Date; provided, however, that the Offer to
Purchase may be deferred until there are aggregate Unutilized Net Cash Proceeds
equal to or in excess of $5.0 million, at which time the entire amount of such
Unutilized Net Cash Proceeds, and not just the amount in excess of $5.0 million,
shall be applied as required pursuant to this paragraph.
In the event that any other Indebtedness of the Company or any Restricted
Subsidiary that ranks pari passu with the Notes or any Guaranty requires that an
offer to purchase be made to repurchase such Indebtedness upon the consummation
of any Asset Sale (the "Other Indebtedness"), the Company may apply the
Unutilized Net Cash Proceeds otherwise required to be applied to an Offer to
Purchase to an offer to purchase such Other Indebtedness and to an Offer to
Purchase so long as the amount of such Unutilized Net Cash Proceeds applied to
repurchase the Notes is not less than the Securities Portion of Unutilized Net
Cash Proceeds. With respect to any Unutilized Net Cash Proceeds, the Company
shall make the Offer to Purchase in respect thereof at the same time as the
analogous offer to purchase is made under any Other Indebtedness and the
Purchase Date in respect thereof shall be the same under the Indenture as the
purchase date in respect thereof pursuant to any Other Indebtedness.
For purposes of this covenant, "Securities Portion of Unutilized Net Cash
Proceeds" means the amount of the Unutilized Net Cash Proceeds equal to the
product of (x) the Unutilized Net Cash Proceeds and (y) a fraction the numerator
of which is the principal amount of all Notes tendered pursuant to the Offer to
Purchase related to such Unutilized Net Cash Proceeds (the "Securities Amount")
and the denominator of which is the sum of the Securities Amount and the lesser
of the aggregate principal face amount or accreted value as of the relevant
purchase date of all Other Indebtedness tendered pursuant to a concurrent offer
to purchase such Other Indebtedness made at the time of such Offer to Purchase.
With respect to any Offer to Purchase effected pursuant to this covenant,
to the extent that the principal amount of the Notes tendered pursuant to such
Offer to Purchase exceeds the Securities Portion of Unutilized Net Cash Proceeds
to be applied to the repurchase thereof, such Notes shall be purchased pro rata
based on the principal amount of such Notes tendered by each Holder.
In the event that the Issuers make an Offer to Purchase the Notes, the
Issuers shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act, and any violation of the provisions of the Indenture relating
to such Offer to Purchase occurring as a result of such compliance shall not be
deemed an Event of Default or an event that with the passing of time or giving
of notice, or both, would constitute an Event of Default.
(b) Each Holder shall be entitled to tender all or any portion of the Notes
owned by such Holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a Note tendered must be tendered in an integral
multiple of $1,000 principal face amount and subject to any proration among
tendering Holders as described above.
Limitations on Conduct of Business of Capital and the Company. Capital
will not hold any operating assets or other properties or conduct any business
other than to serve as an Issuer and co-obligor with respect to the Notes and
will not own any Equity Interests of any Person to the extent that such
ownership would cause such Person to be deemed a Subsidiary of Capital.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any business, either directly or through any
Subsidiary, except for those businesses in which the Company and its Restricted
Subsidiaries were engaged on the Issue Date or businesses reasonably related
thereto.
Merger, Sale of Assets, Etc. No Issuer shall consolidate with or merge
with or into (whether or not such Issuer is the Surviving Person) any other
entity and the Company shall not and shall not cause or permit any Restricted
Subsidiary to, sell, convey, assign, transfer, lease or otherwise dispose of all
or substantially all of the Company's properties and assets (determined on a
consolidated basis for the Company and the Restricted Subsidiaries) to any
entity in a single transaction or series of related transactions, unless: (i)
either (x) such Issuer shall be the Surviving Person or (y) the Surviving Person
(if other than such Issuer) shall be, in the case of Capital, a corporation, or
in any other case, a corporation, partnership or limited liability company
organized and validly existing under the laws of the United States of America or
any State thereof or the District of Columbia,
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and shall, in any such case, expressly assume by a supplemental indenture, the
due and punctual payment of the principal of, premium, if any, and interest on
all the Notes and the performance and observance of every covenant of the
Indenture, the Interest Escrow Agreement, the Security Agreement and the
Registration Rights Agreement to be performed or observed on the part of the
Issuers; (ii) immediately thereafter, no Default or Event of Default shall have
occurred and be continuing; and (iii) immediately after giving effect to any
such transaction involving the Incurrence by the Company or any Restricted
Subsidiary, directly or indirectly, of additional Indebtedness (and treating any
Indebtedness not previously an obligation of the Company or any Restricted
Subsidiary in connection with or as a result of such transaction as having been
Incurred at the time of such transaction), the Surviving Person could Incur, on
a pro forma basis after giving effect to such transaction as if it had occurred
at the beginning of the latest fiscal quarter for which consolidated financial
statements of the Company are available, at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the Debt to Operating
Cash Flow Ratio of the first paragraph of "-- Limitation on Indebtedness" above;
(iv) the Issuers have delivered to the Trustee an opinion of counsel to the
effect that the holders of the Notes will not recognize gain or loss for federal
income tax purposes as a result of such transaction; and (v) immediately
thereafter the Surviving Person shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of such Issuer immediately prior to such
transaction.
Notwithstanding the foregoing, Capital may merge into the Company upon or
at any time following a Corporate Conversion, and clauses (iii), (iv) and (v) in
the preceding paragraph shall not apply in the case of a merger by the Company
if (a) the Company is the Surviving Person, (b) the consideration issued or paid
by the Company in such merger consists solely of Qualified Equity Interests of
the Company, and (c) immediately after giving effect to such merger, (i) if the
Debt to Operating Cash Flow Ratio immediately before such merger is positive,
the Debt to Operating Cash Flow Ratio immediately after such merger does not
exceed such ratio immediately prior to such merger (giving pro forma effect to
the merger as described in clause (iii) of the preceding paragraph) or (ii) if
the Debt to Operating Cash Flow Ratio immediately before such merger is
negative, the Company shall have Consolidated Net Worth immediately after such
merger equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such merger.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interest of which constitutes all or substantially all
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all the properties and assets of the Company.
Subject to the requirements of the immediately preceding paragraph, in the
event of a sale of all or substantially all of the assets of any Guarantor or
all of the Equity Interests of any Guarantor, by way of merger, consolidation or
otherwise, then the Surviving Person of any such merger or consolidation, or
such Guarantor, if all of its Equity Interests are sold, shall be released and
relieved of any and all obligations under the Guaranty of such Guarantor if (i)
the Person or entity surviving such merger or consolidation or acquiring the
Equity Interests of such Guarantor is not a Restricted Subsidiary, and (ii) the
Net Cash Proceeds from such sale are used after such sale in a manner that
complies with the provisions of "-- Covenants -- Disposition of Proceeds of
Asset Sales" above. Except as provided in the preceding sentence, no Guarantor
shall consolidate with or merge with or into another Person, whether or not such
Person is affiliated with such Guarantor and whether or not such Guarantor is
the Surviving Person, unless (i) the Surviving Person is a corporation,
partnership or limited liability company organized and validly existing under
the laws of the United States, any State thereof or the District of Columbia,
(ii) the Surviving Person (if other than such Guarantor) assumes all the
Obligations of such Guarantor under the Notes, the Indenture and the
Registration Rights Agreement pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee, (iii) at the time of and immediately
after such Disposition, no Default or Event of Default shall have occurred and
be continuing, and (iv) the Surviving Person will have Consolidated Net Worth
(immediately after giving pro forma effect to the Disposition) equal to or
greater than the Consolidated Net Worth of such Guarantor immediately preceding
the transaction; provided, however, that clause (iv) of this paragraph shall not
be a condition to a merger or consolidation of a Guarantor if such merger or
consolidation only involves the Company and/or one or more Wholly Owned
Restricted Subsidiaries.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed above in which an Issuer, or any Guarantor,
that is a party to such transaction is not the Surviving Person and the
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Surviving Person is to assume all of the Obligations of such Issuer or any such
Guarantor under the Notes, the Indenture and the Registration Rights Agreement
pursuant to a supplemental indenture, such Surviving Person shall succeed to,
and be substituted for, and may exercise every right and power of, such Issuer
or any such Guarantor, as applicable, and such Issuer or such Guarantor, as
applicable, shall be discharged from its Obligations under the Indenture, the
Notes and the Guaranty, as applicable.
The meaning of the phrase "all or substantially all" as used above varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether the foregoing provisions are applicable.
Transactions With Affiliates. The Company shall not, and shall not cause
or permit any Restricted Subsidiary to, directly or indirectly, conduct any
business or enter into any transaction (or series of related transactions) with
or for the benefit of any of their respective Affiliates or any direct or
indirect beneficial holder of 10% or more of the Equity Interests of the Company
or any officer, director or employee of the Company or any Restricted Subsidiary
(each an "Affiliate Transaction"), unless such Affiliate Transaction is on terms
that are no less favorable to the Company or such Restricted Subsidiary, as the
case may be, than would be available in a comparable transaction with an
unaffiliated third party. If such Affiliate Transaction (or series of related
Affiliate Transactions) involves aggregate payments or other consideration
having a Fair Market Value in excess of $5.0 million, the Company shall not, and
shall not cause or permit any Restricted Subsidiary to, enter into such
Affiliate Transaction, unless a majority of the disinterested members of the
Board of Directors of the Company shall have approved such Affiliate Transaction
and determined that such Affiliate Transaction complies with the foregoing
provisions; provided, however, that if such Affiliate Transaction is in the
ordinary course of business consistent with the past practice of any business of
the Company or a Restricted Subsidiary, then there shall be no need to comply
with this sentence. In the event that the Company obtains a written opinion from
an Independent Financial Advisor (and files the same with the Trustee) stating
that the terms of an Affiliate Transaction are fair, from a financial point of
view, to the Company or the Restricted Subsidiary involved in such Affiliate
Transaction, as the case may be, such opinion will conclusively meet the
requirements of the first sentence of this paragraph and there shall be no need
to comply with the second sentence of this paragraph.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and any Restricted
Subsidiary or between or among Restricted Subsidiaries; (ii) customary
directors' fees, indemnification and similar arrangements, consulting fees,
employee salaries, bonuses or employment agreements, compensation or employee
benefit arrangements and incentive arrangements with any officer, director or
employee of the Company entered into in the ordinary course of business
(including customary benefits thereunder) and payments under any indemnification
arrangements permitted by applicable law; (iii) any transactions undertaken
pursuant to any other contractual obligations in existence on the Issue Date (as
in effect on the Issue Date); (iv) any Restricted Payments made in compliance
with "-- Limitation on Restricted Payments" above; (v) loans and advances to
officers, directors and employees of the Company and the Restricted Subsidiaries
for travel, entertainment, moving and other relocation expenses, in each case
made in the ordinary course of business and consistent with past business
practices; (vi) the Incurrence of intercompany Indebtedness permitted pursuant
to clause (d) of the second paragraph of "-- Limitation on Indebtedness" above;
(vii) the pledge of Equity Interests of Unrestricted Subsidiaries to support the
Indebtedness thereof; and (viii) the issuance and sale by the Company of
Qualified Equity Interests.
Provision of Financial Information. Whether or not the Company is subject
to Section 13(a) or 15(d) of the Exchange Act, or any successor provision
thereto, the Company shall file with the SEC (if permitted by SEC practice and
applicable law and regulations) the annual reports, quarterly reports and other
documents that the Company would have been required to file with the SEC
pursuant to such Section 13(a) or 15(d) or any successor provision thereto if
the Company were so subject, such documents to be filed with the SEC on or prior
to the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company shall also in any event (a) within 15 days of each Required Filing Date
(whether or not permitted or required to be filed with the SEC) (i) transmit (or
cause to be transmitted) by mail to all Holders, as their names and addresses
appear in the Note Register, without cost to such
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Holders, and (ii) file with the Trustee, copies of the annual reports, quarterly
reports and other documents that the Company is required to file with the SEC
pursuant to the preceding sentence, or, if such filing is not so permitted,
information and data of a similar nature, and (b) if, notwithstanding the
preceding sentence, filing such documents by the Company with the SEC is not
permitted by SEC practice or applicable law or regulations, promptly upon
written request supply copies of such documents to any Holder. In addition, for
so long as any Notes remain outstanding, the Company will furnish to the Holders
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, and, to any beneficial holder of Notes, if not obtainable from
the SEC, information of the type that would be filed with the SEC pursuant to
the foregoing provisions, upon the request of any such holder.
Payments for Consent. None of the Issuers or any of the Company's
Subsidiaries shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee, or otherwise, to any Holder of a
Note for or as an inducement to any consent, waiver, or amendment of any of the
terms or provisions of the Indenture or the Notes unless such consideration is
offered to be paid or agreed to be paid to all Holders of the Notes that
consent, waive, or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver, or agreement.
EVENTS OF DEFAULT
The occurrence of any of the following will be defined as an "Event of
Default" under the Indenture: (a) failure to pay principal of (or premium, if
any, on) any Note when due (whether or not prohibited by the provisions of the
Indenture described under "-- Subordination of the Notes and the Guaranties"
above); (b) failure to pay any interest on any Note when due, continued for 30
days or more (whether or not prohibited by the provisions of the Indenture
described under "-- Subordination of the Notes and the Guaranties" above); (c)
default in the payment of principal of or interest on Notes required to be
purchased pursuant to any Offer to Purchase required by the Indenture when due
and payable or failure to pay on the Purchase Date the Purchase Price for any
Note validly tendered pursuant to any Offer to Purchase (whether or not
prohibited by the provisions of the Indenture described under "-- Subordination
of the Notes and the Guaranties" above); (d) failure to perform or comply with
any of the provisions described under "-- Certain Covenants -- Merger, Sale of
Assets, Etc." above, failure to comply with certain obligations with respect to
the Interest Escrow Account, including failure to deposit the funds required to
be deposited therein, or failure to comply with any of the provisions of the
Interest Escrow Agreement or the Security Agreement; (e) failure to perform any
other covenant, warranty or agreement of an Issuer or the Guarantors under the
Indenture or in the Notes continued for 30 days or more after written notice to
the Issuers by the Trustee or Holders of at least 25% of the aggregate principal
amount of the Notes under the Indenture; (f) default or defaults under the terms
of one or more instruments evidencing or securing Indebtedness of an Issuer or
any of the Company's Significant Restricted Subsidiaries having an outstanding
principal amount of $5.0 million or more individually or in the aggregate that
has resulted in the acceleration of the payment of such Indebtedness; provided,
however, that it shall not be an Event of Default if such Indebtedness shall
have been repaid in full or such acceleration shall have been rescinded within
20 days; (g) the rendering of a final judgment or judgments (not subject to
appeal) against an Issuer or any of the Company's Significant Restricted
Subsidiaries in an amount of $2.0 million or more (net of any amounts covered by
reputable and creditworthy insurance companies) that remains undischarged or
unstayed for a period of 60 days after the date on which the right to appeal has
expired; (h) certain events of bankruptcy, insolvency or reorganization
affecting an Issuer or any of the Company's Significant Restricted Subsidiaries;
and (i) any Guaranty of a Guarantor shall be held in a judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect, or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Guaranty. Subject to the provisions
of the Indenture relating to the duties of the Trustee, in case an Event of
Default shall occur and be continuing, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders of Notes, unless such Holders shall have offered
to the Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in aggregate principal
amount of the Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee.
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If an Event of Default with respect to the Notes (other than an Event of
Default with respect to the Company described in clause (h) of the preceding
paragraph) occurs and is continuing, the Trustee or the Holders of at least 25%
in aggregate principal amount of the outstanding Notes by notice in writing to
the Company may declare the unpaid principal of (and premium, if any) and
accrued interest to the date of acceleration on all the outstanding Notes to be
due and payable immediately and, upon any such declaration, such principal
amount (and premium, if any) and accrued interest, notwithstanding anything
contained in the Indenture or the Notes to the contrary, but subject to the
provisions limiting payment described above under "-- Subordination of the Notes
and the Guaranties," will become immediately due and payable; provided, however,
that so long as the Credit Facility shall be in full force and effect, if an
Event of Default shall have occurred and be continuing (other than an Event of
Default with respect to the Company described in clause (h) of the preceding
paragraph), the Notes shall not become due and payable until the earlier to
occur of (x) five Business Days following delivery of written notice of such
acceleration of the Notes to the agent under the Credit Facility and (y) the
acceleration (ipso facto or otherwise) of any Indebtedness under the Credit
Facility. If an Event or Default specified in clause (h) of the preceding
paragraph with respect to an Issuer occurs under the Indenture, the outstanding
Notes will ipso facto become immediately due and payable without any declaration
or other act on the part of the Trustee or any Holder of the Notes.
Any such declaration with respect to the Notes may be annulled as to past
Events of Default and Defaults (except, unless theretofore cured, an Event of
Default or a Default in payment of principal of (and premium, if any) or
interest on the Notes) upon the conditions provided in the Indenture. For
information as to waiver of defaults, see "-- Modification and Waiver" below.
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the outstanding
Notes, give the Holders of the Notes notice of all uncured Defaults or Events of
Default known to it; provided, however, that, except in the case of an Event of
Default in payment with respect to such Notes or a Default or Event of Default
in complying with "-- Certain Covenants -- Merger, Sale of Assets, Etc." above,
the Trustee shall be protected in withholding such notice if and so long as a
committee of its trust officers in good faith determines that the withholding of
such notice is in the interest of the Holders of the Notes.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default thereunder and unless the Holders of at least 25% of the aggregate
principal amount of the outstanding Notes under the Indenture shall have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee, and the Trustee shall have not received from the
Holders of a majority in aggregate principal amount of outstanding Notes a
direction inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a Holder of a Note for enforcement of payment of the principal of
and premium, if any, or interest on such Note on or after the respective due
dates expressed in such Note.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by it of certain of its obligations under the Indenture
and as to any default in such performance.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR AND
STOCKHOLDERS
No director, officer, employee, incorporator, manager or stockholder of the
Issuers or any of their Affiliates, as such, shall have any liability for any
obligations of the Issuers or any of their Affiliates under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
SATISFACTION AND DISCHARGE OF INDENTURE; LEGAL DEFEASANCE AND COVENANT
DEFEASANCE
The Issuers may terminate their and the Guarantors' substantive obligations
in respect of the Notes by delivering all outstanding Notes to the Trustee for
cancellation and paying all sums payable by them on account
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of principal of, premium, if any, and interest on all Notes or otherwise. In
addition to the foregoing, the Issuers may, at their option and at any time,
elect to have all obligations discharged with respect to the outstanding Notes
("Legal Defeasance"). Such Legal Defeasance means that the Issuers will be
deemed to have paid and discharged the entire indebtedness represented by the
outstanding Notes, except for: (a) the rights of holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on the Notes when such payments are due, or on the redemption date, as the case
may be; (b) the Issuers' obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and money
for security payments held in trust; (c) the rights, powers, trust, duties and
immunities of the Trustee, and the Issuers' obligations in connection therewith;
and (d) the Legal Defeasance provisions of the Indenture. In addition, the
Issuer may, at its option and at any time, elect to have all obligations
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "-- Events of Default" will no longer constitute an
Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance: (i)
the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in U.S. dollars, non-callable Government
Obligations, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants
selected by the Trustee, to pay the principal of, premium, if any, and interest
on the outstanding Notes on the stated maturity or on the applicable optional
redemption date, as the case may be; (ii) in the case of Legal Defeasance, the
Issuers shall have delivered to the Trustee an Opinion of Counsel confirming
that (A) the Issuers have received from, or there has been published by the
Internal Revenue Service, a ruling or (B) since the date of the Indenture, there
has been a change in the applicable Federal income tax law, in each case to the
effect that, and based thereon such opinion of counsel shall confirm that, the
holders of such Notes will not recognize income, gain or loss for Federal income
tax purposes as a result of such Legal Defeasance, and will be subject to
Federal income tax in the same amount, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Issuers shall have delivered to the Trustee
an Opinion of Counsel confirming that the holders of such Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Covenant Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit or insofar as
Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under the Indenture or any other material
agreement or instrument to which the Issuers or any Restricted Subsidiary is a
party; (vi) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the intent
of preferring the holders of such Notes over any other creditors of the Issuers
or with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Issuers or others; and (vii) the Issuers shall have delivered
to the Trustee an Officers' Certificate stating that all conditions precedent
provided for or relating to the Legal Defeasance or the Covenant Defeasance have
been complied with.
The Issuers may make an irrevocable deposit pursuant to this provision
pursuant to the Indenture only if at such time they are not prohibited from
doing so under the subordination provisions of the Indenture or certain
covenants in the Senior Indebtedness and the Issuers have delivered to the
Trustee and any Paying Agent an Officers' Certificate to that effect.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of
New York without regard to principles of conflicts of laws.
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MODIFICATION AND WAIVER
From time to time the Issuers, when authorized by resolutions of the
Company's Board, and the Trustee, without the consent of the holders of the
Notes, may amend, waive or supplement the Indenture, Notes or Security Agreement
for certain specified purposes, including among other things, curing
ambiguities, defects or inconsistencies, maintaining the qualification of the
Indenture under the TIA or making any change that does not adversely affect the
rights of any holder. Modifications and amendments of the Indenture, Notes or
Security Agreement may be made by the Issuers, the Guarantors and the Trustee
with the consent of the Holders of a majority in aggregate principal amount of
the outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for the Notes); provided, however, that no such
modification or amendment to the Indenture may, without the consent of the
Holder of each Note affected thereby, (a) change the maturity of the principal
of or any installment of interest on any such Note or alter the optional
redemption or repurchase provisions of any such Note or the Indenture in a
manner adverse to the Holders of such Notes; (b) reduce the principal amount of
(or the premium) of any such Note; (c) reduce the rate of or extend the time for
payment of interest on any such Note; (d) change the place or currency of
payment of principal of (or premium, if any) or interest on any such Note; (e)
modify any provisions of the Indenture relating to the waiver of past defaults
(other than to add sections of the Indenture or such Notes) or the right of the
Holders of outstanding Notes to institute suit for the enforcement of any
payment on or with respect to any Note in respect thereof or the modification
and amendment provisions of the Indenture and the Notes (other than to add
sections of the Indenture or the Notes which may not be amended, supplemented or
waived without the consent of each Holder herein affected); (f) reduce the
percentage of the principal amount of outstanding Notes necessary for amendment
to or waiver of compliance with any provision of the Indenture or the
outstanding Notes or for waiver of any Default; (g) waive a default in the
payment of principal of, interest on, or redemption payment with respect to,
such Note (except a rescission of acceleration of the Notes by the Holders as
provided in the Indenture and a waiver of the payment default that resulted from
such acceleration); (h) modify the ranking or priority of any Note or the
Guaranty of any Guarantor or modify the definition of Senior Indebtedness or
Guarantor Senior Indebtedness or amend or modify the subordination provisions of
the Indenture in any manner adverse to the Holders of the Notes; (i) release any
Guarantor from any of its obligations under its Guaranty or the Indenture
otherwise than in accordance with the Indenture; (j) modify the provisions of
any covenant (or the related definitions) in the Indenture requiring the Issuers
to make an Offer to Purchase in a manner materially adverse to the Holders of
Notes affected thereby; or (k) release any of the Collateral from the lien
created by the Security Agreement prior to the time specified therein.
The Holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all Holders of Notes, may waive compliance by the Issuers
with certain restrictive provisions of the Indenture. Subject to certain rights
of the Trustee, as provided in the Indenture, the Holders of a majority in
aggregate principal amount of the Notes, on behalf of all Holders of Notes, may
waive any past default under the Indenture (including any such waiver obtained
in connection with a tender offer or exchange offer for the Notes), except a
default in the payment of principal, premium or interest or a default arising
from failure to purchase any Notes tendered pursuant to an Offer to Purchase
pursuant thereto, or a default in respect of a provision that under the
Indenture cannot be modified or amended without the consent of the Holder of
each outstanding Note that is affected.
THE TRUSTEE
Except during the continuance of a Default, the Trustee will perform only
such duties as are specifically set forth in the Indenture. During the existence
of a Default under the Indenture, the Trustee will exercise such rights and
powers vested in it under the Indenture and use the same degree of care and
skill in such 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 incorporated by
reference therein contain limitations on the rights of the Trustee, if it
becomes a creditor of the Issuers, any Guarantor or any other obligor upon the
Notes, to obtain payment of claims in certain cases or to realize on certain
property received by it in respect of any such claim as security or otherwise.
The Trustee is permitted to engage in other transactions with the Company or an
Affiliate of the Issuers; provided, however, that if it acquires any conflicting
interest (as defined in the Indenture or in the Trust Indenture Act), it must
eliminate such conflict or resign.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Restricted Subsidiary or is merged or consolidated with or into
the Company or any Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person, any other
Person that merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any 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 to any other Person, or any acquisition or purchase of Equity
Interests of any other Person by the Company or any Restricted Subsidiary, in
either case pursuant to which such Person shall become a Restricted Subsidiary
or shall be consolidated or merged with or into the Company or any Restricted
Subsidiary or (ii) any acquisition by the Company or any Restricted Subsidiary
of the assets of any Person which constitute substantially all of an operating
unit or line of business of such Person or which is otherwise outside of the
ordinary course of business.
"Additional Interest" has the meaning provided in Section 4(a) of the
Registration Rights Agreement.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that (i) beneficial ownership of 10.0% or more of the voting power of the then
outstanding voting securities of a Person shall be deemed to be control; and
(ii) no individual, other than a manager or director of the Company or an
officer of the Company with a policy making function, shall be deemed an
Affiliate of the Company or any of the Company's Subsidiaries, solely by reason
of such individual's employment, position or responsibilities by or with respect
to the Company or any of the Company's Subsidiaries.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without
limitation, any merger, consolidation or sale-leaseback transaction) to any
Person other than the Company or a Wholly Owned Restricted Subsidiary, in one
transaction or a series of related transactions, of (i) any Equity Interest of
any Restricted Subsidiary; (ii) any material license, franchise or other
authorization of the Company or any Restricted Subsidiary; (iii) any assets of
the Company or any Restricted Subsidiary that constitute substantially all of an
operating unit or line of business of the Company or any Restricted Subsidiary;
or (iv) any other property or asset of the Company or any Restricted Subsidiary
outside of the ordinary course of business (including the receipt of proceeds
paid on account of the loss of or damage to any property or asset and awards of
compensation for any asset taken by condemnation, eminent domain or similar
proceedings). The term "Asset Sale" shall not include (a) any transaction
consummated in compliance with "-- Certain Covenants -- Merger, Sale of Assets,
Etc." above and the creation of any Lien not prohibited by "-- Certain
Covenants -- Limitation on Liens" above; provided, however, that any transaction
consummated in compliance with "-- Certain Covenants -- Merger, Sale of Assets,
Etc.", above involving a sale, conveyance, assignment, transfer, lease or other
disposal of less than all of the properties or assets of the Company and the
Restricted Subsidiaries shall be deemed to be an Asset Sale with respect to the
properties or assets of the Company and Restricted Subsidiaries that are not so
sold, conveyed, assigned, transferred, leased or otherwise disposed of in such
transaction; (b) sales 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; (c)
any transaction consummated in compliance with "-- Certain Covenants --
Limitation on Restricted Payments" above; and (d) sales of accounts receivable
for cash at fair market value. In addition, solely for purposes of "-- Certain
Covenants -- Disposition of Proceeds of Asset Sales" above, any
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sale, conveyance, transfer, lease or other disposition of any property or asset,
whether in one transaction or a series of related transactions, involving assets
with a Fair Market Value not in excess of $500,000, and not in the aggregate,
together with all other such sales, conveyances, transfers, leases or
dispositions after the Issue Date, exceeding $2.0 million shall be deemed not to
be an Asset Sale.
"Board of Directors" means (i) in the case of a Person that is a
corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors, board of managers, management committee or
similar governing body of such Person (or in the case of a limited partnership,
of such Person's general partner, or in the case of a limited liability company,
of such Person's manager), or any authorized committee thereof responsible for
the management of the business and affairs of such Person.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Cash Equivalents" means: (a) U.S. dollars; (b) securities issued or
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition; (c) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million; (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) entered into with any financial institution meeting the
qualifications specified in clause (c) above; and (e) commercial paper rated
P-1, A-1 or the equivalent thereof by Moody's Investors Service, Inc. or
Standard & Poor's, respectively, and in each case maturing within six months
after the date of acquisition.
"Change of Control" shall mean the occurrence of any of the following
events (whether or not approved by the Board of Directors of the Company): (a)
any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of
the Exchange Act or any successor provision to either of the foregoing,
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under 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 upon the happening of an event or otherwise), directly or
indirectly, of more than 45% of the total voting power of the then outstanding
Equity Interests of the Company; (b) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new members of the Board of
Directors whose election by the Board of Directors of the Company or whose
nomination for election by the members or stockholders of the Company was
approved by a vote of at least a majority of the members of the Board of
Directors then still in office who were either such members at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason (other than by action of the Permitted Holders)
to constitute a majority of the Board of Directors of the Company then in
office; or (c) the liquidation or dissolution of the Company; provided, however,
that a Corporate Conversion shall not be a Change of Control except that, in
such case, the surviving corporation in such Corporate Conversion shall be
substituted for the Company for purposes of clauses (a) and (b) of this
paragraph; provided further, that a Change of Control will be deemed not to
occur pursuant to clauses (a) or (b) above if either (x) the acquiring "person"
is a corporation engaged in the telecommunications business with outstanding
senior, unsecured corporate debt securities having a maturity at original
issuance of at least one year and such debt securities are rated Investment
Grade (without giving effect to any third-party credit support or enhancement)
by Standard & Poor's or Moody's Investors Service, Inc. for a period of at least
90 consecutive days, beginning on the date of such event (which period will be
extended up to 90 additional days for as long as the rating of such debt
securities is under publicly announced consideration for possible downgrading by
the applicable rating agency), or (y) in the event that the acquiring "person"
is a corporation that either (1) does not have any outstanding senior, unsecured
corporate debt securities that are rated by Standard & Poor's or Moody's
Investors Service, Inc. at any time during a period of 90 consecutive days
beginning on the date of such event (which period will be extended up to an
additional 90 days for as long as any such rating agency has publicly
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announced that such debt securities will be rated), or (2) after the date of
such event but during such 90 day period, has outstanding senior, unsecured
corporate debt securities having a maturity at original issuance of at least one
year that have been rated Investment Grade (without giving effect to any
third-party credit support or enhancement) by Standard & Poor's or Moody's
Investors Service, Inc. which rating continues in effect for the remainder of
the period specified in clause (x) above, the Notes shall be rated Investment
Grade immediately upon such Change of Control.
"Change of Control Date" has the meaning set forth under "-- Offer to
Purchase Upon Change of Control" above.
"Collateral" means all of the assets in which the Issuers have granted a
security interest pursuant to the Security Agreement.
"Consolidated Income Tax Expense" means, with respect to the Company for
any period, the provision for federal, state, local and foreign income taxes
payable by the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Company for any
period, without duplication, the sum of (i) the interest expense of the Company
and the Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount; (b) the net cost under Interest Rate Protection
Obligations (including any amortization of discounts); (c) the interest portion
of any deferred payment obligation; (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; and (e) all capitalized interest and all accrued interest; (ii) the
interest component of Capital Lease Obligations paid, accrued and/or scheduled
to be paid or accrued by the Company and the Restricted Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP; and (iii)
dividends and distributions in respect of Disqualified Equity Interests actually
paid in cash by the Company during such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net income
of the Company and the Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, adjusted, to the extent included in
calculating such net income, by excluding, without duplication, (a) all
extraordinary gains or losses and all gains and losses from the sales or other
dispositions of assets out of the ordinary course of business (net of taxes,
fees and expenses relating to the transaction giving rise thereto) for such
period; (b) that portion of such net income derived from or in respect of
investments in Persons other than Restricted Subsidiaries, except to the extent
actually received in cash by the Company or any Restricted Subsidiary (subject,
in the case of any Restricted Subsidiary, to the provisions of clause (e) of
this definition); (c) the portion of such net income (or loss) allocable to
minority interests in any Person (other than a Restricted Subsidiary) for such
period, except to the extent actually received in cash by the Company or any
Restricted Subsidiary (subject, in the case of any Restricted Subsidiary, to the
provisions of clause (e) of this definition); (d) net income (or loss) of any
other Person combined with the Company or any Restricted Subsidiary on a
"pooling of interests" basis attributable to any period prior to the date of
combination; and (e) the net income of any Restricted Subsidiary to the extent
that the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time (regardless of any waiver)
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulations applicable to that Restricted Subsidiary or its Equity
Interest holders.
"Consolidated Net Worth" with respect to any Person means the equity of the
holders of Qualified Equity Interests of such Person and its Restricted
Subsidiaries, as reflected on a balance sheet of such Person determined on a
consolidated basis and in accordance with GAAP.
"Consolidated Operating Cash Flow" means, with respect to any period,
Consolidated Net Income for such period increased (without duplication) by the
sum of (a) Consolidated Income Tax Expense for such period to the extent
deducted in determining Consolidated Net Income for such period; (b)
Consolidated Interest Expense for such period to the extent deducted in
determining Consolidated Net Income for such period; (c) all dividends on
Preferred Equity Interests to the extent not taken into account for computing
Consolidated Net Income for that
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period; and (d) depreciation, amortization and any other non cash items for such
period to the extent deducted in determining Consolidated Net Income for such
period (other than any non cash item that requires the accrual of, or a reserve
for, cash charges for any future period) of the Company and the Restricted
Subsidiaries, including, without limitation, amortization of capitalized debt
issuance costs for such period, all of the foregoing determined on a
consolidated basis in accordance with GAAP minus non cash items to the extent
they increase Consolidated Net Income (including the partial or entire reversal
of reserves taken in prior periods) for such period.
"Corporate Conversion" shall mean the conversion of the Company to a
corporation, whether pursuant to a merger, consolidation, conversion by filing,
assignment of assets, or similar transaction or series of transactions, in each
case resulting in a corporation substantially all of the assets of which consist
of substantially all of the assets that were held directly or indirectly by the
Company immediately prior to such transaction and substantially all of the
capital stock of which corporation is held by Persons who were members of the
Company immediately prior to such transaction or Permitted Transferees of such
Persons in substantially the same proportions.
"Credit Facility" means the Second Amended and Restated Credit Agreement,
dated as of July 30, 1997, between Digital Television Services, LLC, the lenders
named therein, CIBC Wood Gundy Securities Corp., as Arranger, Morgan Guaranty
Trust Company of New York, as Syndication Agent, Fleet National Bank, as
Documentation Agent, and Canadian Imperial Bank of Commerce, as Administrative
Agent, including any deferrals, renewals, waivers, extensions, replacements,
refinancings or refundings thereof, or amendments, modifications or supplements
thereto and any agreement providing therefor, whether by or with the same or any
other lender, creditor, group of lenders or group of creditors, and including
related notes, guarantees, security agreements, pledge agreements, mortgages,
other collateral documents (including all Loan Documents (as defined in the
Credit Facility)) and note agreements and other instruments and agreements
executed in connection therewith.
"Cumulative Operating 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.
"DBS" means direct broadcast satellite.
"Debt to Operating Cash Flow Ratio" means the ratio of (a) an amount equal
to the Total Consolidated Indebtedness as of the date of calculation (the
"Determination Date") minus the amount of funds on deposit in the Interest
Escrow Account as of the Determination Date to (b) four times the Consolidated
Operating Cash Flow for the latest fiscal quarter for which financial
information is available immediately preceding such Determination Date (the
"Measurement Period"). For purposes of calculating Consolidated Operating Cash
Flow for the Measurement Period immediately prior to the relevant Determination
Date, (I) any Person that is a Restricted Subsidiary on the Determination Date
(or would become a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of such
Consolidated Operating Cash Flow) will be deemed to have been a Restricted
Subsidiary at all times during such Measurement Period, (II) any Person that is
not a Restricted Subsidiary on such Determination Date (or would cease to be a
Restricted Subsidiary on such Determination Date in connection with the
transaction that requires the determination of such Consolidated Operating Cash
Flow) will be deemed not to have been a Restricted Subsidiary at any time during
such Measurement Period, and (III) if the Company or any Restricted Subsidiary
shall have in any manner (x) acquired (including through an Acquisition or the
commencement of activities constituting such operating business) or (y) disposed
of (including by way of an Asset Sale or the termination or discontinuance of
activities constituting such operating business) any operating business during
such Measurement Period or after the end of such period and on or prior to such
Determination Date, such calculation will be made on a pro forma basis in
accordance with GAAP as if, in the case of an Acquisition or the commencement of
activities constituting such operating business, all such transactions had been
consummated on the first day of such Measurement Period and, in the case of an
Asset Sale or termination or discontinuance of activities constituting such
operating business, all
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such transactions had been consummated prior to the first day of such
Measurement Period; provided, however, that such pro forma adjustment shall not
give effect to the Operating Cash Flow of any Acquired Person to the extent that
such Person's net income would be excluded pursuant to clause (e) of the
definition of Consolidated Net Income. For purposes of determining Total
Consolidated Indebtedness as of any Determination Date, the sum of all
Indebtedness outstanding under the Credit Facility on such Determination Date
and all amounts that the Company or any Restricted Subsidiary could borrow under
the Credit Facility on such Determination Date (assuming the satisfaction of all
conditions precedent under the Credit Facility other than conditions relating
solely to incremental amounts being available under the Credit Facility) shall
be deemed to be outstanding and added to Total Consolidated Indebtedness on such
Determination Date (but without duplication).
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Indebtedness" means (a) any Indebtedness of the Company
and any Guarantor outstanding under the Credit Facility (including guarantees)
and (b) any other Senior Indebtedness or Guarantor Senior Indebtedness that, at
the time of determination, has an aggregate principal amount outstanding,
together with any commitments to lend additional amounts, of at least $10.0
million, if (in the case of Senior Indebtedness or Guarantor Senior Indebtedness
described in this clause (b)) the instrument governing such Senior Indebtedness
or Guarantor Senior Indebtedness expressly states that such Indebtedness is
"Designated Senior Indebtedness" for purposes of the Indenture, a Board
Resolution setting forth such designation by the Company has been filed with the
Trustee and such designation is not prohibited by the Credit Facility.
"Designation" has the meaning set forth in "-- Certain
Covenants -- Designation of Unrestricted Subsidiaries" above.
"Designation Amount" has the meaning set forth in "-- Certain
Covenants -- Designation of Unrestricted Subsidiaries" above.
"DirecTv(R) Services" means DBS television services and all other video,
audio, data packages, "a la carte" programming services and other services
offered by DirecTv, Inc., a subsidiary of Hughes Communications Galaxy, Inc.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof, in
whole or in part, or exchangeable into Indebtedness on or prior to the earlier
of the maturity date of the Notes or the date on which no Notes remain
outstanding.
"DTS" means Digital Television Services, LLC, a Delaware limited liability
company.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated Investment Grade at the time as of which
any investment or rollover therein is made.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, or
member interests in such Person, including any Preferred Equity Interests.
"Escrow Agent" means the Trustee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
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"Existing Indebtedness" means any Indebtedness of the Company and its
Subsidiaries in existence on the Issue Date until such amounts are repaid.
"Expiration Date" has the meaning set forth in the definition of "Offer to
Purchase" below.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) that could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets shall be determined conclusively by the Board
of Directors of the Company acting in good faith, and shall be evidenced by
resolutions of the Board of Directors of the Company delivered to the Trustee;
provided, however, that if the fair market value of such assets exceeds $10
million, the fair market value shall be determined by an investment banking firm
of national standing selected by the Company.
"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States that are applicable at the date of
determination and that are consistently applied for all applicable periods.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States are pledged.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other Person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
"Guarantor" means each Restricted Subsidiary of the Company that guarantees
the Issuers' obligations under the Indenture and the Notes.
"Guarantor Senior Indebtedness" means, with respect to any Guarantor, at
any date, (i) all Obligations of such Guarantor under the Credit Facility, (ii)
all Interest Rate Protection Obligations of such Guarantor, (iii) all
Obligations of such Guarantor under stand-by letters of credit and (iv) all
other Indebtedness of such Guarantor for borrowed money, including principal,
premium, if any, and interest (including Post-Petition Interest) on such
Indebtedness, unless the instrument under which such Indebtedness of such
Guarantor for money borrowed is Incurred expressly provides that such
Indebtedness for money borrowed is not senior or superior in right of payment to
such Guarantor's Guaranty, and all renewals, extensions, modifications,
amendments or refinancings thereof. Notwithstanding the foregoing, Guarantor
Senior Indebtedness shall not include (i) to the extent that it may constitute
Indebtedness, any Obligation for federal, state, local or other taxes, (ii) any
Indebtedness among or between such Guarantor and the Company or any of such
Guarantor or the Company, (iii) to the extent that it may constitute
Indebtedness, any Obligation in respect of any trade payable Incurred for the
purchase of goods or materials, or for services obtained, in the ordinary course
of business, (iv) that portion of any Indebtedness that is Incurred in violation
of the Indenture; provided, however, that such Indebtedness shall be deemed not
to have been Incurred in violation of the Indenture for purposes of this clause
(iv) if (I) the holder(s) of such Indebtedness or their representative or such
Guarantor shall have furnished to the Trustee an opinion of independent legal
counsel, unqualified in all material respects, addressed to the Trustee (which
legal counsel may, as to matters of fact, rely upon an officers' certificate of
such Guarantor) to the effect that the Incurrence of such Indebtedness does not
violate the provisions of the Indenture or (II) in the case of any Obligations
under the Credit Facility, the holder(s) of such Obligations or their agent or
representative shall have received a representation from such Guarantor to the
effect that the Incurrence of such Indebtedness does not violate the provisions
of the Indenture, (v) Indebtedness evidenced by the Guaranty, (vi) Indebtedness
of such Guarantor that is expressly subordinate or junior in right of payment to
any other Indebtedness of such Guarantor, (vii) to the extent that it may
constitute Indebtedness, any obligation owing under leases (other than Capital
Lease Obligations) or management
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agreements and (viii) any obligation that by operation of law is subordinate to
any general unsecured obligations of such Guarantor.
"Guaranty" means any guarantee by any Restricted Subsidiary of the Company
of the Issuers' obligations under the Indenture and the Notes.
"High Power Satellite Transmission Business" means the business of the
acquisition, transmission or sale of programming in the high power DBS business
utilizing broadcast satellite service (including any provision of such services
to cable operators or other media providers), which may utilize all or part of
satellites owned by DirecTv, Inc. or Hughes Communication Galaxy Inc. and all
other activities relating thereto or arising therefrom.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing).
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed; (b)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable incurred in the
ordinary course of business and payable in accordance with industry practices,
or other accrued liabilities arising in the ordinary course of business that are
not overdue or that are being contested in good faith); (e) every Capital Lease
Obligation of such Person; (f) every net obligation under interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements,
and other agreements or arrangements designed to protect such Person against
fluctuations in interest rates; (g) every obligation of the type referred to in
clauses (a) through (f) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor, guarantor or
otherwise; and (h) any and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a) through (g) above. Indebtedness
(a) shall never be calculated taking into account any cash and cash equivalents
held by such Person; (b) shall not include obligations of any Person (x) arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently drawn against insufficient funds in the
ordinary course of business, provided that such obligations are extinguished
within two Business Days of their incurrence unless covered by an overdraft
line, (y) resulting from the endorsement of negotiable instruments for
collection in the ordinary course of business and consistent with past business
practices and (z) under stand-by letters of credit to the extent collateralized
by cash or Cash Equivalents; (c) that provides that an amount less than the
principal amount thereof shall be due upon any declaration of acceleration
thereof shall be deemed to be incurred or outstanding in an amount equal to the
accreted value thereof at the date of determination; (d) shall include the
liquidation preference and any mandatory redemption payment obligations in
respect of any Disqualified Equity Interests of the Company or any Restricted
Subsidiary; and (e) shall not include obligations under performance bonds,
performance guarantees, surety bonds and appeal bonds, letters of credit or
similar obligations, Incurred in the ordinary course of business (including
standby letters of credit securing obligations to the NRTC Incurred in the
ordinary course of business that are not overdue or that are being contested in
good faith by appropriate proceedings) (other than obligations under or in
respect of any direct or indirect credit support for obligations of any
Unrestricted Subsidiary).
"Independent Financial Advisor" means a nationally recognized, accounting,
appraisal, investment banking firm or consultant with experience advising DBS
businesses that is, in the judgment of the Company's Board of Directors,
qualified to perform the task for which it has been engaged (i) that does not,
and whose directors, officers and employees or Affiliates do not, have a direct
or indirect financial interest in the Company and
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(ii) that, in the judgment of the Board of Directors of the Company, is
otherwise independent and qualified to perform the task for which it is to be
engaged.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
any liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"interest" means, with respect to the Notes, the sum of any cash interest
and any Additional Interest on the Notes.
"Interest Escrow Account" shall mean an account established in the name of
the Escrow Agent and funded by the Issuers on the Closing Date pursuant to the
Indenture.
"Interest Escrow Agreement" means the Interest Escrow Agreement dated as of
July 30, 1997 among the Issuers and the Trustee, as trustee and as escrow agent.
"Interest Rate Protection Obligations" means, with respect to any Person,
the Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit or capital contribution to
(by means of transfers of cash or other property or assets to others or payments
for property or services for the account or use of others, or otherwise), or
purchase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person. The amount
of any Investment shall be the original cost of such Investment, plus the cost
of all additions thereto, and minus the amount of any portion of such Investment
repaid to such Person in cash as a repayment of principal or a return of
capital, as the case may be, but without any other adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment. In determining the amount of any Investment involving a transfer of
any property or asset other than cash, such property shall be valued at its fair
market value at the time of such transfer, as determined in good faith by the
Board of Directors (or comparable body) of the Person making such transfer.
"Investment Grade" means with respect to a security, that such security is
rated, by at least two nationally recognized statistical rating organizations,
in one of each such organization's four highest generic rating categories.
"Issue Date" means the original issue date of the Notes.
"Lien" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrance of any kind (including any conditional
sale or capital lease or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Marketable Securities" means: (a) Government Securities; (b) any
certificate of deposit maturing not more than 365 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution; (c)
commercial paper maturing not more than 365 days after the date of acquisition
issued by a corporation (other than an Affiliate of the Issuer) with an
Investment Grade rating, at the time as of which any investment therein is made,
issued or offered by an Eligible Institution; (d) any bankers acceptances or
money market deposit accounts issued or offered by an Eligible Institution; and
(e) any fund investing exclusively in investments of the types described in
clauses (a) through (d) above.
"Maturity Date" means the date, which is set forth on the face of the
Notes, on which the Notes will mature.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or
Cash Equivalents received by the Company or any Restricted Subsidiary in respect
of any Asset Sale, including all cash or Cash Equivalents received upon any
sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof; (b) taxes paid or payable, or amounts in respect
thereof permitted to be distributed pursuant to clause (vi) of the second
paragraph under "Limitation on Restricted Payments," as a result thereof (after
taking
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into account any available tax credits or deductions and any tax sharing
arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale; (d) amounts deemed, in good faith, appropriate by the Board of
Directors of the Company to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets that are the subject of such
Asset Sale (provided that the amount of any such reserves shall be deemed to
constitute Net Cash Proceeds at the time such reserves shall have been released
or are not otherwise required to be retained as a reserve); and (e) with respect
to Asset Sales by Subsidiaries, the portion of such cash payments attributable
to Persons holding a minority interest in such Subsidiary.
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to immediately
accelerate the maturity of any Designated Senior Indebtedness.
"NRTC" means the National Rural Telecommunications Cooperative and any
successor entity to it.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer to Purchase"
below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each Holder at
such Holder's address appearing in the register for the Notes on the date of the
Offer offering to purchase up to the principal amount of Notes specified in such
Offer at the purchase price specified in such Offer (as determined pursuant to
the Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase,
which shall be not less than 20 Business Days nor more than 60 days after the
date of such Offer, and a settlement date (the "Purchase Date") for purchase of
Notes to occur no later than five Business Days after the Expiration Date. The
Company shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Company or, at the Company's request, by the Trustee in the name and at
the expense of the Company; provided, however, that, if the Company mails the
Offer, the Company may notify the Trustee on the same Business Day as the
mailing of the Offer of the Company's obligation to make an Offer to Purchase
pursuant to the above. The Offer shall contain all the information required by
applicable law to be included therein. The Offer shall also contain information
concerning the business of the Company and its Subsidiaries that the Company in
good faith believes will enable such Holders to make an informed decision with
respect to the Offer to Purchase (which at a minimum will include (i) the most
recent annual and quarterly financial statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contained in the
document required to be filed with the Trustee pursuant to the Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other information required by
applicable law to be included therein). The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes offered to
be purchased by the Company pursuant to the Offer to Purchase (including,
if less than 100%, the manner by which such amount has been determined
pursuant to the Section of the Indenture requiring the Offer to Purchase)
(the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to the Indenture) (the "Purchase Price");
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(5) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal face
amount;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each Holder electing to tender all or any portion of a Note
pursuant to the Offer to Purchase will be required to surrender such Note
at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Note being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its Paying Agent) receives, not later
than the close of business on the fifth Business Day next preceding the
Expiration Date, a facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Note the Holder tendered, the
certificate number of the Note the Holder tendered and a statement that
such Holder is withdrawing all or a portion of such Holder's tender;
(11) that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Notes and (b)
if Notes in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase Notes having an aggregate principal amount equal to
the Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Notes in denominations of $1,000 principal
amount or integral multiples thereof shall be purchased); and
(12) that in the case of any Holder whose Note is purchased only in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or
Notes, of any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased
portion of the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Payment Default" means any default, after any requirement for the giving
of notice, the lapse of time or both, or any other condition to such default
becoming an event of default has occurred, in the payment of principal of (or
premium, if any) or interest on or any other amount payable in connection with
Designated Senior Indebtedness.
"Permitted Acquisition Deposits" means any advance or payment of funds,
whether as consideration for an option to acquire or as a deposit, binder or
earnest money, whether or not refundable, and whether or not made into escrow,
made pursuant to any written agreement, term sheet, letter of intent or other
instrument providing for the Acquisition of any High Power Satellite
Transmission Business, the consummation of which would not constitute a
Restricted Payment pursuant to clause (iv) of the first paragraph under
"-- Limitation on Restricted Payments," or providing for an Investment made in
compliance with clause (vii) of the second paragraph under "-- Limitation on
Restricted Payments," to the extent that the aggregate of such amounts
outstanding at any one time with respect to Acquisitions or such Investments
that have not yet been consummated does not exceed $10 million.
"Permitted Holder" means any of those Persons who were members of the
Company on the Issue Date, the Permitted Transferees of such Persons, and any
Person or group controlled by each or any of such Persons.
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"Permitted Investments" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) loans and
advances to employees made in the ordinary course of business not to exceed $1.0
million in the aggregate at any one time outstanding; (d) Interest Rate
Protection Obligations; (e) bonds, notes, debentures or other securities
received as a result of Asset Sales permitted under "-- Certain Covenants --
Disposition of Proceeds of Asset Sales" above not to exceed 20% of the total
consideration for such Asset Sales (determined and computed as set forth under
"-- Certain Covenants -- Disposition of Proceeds of Asset Sales"); (f)
transactions with officers, directors and employees of the Company, or any
Restricted Subsidiary entered into in the ordinary course of business (including
compensation or employee benefit arrangements with any such director or
employee) and consistent with past business practices; (g) Investments existing
as of the Issue Date and any amendment, extension, renewal or modification
thereof to the extent that any such amendment, extension, renewal or
modification does not require the Company or any Restricted Subsidiary to make
any additional cash or non-cash payments or provide additional services in
connection therewith; (h) any Investment to the extent that the consideration
therefor consists of Qualified Equity Interests of the Company; (i) any
Investment consisting of a guarantee by a Restricted Subsidiary of Senior
Indebtedness or any guarantee permitted under clause (e) of the second paragraph
of "-- Limitation on Indebtedness" above and (j) Investments in Marketable
Securities by the Escrow Agent and held in the Interest Escrow Account.
"Permitted Junior Securities" means any securities of the Company or any
other Person that are (i) equity securities without special covenants or (ii)
subordinated in right of payment to all Senior Indebtedness that may at the time
be outstanding, to substantially the same extent as, or to a greater extent
than, the Notes are subordinated as provided in the Indenture, in any event
pursuant to a court order so providing and as to which (a) the rate of interest
on such securities shall not exceed the effective rate of interest on the Notes
on the date of the Indenture, (b) such securities shall not be entitled to the
benefits of covenants or defaults materially more beneficial to the holders of
such securities than those in effect with respect to the Notes on the date of
the Indenture and (c) such securities shall not provide for amortization
(including sinking fund and mandatory prepayment provisions) commencing prior to
the date six months following the final scheduled maturity date of the Senior
Indebtedness (as modified by the plan of reorganization or readjustment pursuant
to which such securities are issued).
"Permitted Liens" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not secure any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets subject to the Liens prior to such merger or consolidation;
(b) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens
and other similar Liens arising in the ordinary course of business that secure
payment of obligations not more than 60 days past due or that are being
contested in good faith and by appropriate proceedings; (c) Liens existing on
the Issue Date; (d) Liens securing only the Notes; (e) Liens in favor of the
Company or any Restricted Subsidiary so long as held by the Company or any
Restricted Subsidiary; (f) Liens for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently conducted;
provided, however, that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (g) easements,
reservation of rights of way, restrictions and other similar easements,
licenses, restrictions on the use of properties, or minor imperfections of title
that in the aggregate are not material in amount and do not in any case
materially detract from the properties subject thereto or interfere with the
ordinary conduct of the business of the Company and the Restricted Subsidiaries;
(h) Liens resulting from the deposit of cash or notes in connection with
contracts, Permitted Acquisition Deposits, tenders or expropriation proceedings,
or to secure workers' compensation, surety or appeal bonds, costs of litigation
when required by law and public and statutory obligations or obligations under
franchise arrangements and agreements with the NRTC entered into in the ordinary
course of business; (i) Liens securing Indebtedness consisting of Capital Lease
Obligations, Purchase Money Indebtedness, mortgage financings, industrial
revenue bonds or other monetary obligations, in each case incurred solely for
the purpose of financing all or any part of the purchase price or cost of
construction or installation of assets used in the business of the Company or
the Restricted Subsidiaries, or repairs, additions or improvements to such
assets; provided, however, that (I) such Liens secure Indebtedness in an amount
not in excess of the original purchase price or the original cost of any such
assets or repair, addition or improvement thereto (plus an amount equal to the
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reasonable fees and expenses in connection with the incurrence of such
Indebtedness), (II) such Liens do not extend to any other assets of the Company
or the Restricted Subsidiaries (and, in the case of repair, addition or
improvements to any such assets, such Lien extends only to the assets (and
improvements thereto or thereon) repaired, added to or improved), (III) the
Incurrence of such Indebtedness is permitted by "-- Certain
Covenants -- Limitation on Indebtedness" above, and (IV) such Liens attach
within 90 days of such purchase, construction, installation, repair, addition or
improvement; (j) Liens to secure any refinancings, renewals, extensions,
modifications or replacements (collectively, "refinancing") (or successive
refinancings), in whole or in part, of any Indebtedness secured by Liens
referred to in the clauses above so long as such Lien does not extend to any
other property (other than improvements thereto); (k) Liens securing letters of
credit entered into in the ordinary course of business and consistent with past
business practice; (l) Liens on and pledges of the Equity Interests of any
Unrestricted Subsidiary securing any Indebtedness of such Unrestricted
Subsidiary; and (m) any calls or rights of first refusal with respect to any
partnership interests.
"Permitted Transferee" means, with respect to any Person: (a) in the case
of any Person who is a natural person, such individual's spouse or children, any
trust for such individual's benefit or the benefit of such individual's spouse
or children, or any corporation, limited liability company or partnership in
which the direct and beneficial owner of all of the equity interest is such
Person or such individual's spouse or children or any trust for the benefit of
such persons; (b) in the case of any Person who is a natural person, the heirs,
executors, administrators or personal representatives upon the death of such
Person or upon the incompetency or disability of such Person for purposes of the
protection and management of such individual's assets; and (c) in the case of
any Person who is not a natural person, any Affiliate of such Person.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Post-Petition Interest" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding with respect to such
Person in accordance with and at the contract rate (including, without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing such Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is allowed
as a claim in such Insolvency or Liquidation Proceeding.
"Preferred Equity Interest," in any Person, means an Equity Interest of any
class or classes (however designated) that is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"principal" of a debt security means the principal of the security, plus,
when appropriate, the premium, if any, on the security.
"Public Equity Offering" means an underwritten public offering of Qualified
Equity Interests of the Company or its corporate successor pursuant to an
effective registration statement filed under the Securities Act (excluding
registration statements filed on Form S-8).
"Purchase Amount" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property;
provided, however, that the aggregate principal amount of such Indebtedness does
not exceed the lesser of the Fair Market Value of such property or such purchase
price or cost, including any refinancing of such Indebtedness that does not
increase the aggregate principal amount (or accreted amount, if less) thereof as
of the date of refinancing.
"Purchase Price" has the meaning set forth in the definition of "Offer to
Purchase" above.
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"Qualified Equity Interest" in any Person means any Equity Interest in such
Person other than any Disqualified Equity Interest.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a resolution of the
Board of Directors of the Company delivered to the Trustee, as an Unrestricted
Subsidiary pursuant to "-- Certain Covenants -- Designation of Unrestricted
Subsidiaries" above. Any such designation may be revoked by a resolution of the
Board of Directors of the Company delivered to the Trustee, subject to the
provisions of such covenant.
"SEC" means the Securities and Exchange Commission.
"Security Agreement" means the security agreement dated as of the date of
the Indenture, by and between the Escrow Agent and the Issuers, governing the
disbursement of funds for the Interest Escrow Account.
"Senior Indebtedness" means, at any date, (a) all Obligations of the
Company under the Credit Facility; (b) all Interest Rate Protection Obligations
of the Company; (c) all Obligations of the Company under stand-by letters of
credit; and (d) all other Indebtedness of the Company for borrowed money,
including principal, premium, if any, and interest (including Post-Petition
Interest) on such Indebtedness, unless the instrument under which such
Indebtedness of the Company for money borrowed is Incurred expressly provides
that such Indebtedness for money borrowed is not senior or superior in right of
payment to the Notes, and all renewals, extensions, modifications, amendments or
refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall
not include (a) to the extent that it may constitute Indebtedness, any
Obligation for federal, state, local or other taxes; (b) any Indebtedness among
or between the Company and any Subsidiary of the Company; (c) to the extent that
it may constitute Indebtedness, any Obligation in respect of any trade payable
Incurred for the purchase of goods or materials, or for services obtained, in
the ordinary course of business; (d) that portion of any Indebtedness that is
Incurred in violation of the Indenture; provided, however, that such
Indebtedness shall be deemed not to have been Incurred in violation of the
Indenture for purposes of this clause (d) if (I) the holder(s) of such
Indebtedness or their representative or the Company shall have furnished to the
Trustee an opinion of independent legal counsel, unqualified in all material
respects, addressed to the Trustee (which legal counsel may, as to matters of
fact, rely upon an officers' certificate of the Company) to the effect that the
Incurrence of such Indebtedness does not violate the provisions of the Indenture
or (II) in the case of any Obligations under the Credit Facility, the holder(s)
of such Obligations or their agent or representative shall have received a
representation from the Company to the effect that the Incurrence of such
Indebtedness does not violate the provisions of the Indenture; (e) Indebtedness
evidenced by the Notes; (f) Indebtedness of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness of the
Company; (g) to the extent that it may constitute Indebtedness, any obligation
owing under leases (other than Capital Lease Obligations) or management
agreements; and (h) any obligation that by operation of law is subordinate to
any general unsecured obligations of the Company.
"Significant Restricted Subsidiary" means, at any date of determination,
(a) any Restricted Subsidiary that, together with its Subsidiaries that
constitute Restricted Subsidiaries (i) for the most recent fiscal year of the
Company accounted for more than 5.0% of the consolidated revenues of the Company
and the Restricted Subsidiaries or (ii) as of the end of such fiscal year, owned
more than 5.0% of the consolidated assets of the Company and the Restricted
Subsidiaries, all as set forth on the consolidated financial statements of the
Company and the Restricted Subsidiaries for such year prepared in conformity
with GAAP, and (b) any Restricted Subsidiary that, when aggregated with all
other Restricted Subsidiaries that are not otherwise Significant Restricted
Subsidiaries and as to which any event described in clause (f), (g) or (h) of
"-- Events of Default" above has occurred, would constitute a Significant
Restricted Subsidiary under clause (a) of this definition.
"Stated Maturity", when used with respect to any Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
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"Strategic Equity Investor" means a Person that owns and operates
businesses in the telecommunications, DBS information systems, entertainment,
cable television, programming, electronics or similar or related industries.
"Subordinated Indebtedness" means (a) with respect to the Company, any
Indebtedness of the Company that is expressly subordinated in right of payment
to the Notes and (b) with respect to any Guarantor, any Indebtedness of such
Guarantor that is expressly subordinated in right of payment to the Guaranty of
such Guarantor.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Total Consolidated Indebtedness" means, as at any date of determination,
an amount equal to the aggregate amount of all Indebtedness and Disqualified
Equity Interests of the Company and the Restricted Subsidiaries outstanding as
of such date of determination.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to "-- Certain Covenants -- Designation of Unrestricted
Subsidiaries" above. Any such designation may be revoked by a resolution of the
Board of Directors of the Company delivered to the Trustee, subject to the
provisions of "-- Certain Covenants -- Designation of Unrestricted Subsidiaries"
above.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such
corporation or such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of
the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
BOOK-ENTRY, DELIVERY AND FORM
The Private Notes were initially issued in the form of two senior
subordinated global notes (the "Private Global Notes"). The Private Global Notes
were deposited on July 30, 1997 (the "Closing Date") with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of Cede &
Co., as nominee of the Depositary (such nominee being referred to herein the
"Global Notes Holder"). Except as set forth in the next paragraph, the Exchange
Notes exchanged for the Private Notes represented by the Private Global Notes
will be represented by one or more senior subordinated global exchange notes in
registered form (the "Global Exchange Notes" and, together with the Private
Global Notes, the "Global Notes"), deposited with DTC and registered in the name
of the Global Notes Holder.
Exchange Notes that are issued as described below under "-- Exchange of
Global Notes for Certificated Notes" will be issued in the form of registered
definitive certificates (the "Certificated Notes"). Such Certificated Notes may,
unless the applicable Global Note has previously been exchanged for Certificated
Notes, be exchanged for an interest in the applicable Global Note representing
the principal amount of Notes being transferred.
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The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in the accounts of such Participants. The
Depositary's Participants include securities brokers and dealers (including the
Initial Purchasers), banks and trust companies, clearing corporations and
certain other organizations. Access to the Depositary's system is also available
to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only through
the Depositary's Participants or the Depositary's Indirect Participants.
The Issuers expect that pursuant to procedures established by the
Depositary: (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Notes; and (ii) ownership of the Notes
evidenced by the applicable Global Note will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by the
Depositary (with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Notes evidenced by the Global
Notes will be limited to such extent. For certain other restrictions on the
transferability of the Notes, see "Notice to Investors."
So long as the Global Notes Holder is the registered owner of any Notes,
the Global Notes Holder will be considered the sole holder under the Indenture
of any Notes evidenced by the Global Notes. Beneficial owners of Notes evidenced
by the Global Notes will not be considered the owners or holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the agent or trustee thereunder. As a
result, the ability of a person having a beneficial interest in Notes
represented by any Global Note to pledge such interest to persons or entities
that do not participate in the Depositary's system or to otherwise take actions
in respect of such interest may be affected by the lack of a physical
certificate evidencing such interest. Neither the Issuers nor the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of the Notes by the Depositary, or for maintaining,
supervising or reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Notes Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Notes Holder in its capacity as the registered holder of such Notes. Under the
terms of the Indenture, the Issuers and the Trustee may treat the persons in
whose names Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Issuers nor the Trustee have or will have any responsibility or liability for
the payment of such amounts to beneficial owners of Notes. The Issuers believe,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holders of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Exchange Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). All such Certificated Notes will be subject to the legend requirements
described herein under "Notice to Investors," unless the Company determines
otherwise in compliance with applicable law. In addition, if: (i) the Issuers
notify the Trustee in writing that the Depositary cis no longer willing or able
to act as a depository and the Issuers are unable to locate a qualified
successor within 90 days; or (ii) the Issuers, at their option, notify the
Trustee in writing that they elect to cause the issuance of
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Exchange Notes in the form of Certificated Notes under the Indenture, then, upon
surrender by the Global Notes Holder of the Global Note, Exchange Notes in such
form will be issued to each person that the Global Notes Holder and the
Depositary identify as being the beneficial owner of the related Exchange Notes.
Neither the Issuers nor the Trustee will be liable for any delay by the
Global Notes Holder or the Depositary in identifying the beneficial owners of
the Exchange Notes and the Issuers and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the Global Notes Holder or
the Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Exchange Notes
represented by the Global Notes (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the Global Notes Holder. With respect to Certificated
Notes, the Issuers will make all payments in respect of the Exchange Notes
(including principal, premium, if any, and interest) by mailing a check to each
such holder's registered address. Secondary trading in long-term notes and
debentures of corporate issuers is generally settled in clearing-house or
next-day funds. In contrast, the Exchange Notes represented by the Global Notes
are expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the
Depositary to be settled in immediately available funds.
PRIVATE NOTES' REGISTRATION RIGHTS; ADDITIONAL INTEREST
The Issuers, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on July 30, 1997 (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, the Issuers and the
Guarantors agreed to file with the Commission the Registration Statement on the
appropriate form under the Securities Act with respect to the Exchange Notes to
be exchanged for the Private Notes. Upon the effectiveness of the Registration
Statement, the Issuers and the Guarantors will offer, pursuant to the Exchange
Offer, to the holders of Registrable Notes who are able to make certain
representations the opportunity to exchange their Registrable Notes for Exchange
Notes. If: (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Issuers reasonably determine
in good faith, after consultation with counsel, that they are not permitted to
effect the Exchange Offer (a "Legal Prohibition"), (ii) the Exchange Offer is
not commenced on or prior to December 27, 1997, (iii) the Exchange Offer is not,
for any reason, consummated on or prior to January 26, 1998, (iv) any holder of
notes of the Issuers (the "Private Exchange Notes") issued simultaneously with
the issuance of the Exchange Notes in exchange for certain Private Notes held by
the Initial Purchasers so requests, or (v) in the case of any holder that
participates in the Exchange Offer, such holder does not receive Exchange Notes
on the Exchange Date that may be sold without restriction under state and
federal securities laws (each of the foregoing, a "Shelf Registration Event"),
the Issuers and the Guarantors will file with the Commission the Shelf
Registration Statement to cover resales of the Private Notes by the holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. For purposes of the
foregoing, "Registrable Notes" means each Note until: (i) a registration
statement (other than, with respect to any Exchange Note described in clause (v)
above, the Registration Statement) covering such Private Note, Exchange Note or
Private Exchange Note has been declared effective by the Commission and such
Private Note, Exchange Note or Private Exchange Note, as the case may be, has
been disposed of in accordance with such effective registration statement, (ii)
such Private Note, Exchange Note or Private Exchange Note, as the case may be,
is sold in compliance with Rule 144, (iii) such Private Note has been exchanged
for an Exchange Note and such Exchange Note is not described in clause (v) above
or (iv) such Private Note, Exchange Note or Private Exchange Note, as the case
may be, ceases to be outstanding.
The Registration Rights Agreement provides that the Issuers and the
Guarantors will: (i) file the Registration Statement with the Commission on or
prior to December 27, 1997; (ii) use their commercially reasonable best efforts
to (x) cause the Registration Statement to be declared effective and to commence
the Exchange Offer on or prior to January 26, 1998, (y) keep the Exchange Offer
open for 30 days (or longer if required by applicable law) and (z) exchange
Exchange Notes for all Private Notes validly tendered and not withdrawn pursuant
to the
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Exchange Offer on or prior to the fifth day following the date on which the
Exchange Offer expires and (iii) if obligated to file the Shelf Registration
Statement, file the Shelf Registration Statement with the Commission on or prior
to (x) the 30th day after the Shelf Registration Event occurs, if the Shelf
Registration Event occurs fewer than 30 days prior to November 27, 1997 or (y)
the 45th day after the Shelf Registration Event occurs, if the Shelf
Registration Event occurs after the filing of the Registration Statement (in
either case, the "Filing Date") with the Commission and use their commercially
reasonable best efforts to cause the Shelf Registration Statement to become
effective on or prior to, if the Filing Date in respect thereof is fewer than 60
days prior to December 27, 1997, the 60th day after such Filing Date and, if the
Filing Date if after the filing of the Registration Statement, the 60th day
after such Filing Date. If: (a) the Issuers and the Guarantors fail to file any
of the Registration Statements on or before the date specified for such filing
(other than due to a Legal Prohibition), (b) any of such Registration Statements
is not declared effective by the Commission on or prior to the date specified
for such effectiveness (other than due to a Legal Prohibition), (c) the Issuers
have not exchanged Exchange Notes for all Registrable Notes validly tendered and
not withdrawn on or prior to the fifth day after the expiration of the Exchange
Offer, (d) the Registration Statement ceases to be effective at any time prior
to the date on which the Exchange Offer is to expire or (e) the Shelf
Registration Statement is declared effective but ceases to be effective at any
time during the periods specified in the Registration Rights Agreement (each
such event referred to in clauses (a) through (e) above, a "Registration
Default"), then the Issuers agree to pay to each holder of Notes, with respect
to the first 90-day period immediately following the occurrence of such
Registration Default, an amount equal to $.05 per week per $1,000 principal
amount of Notes held by such holder. Such interest, together with interest
accrued by the Issuers pursuant to the next succeeding sentence, is collectively
referred to herein as "Additional Interest." The amount of the Additional
Interest will increase by an additional $.05 per week per $1,000 principal
amount of Notes with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Additional
Interest of $.40 per week per $1,000 principal amount of Notes. All Additional
Interest will be payable to holders of the Private Notes in cash on each August
1 and February 1, commencing with the first such date occurring after any such
Additional Interest commences to accrue, until such Registration Default is
cured. After the date on which such Registration Default is cured, the interest
rate on the Private Notes will revert to 12 1/2% per annum.
Holders of Private Notes will be required to make certain representations
to the Issuers (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be sued in connection with the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreement in order to have their
Private Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Additional Interest set forth above.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal U.S. federal income tax
consequences of the ownership and disposition of the Notes. This summary is
based on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), administrative pronouncements, judicial decisions and existing and
proposed Treasury Regulations, changes to any of which subsequent to the date
hereof may affect the tax consequences described below. This summary addresses
only initial holders of the Notes who acquire such Notes at the offering price
set forth on the cover of this Offering Memorandum, and discusses only Notes
held as capital assets within the meaning of Section 1221 of the Code. It does
not discuss all of the tax consequences that may be relevant to a holder in
light of such holder's particular circumstances or to holders subject to special
rules, such as certain financial institutions, insurance companies, dealers in
securities or persons holding the Notes as part of a straddle or a hedging
arrangement.
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR TAX ADVISORS WITH
REGARD TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS, AS WELL AS WITH REGARD TO ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION.
THE EXCHANGE
The exchange of Private Notes for Exchange Notes will be treated as a
"non-event" for federal income tax purposes because the Exchange Notes will not
be considered to differ materially in kind or extent from the Private Notes. As
a result, no material federal income tax consequences will result to holders
exchanging Private Notes for Exchange Notes.
INTEREST
Holders of the Notes will be required to include stated interest on the
Notes in gross income for Federal income tax purposes in accordance with their
regular method of accounting for tax purposes. Although the Notes will be issued
at a discount from their face amount, the amount of this original issue discount
("OID") is de minimis under the Code ("de minimis OID") and, thus, for federal
income tax purposes, holders of the Notes will not be required or permitted to
include any OID in income until the principal amount due under the Notes is
received. When the de minimis OID is received upon retirement of the Notes, such
amount will be treated as described below under "-- Sale, Exchange or Retirement
of the Notes." Although the de minimis OID will not be taxed as interest to the
holders of the Notes, the Company will be entitled to deduct the de minimis OID
as interest over the term of the Notes on a straight-line basis.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
In general, a holder of a Note will recognize gain or loss on the sale,
exchange, retirement or other taxable disposition of such Note measured by the
difference, if any, between (i) the amount of cash and the fair market value of
property received (including amounts received with respect to de minimis OID)
and (ii) the holder's tax basis in the Note.
Gain or loss realized on the sale, exchange or retirement of a Note will be
capital gain or loss and will be long-term capital gain or loss if the holding
period of the Note exceeds one year as of the date of the sale, exchange or
retirement. Under current law, the excess of net long-term capital gains over
net short-term capital losses is taxed at a lower rate than ordinary income for
certain noncorporate taxpayers. The distinction between capital gain or loss and
ordinary income or loss is also relevant for purposes of, among other things,
limitation on the deductibility of capital losses.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain noncorporate holders may be subject to backup withholding at a rate
of 31% on payments of principal and interest and premium on, and the proceeds of
disposition of, a Note. Backup withholding will apply only if the holder: (i)
fails to furnish its Taxpayer Identification Number ("TIN") which, for an
individual, would
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be his or her Social Security number; (ii) furnishes an incorrect TIN; (iii) is
notified by the IRS that it has failed properly to report payments of interest
and dividends; or (iv) under certain circumstances, fails to certify, under
penalty of perjury, that it has furnished a correct TIN and has not been
notified by the IRS that it is subject to backup withholding for failure to
report interest and dividend payments. Holders of the Notes should consult their
tax advisors regarding their qualification for exemption from backup withholding
and the procedure for obtaining such an exemption, if applicable.
The amount of any backup withholding from a payment to a holder of a Note
will be allowed as a credit against the holder's U.S. federal income tax
liability and may entitle the holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
OTHER TAX CONSEQUENCES
In addition to the federal income tax considerations described above,
prospective purchasers of the Notes should consider potential state, local,
income, franchise, personal property and other taxation in any state or locality
and the tax effect of ownership, sale, exchange, or retirement of the Notes in
any state or locality. Prospective purchasers of Notes are advised to consult
their own tax advisors with respect to any state or local income, franchise,
personal property or other tax consequences arising out of their ownership of
the Notes.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE PURCHASER OF THE NOTES SHOULD CONSULT HIS OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OF THE NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN INCOME TAX LAWS AND ANY
RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with the resales of Exchange
Notes received in exchange for Private Notes where such Private Notes were
acquired as a result of market-making activities or other trading activities.
The Issuers have agreed that for a period of up to 180 days after the Expiration
Date, it will make this Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer that requests such document in the Letter of
Transmittal for use in connection with any such resale.
The Issuers will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells Exchange
Notes that were received by it for its own account pursuant to the Exchange
Offer and any broker or dealer that participates in a distribution of such
Exchange Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The Issuers have agreed to pay all expenses incident to the Issuers's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any Participating
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Broker-Dealers), and certain parties related to such holders, against certain
liabilities, including liabilities under the Securities Act.
NOTICE TO INVESTORS
Because the following instructions will apply to Private Notes held by
holders who do not participate in the Exchange Offer, holders of the Private
Notes are advised to consult legal counsel prior to making any offer, resale,
pledge or transfer of any of the Private Notes.
The Private Notes have not been registered under the Securities Act and may
not be offered or sold within the United States or to U.S. Persons (as such
terms are defined under the Securities Act) except pursuant to an exemption
from, or in a transaction not subject to the registration requirements of the
Securities Act. Accordingly, the Private Notes were offered only to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act)
("QIBs") in reliance on the exemption from the registration requirements of the
Securities Act provided by Rule 144A, and to a limited number of institutional
"accredited investors" within the meaning of Rule 501(a)(1), (2), (3) and (7)
under the Securities Act ("Institutional Accredited Investors").
Each purchaser of Private Notes purchased in a sale made in reliance on
Rule 144A has been deemed to have represented and agreed as follows (terms used
in this paragraph that are defined in Rule 144A are used herein as defined
therein):
(1) The purchaser is either (A) a QIB and is aware that the sale to it
is being made in reliance on Rule 144A, and such QIB has acquired such
Private Notes for its own account or for the account of another QIB or, (B)
an Institutional Accredited Investor or, if the Private Notes are to be
purchased for one or more accounts ("investor accounts") for which it is
acting as fiduciary or agent, each such account is an Institutional
Accredited Investor on a like basis.
(2) The purchaser understands that the Private Notes were offered in a
transaction not involving any public offering in the United States within
the meaning of the Securities Act, that the Notes have not been registered
under the Securities Act and that: (A) the Private Notes may be offered,
resold, pledged or otherwise transferred only: (i) to a person who the
seller reasonably believes is a QIB in a transaction meeting the
requirements of Rule 144A, in a transaction meeting the requirements of
Rule 144 under the Securities Act, outside the United States to a foreign
person in a transaction meeting the requirements of Rule 904 under the
Securities Act or in accordance with another exemption from the
registration requirements of the Securities Act (and based upon an opinion
of counsel if the Issuers so request); (ii) to the Issuers; or (iii)
pursuant to an effective registration statement, and, in each case, in
accordance with any applicable securities laws of any State of the United
States or any other applicable jurisdictions; and (B) the purchaser will,
and each subsequent holder is required to, notify any subsequent purchaser
from it of the resale restrictions set forth in (A) above.
(3) The purchaser understands that the certificates evidencing the
Private Notes bear, and if not exchanged pursuant to the Exchange offer
will continue to bear unless otherwise agreed by the Issuers and the holder
thereof, a legend substantially to the following effect:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(A)
INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION
111
<PAGE> 119
MEETING THE REQUIREMENTS OF RULE 144A, (B) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (D) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE ISSUERS SO REQUEST), (2) TO THE
ISSUERS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
(4) The purchaser acknowledged that none of the Issuers, the Initial
Purchasers or any person representing the Issuers or the Initial Purchasers
made any representations to it with respect to the Issuers or the offering
or sale of the Private Notes, other than the information contained in the
Offering Memorandum dated July 25, 1997, relating to the Private Notes (the
"Offering Memorandum"), which was delivered to it and upon which it relied
in making its investment decision with respect to the Private Notes. The
purchaser had access to such financial and other information concerning the
Issuers and the Private Notes as it was deemed necessary in connection with
its decision to purchase the Private Notes, including an opportunity to ask
questions of and request information from the Issuers and the Initial
Purchasers.
(5) The purchaser acknowledged that the Issuers and the Initial
Purchasers and others relied upon the truth and accuracy of the foregoing
acknowledgements, representations and agreements and agrees that, if any of
the foregoing acknowledgements, representations or agreements deemed to
have been made by it are no longer accurate, it shall promptly notify the
Initial Purchasers. If such purchaser acquired Private Notes as a fiduciary
or agent for one or more investor accounts, such purchaser represented that
it has sole investment discretion with respect to each such account and
that it has full power to make the foregoing acknowledgements,
representations and agreements on behalf of each such account.
Each purchaser of Private Notes that is an Institutional Accredited
Investor executed and delivered a purchaser's letter for the benefit of the
Initial Purchasers and the Issuers, substantially in the form included as
Appendix A to the Offering Memorandum, whereby such Institutional Accredited
Investor (a) agrees to the restrictions on transfer set forth in clause (2)
above, (b) confirmed that it: (i) acquired Private Notes having a minimum
purchase price of at least $100,000 for its own account and for each separate
account for which it is acting; (ii) acquired such Private Notes for its own
account or for certain qualified institutional accounts, as specified therein;
and (iii) did not acquire the Private Notes with a view to distribution thereof
in a transaction that would violate the Securities Act or the securities laws of
any State of the United States or any other applicable jurisdiction; and (c)
acknowledged that the registrar and transfer agent for the Private Notes will
not be required to accept for registration of transfer any Private Notes
acquired by them, except upon presentation of evidence satisfactory to the
Issuers that the restrictions on transfer set forth in clause (2) above have
been complied with, and that any such Private Notes will bear the legend set
forth in clause (3) above.
The Private Notes may not be sold or transferred to, and each purchaser, by
its purchase of the Private Notes shall be deemed to have represented and
covenanted that it is not acquiring the Private Notes for or on behalf of, and
will not transfer the Private Notes to, any pension or welfare plan (as defined
in Section 3 of the Employee Retirement Income Security Act of 1974 ("ERISA"))
except that such a purchase for or on behalf of a pension or welfare plan shall
be permitted:
(1) to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchaser in which no plan
(together with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total assets in such
collective investment fund and the conditions of Section III of Prohibited
Transaction Class Exemption 91-38 issued by the Department of Labor are
satisfied;
(2) to the extent such purchase is made by or on behalf of an
insurance company pooled separate account maintained by the purchaser in
which, at any time while the Private Notes are outstanding, no plan
112
<PAGE> 120
(together with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total of all assets
in such pooled separate account and the conditions of Section III of
Prohibited Transaction Class Exemption 90-1 issued by the Department of
Labor are satisfied;
(3) to the extent such purchase is made on behalf of a plan by: (i) an
investment advisor registered under the Investment Advisers Act of 1940
that had as of the last day of its most recent fiscal year total assets
under its management and control in excess of $50 million and had
stockholders' or partners' equity in excess of $0.75 million, as shown in
its most recent balance sheet prepared in accordance with generally
accepted accounting principles; or (ii) a bank as defined in Section
202(a)(2) of the Investment Advisers Act of 1940 with equity capital in
excess of $1 million as of the last day of its most recent fiscal year; or
(iii) an insurance company that is qualified under the laws of more than
one state to manage, acquire or dispose of any assets of a plan, which
insurance company has as of the last day of its most recent fiscal year,
net worth in excess of $1 million and which is subject to supervision and
examination by a state authority having supervision over insurance
companies and, in any case, such investment advisor, bank or insurance
company is otherwise a qualified professional asset manager, as such term
is used in Prohibited Transaction Class Exemption 84-14 issued by the
Department of Labor, and the assets of such plan when combined with the
assets of other plans established or maintained by the same employer (or
affiliate thereof) or employee organization and managed by such investment
advisor, bank or insurance company, do not represent more than 20% of the
total client assets managed by such investment advisor, bank or insurance
company, and the conditions of Section I of such exemption are otherwise
satisfied;
(4) to the extent such plan is a governmental plan (as defined in
Section 3 of ERISA) which is not subject to the provisions of Title I of
ERISA of Section 401 of the Internal Revenue Code; or
(5) to the extent such purchase is made from funds from an insurance
company general account, the conditions of Sections I and IV of Prohibited
Transactions Class Exemption 95-60 issued by the Department of Labor are
satisfied.
LEGAL MATTERS
The validity of the Notes has been passed upon for the Issuers by Nelson
Mullins Riley & Scarborough, L.L.P., Charlotte, North Carolina. Each of H. Bryan
Ives III and C. Mark Kelly, partners of Nelson Mullins Riley & Scarborough,
L.L.P., beneficially owns a 0.1301% limited partnership interest in Columbia DBS
Investors, L.P., and 0.2381% member interest in Columbia DBS Class A Investors,
LLC, which, in the aggregate, beneficially own 61.6% of all Units.
EXPERTS
The (i) consolidated financial statements of the Company and its
subsidiaries for the period from inception (January 30, 1996) through December
31, 1996, (ii) financial statements of Direct Programming Services Limited
Partnership for the years ended December 31, 1994, December 31, 1995 and
December 31, 1996, (iii) financial statements of Kansas DBS, L.L.C. for the
years ended December 31, 1995 and December 31, 1996, (iv) financial statements
of the DBS Operations of NRTC System No. 0422 for the years ended December 31,
1995 and December 31, 1996, (v) financial statements of the DBS Operations of
NRTC System No. 0073 for the year ended December 31, 1996, (vi) financial
statements of Northeast DBS Enterprises, L.P. for the year ended December 31,
1996, (vii) financial statements of the DBS Operations of NRTC System No. 0001
for the years ended December 31, 1995 and for the period from January 1, 1996
through November 26, 1996 and (viii) financial statements of the DBS Operations
of NRTC System No. 1025 for the period from March 10, 1995 (inception) through
December 31, 1995 and the period from January 1, 1996 through August 28, 1996
appearing in this Prospectus have been audited by Arthur Andersen LLP,
independent accountants and are included herein in reliance upon the authority
of said firm as experts in giving said reports. The financial statements of
Northeast DBS Enterprises, L.P. for the years ended December 31, 1994 and
December 31, 1995 appearing in this Prospectus have been audited by Fishbein &
Company, P.C., independent auditors and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
113
<PAGE> 121
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of the Company, or industry results, to differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other factors include,
among others: general economic and business conditions and industry trends; the
continued growth of the direct-to-home television industry; uncertainties
regarding business strategies, including the Company's acquisition strategy; the
ability of the Company to obtain and retain subscribers; changes in the
regulatory environment affecting the Company; and actions of the Company's
competitors. All statements herein other than statements of historical fact,
including, without limitation, the statements under "Prospectus Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business" regarding the
Company's profitability, financial position, liquidity and capital requirements
are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that those expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") are disclosed in this
Prospectus, including, without limitation, under "Risk Factors." All written and
oral forward-looking statements by or attributable to the Company or persons
acting on its behalf contained in this Prospectus are expressly qualified in
their entirety by the Cautionary Statements.
AVAILABLE INFORMATION
The Issuers and the Guarantors have filed with the Commission a
Registration Statement on Form S-4 (the "Exchange Offer Registration Statement,"
which term shall encompass all amendments, exhibits, annexes and schedules
thereto) pursuant to the Securities Act and the rules and regulations
promulgated thereunder, covering the Exchange Notes being offered hereby. This
Prospectus does not contain all the information set forth in the Exchange Offer
Registration Statement. For further information with respect to the Issuers and
the Exchange Offer, reference is made to the Exchange Offer Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contact, agreement or other document filed as an
exhibit to the Exchange Offer Registration Statement, reference is made to the
exhibit for a more complete description of the document or matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
The Exchange Offer Registration Statement, including the exhibits thereto, can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the
Regional Offices of the Commission at 7 World Trade Center, 13th Floor, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of such site is http://www.sec.gov.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Issuers and the Guarantors will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. The obligation of
the Issuers and the Guarantors to file periodic reports and other information
with the Commission will be suspended if the Notes are held of record by fewer
than 300 holders as of the beginning of any fiscal year of the Issuers and the
Guarantors other than the fiscal year in which the Exchange Offer Registration
Statement is declared effective. The Issuers have agreed that, whether or not
they are required to do so by the rules and regulations of the Commission, for
so long as any of the Notes remain outstanding, they will furnish to the holders
of the Notes and file with the Commission (unless the Commission will not accept
such a filing) (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Issuers were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
114
<PAGE> 122
and, with respect to the annual information only, a report thereon by the
Issuers' certified independent accountants and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Issuers
were required to file such reports. In addition, for so long as any of the Notes
remain outstanding, the Issuers have agreed to furnish to the holders of the
Notes or any prospective transferee of any such holder, upon their request, the
information required to be delivered by Rule 144A(d)(4) under the Securities
Act.
115
<PAGE> 123
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PRO FORMA FINANCIAL STATEMENTS
Digital Television Services, LLC
Unaudited Condensed Consolidated Pro Forma Financial
Statements............................................. F-3
Unaudited Condensed Consolidated Pro Forma Balance Sheet
as of June 30, 1997.................................... F-4
Unaudited Condensed Consolidated Pro Forma Statement of
Operations for the Six Months Ended June 30, 1997 and
for the Year Ended December 31, 1996................... F-5
Notes to Unaudited Condensed Consolidated Pro Forma
Financial Statements................................... F-6
HISTORICAL FINANCIAL STATEMENTS
Digital Television Services, LLC
Report of Independent Public Accountants.................. F-9
Consolidated Balance Sheets as of December 31, 1996 and as
of June 30, 1997 (unaudited)........................... F-10
Consolidated Statements of Operations for the Period from
Inception (January 30, 1996) Through December 31, 1996,
for the Period from Inception (January 30, 1996)
Through June 30, 1996 (unaudited) and for the Six
Months Ended June 30, 1997 (unaudited)................. F-11
Consolidated Statements of Members' Equity for the Period
from Inception (January 30, 1996) Through December 31,
1996 and for the Six Months Ended June 30, 1997
(unaudited)............................................ F-12
Consolidated Statements of Cash Flows for the Period from
Inception (January 30, 1996) Through December 31, 1996,
for the Period from Inception (January 30, 1996)
Through June 30, 1996 (unaudited) and for the Six
Months Ended June 30, 1997 (unaudited)................. F-13
Notes to Consolidated Financial Statements................ F-14
Direct Programming Services Limited Partnership
Report of Independent Public Accountants.................. F-31
Balance Sheets as of December 31, 1995 and 1996........... F-32
Statements of Operations for the Years Ended December 31,
1994, 1995 and 1996.................................... F-33
Statements of Changes in Partners' Capital for the Years
Ended December 31, 1994, 1995 and 1996................. F-34
Statements of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996.................................... F-35
Notes to Financial Statements............................. F-36
Kansas DBS, L.L.C.
Report of Independent Public Accountants.................. F-42
Balance Sheets as of December 31, 1995 and 1996........... F-43
Statements of Operations and Changes in Accumulated
Deficit for the Years Ended December 31, 1995 and
1996................................................... F-44
Statements of Cash Flows for the Years Ended December 31,
1995 and 1996.......................................... F-45
Notes to Financial Statements............................. F-46
DBS Operations of NRTC System No. 0422
Report of Independent Public Accountants.................. F-51
Statements of Assets and Liabilities and Accumulated
Deficit as of December 31, 1995 and 1996 and as of
March 31, 1997 (unaudited)............................. F-52
Statements of Expenses over Revenues and Changes in
Accumulated Deficit for the Years Ended December 31,
1995 and 1996 and for the Three Months Ended March 31,
1997 (unaudited)....................................... F-53
Statements of Cash Flows for the Years Ended December 31,
1995 and 1996 and for the Three Months Ended March 31,
1997 (unaudited)....................................... F-54
Notes to Financial Statements............................. F-55
</TABLE>
F-1
<PAGE> 124
DBS Operations of NRTC System No. 0073
Report of Independent Public Accountants.................. F-60
Statement of Assets and Liabilities and Accumulated
Earnings as of December 31, 1996 and as of March 31,
1997 (unaudited)....................................... F-61
Statements of Revenues over Expenses and Change in
Accumulated Earnings for the Year Ended December 31,
1996 and for the Three Months Ended March 31, 1997
(unaudited)............................................ F-62
Statements of Cash Flows for the Year Ended December 31,
1996 and for the Three Months Ended March 31, 1997
(unaudited)............................................ F-63
Notes to Financial Statements............................. F-64
Northeast DBS Enterprises, L.P.
Independent Auditor's Report.............................. F-69
Balance Sheets as of December 31, 1994 and 1995........... F-70
Statements of Operations and Partners' Equity for the
Years Ended December 31, 1994 and 1995................. F-71
Statements of Cash Flows for the Years Ended December 31,
1994 and 1995.......................................... F-72
Notes to Financial Statements............................. F-74
Northeast DBS Enterprises, L.P.
Report of Independent Public Accountants.................. F-78
Balance Sheet as of December 31, 1996..................... F-79
Statement of Operations for the Year Ended December 31,
1996................................................... F-80
Statement of Changes in Partners' Capital for the Year
Ended December 31, 1996................................ F-81
Statement of Cash Flows for the Year Ended December 31,
1996................................................... F-82
Notes to Financial Statements............................. F-83
DBS Operations of NRTC System No. 0001
Report of Independent Public Accountants.................. F-89
Statements of Assets and Liabilities and Accumulated
Deficit as of December 31, 1995 and November 26,
1996................................................... F-90
Statements of Expenses over Revenues and Changes in
Accumulated Deficit for the Year Ended December 31,
1995 and the Period From January 1, 1996 Through
November 26, 1996...................................... F-91
Statements of Cash Flows for the Year Ended December 31,
1995 and the Period From January 1, 1996 Through
November 26, 1996...................................... F-92
Notes to Financial Statements............................. F-93
DBS Operations of NRTC System No. 1025
Report of Independent Public Accountants.................. F-98
Statements of Assets and Liabilities and Accumulated
Deficit as of December 31, 1995 and August 28, 1996.... F-99
Statements of Expenses over Revenues and Changes in
Accumulated Deficit for the Period From March 10, 1995
(Inception) Through December 31, 1995 and the Period
From January 1, 1996 Through August 28, 1996........... F-100
Statements of Cash Flows for the Period From March 10,
1995 (Inception) Through December 31, 1995 and the
Period From January 1, 1996 Through August 28, 1996.... F-101
Notes to Financial Statements............................. F-102
F-2
<PAGE> 125
DIGITAL TELEVISION SERVICES, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
The following unaudited condensed pro forma financial statements include
the effects of the following transactions: (i) the acquisition by the Company
during 1996 of the rights to distribute DIRECTV Services in eight Rural DirecTv
Markets (the "1996 Acquisitions"), (ii) the acquisition by the Company in the
first half of 1997 of the rights to distribute DIRECTV Services in eight Rural
DirecTv Markets in Kentucky, Kansas, Vermont and Georgia (the "1997
Acquisitions"), (iii) the sale by the Company in January 1997 of 205,902 Class B
Units to Columbia and senior management raising approximately $2,059,000 of
equity capital and the sale by the Company in February 1997 of 1,333,333 Class A
Units to the Equity Investors raising an additional $30.0 million of equity
capital (collectively, the "1997 Equity"), (iv) the repayment of approximately
$14.8 million of outstanding indebtedness under certain seller notes incurred in
connection with the 1996 Acquisitions, (v) the amendment and restatement of its
existing credit facility (the "Existing Credit Facility") in May 1997 to provide
for a $50.0 million term loan facility and a revolving credit facility in the
amount of $85.0 million with a $50.0 million sublimit for letters of credit,
(vi) the offering (the "Offering") of the Senior Subordinated Notes of the
Company (the "Notes") generating gross proceeds to the Company of $152.8
million, (vii) the placement of approximately $36.2 million in an interest
escrow account (the "Interest Escrow Account") to fund the first four
semi-annual interest payments on the Notes, (viii) the repayment of the $50.0
million term loans outstanding under the Existing Credit Facility and
approximately $29.2 million of the revolving credit loans outstanding at June
30, 1997 under the Existing Credit Facility along with outstanding accrued
interest of approximately $0.6 million, and (ix) the amendment and restatement
of the Existing Credit Facility pursuant to the Second Amended and Restated
Credit Agreement dated July 30, 1997 among the Company and the lenders parties
thereto providing for a revolving credit facility in the amount of up to $70.0
million, with a $50.0 million sublimit for Letters of Credit, and a $20.0
million term loan facility of which $56.5 million is immediately available
thereunder. The pro forma financial statements do not include the repayment by
the Company of $3.0 million of indebtedness outstanding under the Existing
Credit Facility which was borrowed by the Company subsequent to June 30, 1997.
This amount is reflected in "Use of Proceeds" elsewhere in this Prospectus.
All such transactions are reflected as if they had occurred as of January
1, 1996 and January 1, 1997 for the unaudited condensed pro forma statements of
operations and at June 30, 1997 for the unaudited condensed pro forma balance
sheet.
Actual information for the Company for the period from inception (January
30, 1996) through December 31, 1996 has been derived from the audited financial
statements of the Company. See audited financial statements of the Company
elsewhere in this Prospectus. Actual information for the Company as of June 30,
1997 and for the six months then ended has been derived from the unaudited
condensed consolidated financial statements of the Company. The financial
information for the 1996 Acquisitions and the 1997 Acquisitions has been derived
from the respective historical financial statements of the various entities. To
the extent that such historical financial information is audited, the respective
audited financial statements are included elsewhere in this Prospectus. See
Index to Financial Statements. Financial information for the remaining 1996
Acquisitions and 1997 Acquisitions is unaudited.
The pro forma condensed consolidated financial statements and notes thereto
are provided for informational purposes only and do not purport to be indicative
of actual results had the 1996 Acquisitions, the 1997 Acquisitions, the
Offering, and the 1997 Equity been completed on the dates indicated or of future
results.
F-3
<PAGE> 126
DIGITAL TELEVISION SERVICES, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
--------------------------------------------
OFFERING AND EQUITY TOTAL
ACTUAL(1) ADJUSTMENTS(2) PRO FORMA
($ IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash, cash equivalents and marketable investment
securities....................................... $ 1,875 $ 30,017(3) $ 31,892
Other current assets................................ 6,105 -- 6,105
-------- -------- --------
Total current assets........................ 7,980 30,017 37,997
RESTRICTED CASH....................................... -- 36,219(4) 36,219
PROPERTY AND EQUIPMENT, NET........................... 1,485 -- 1,485
CONTRACT RIGHTS AND OTHER ASSETS...................... 140,884 6,849(5) 147,733
-------- -------- --------
TOTAL ASSETS................................ $150,349 $ 73,085 $223,434
======== ======== ========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt................ $ 8,595 $ -- $ 8,595
Other current liabilities........................... 13,224 (587)(6) 12,637
-------- -------- --------
Total current liabilities................... 21,819 (587) 21,232
LONG-TERM DEBT, less current maturities............... 91,990 (79,169)(6) 165,662
152,841(7)
OTHER LIABILITIES..................................... 84 -- 84
MEMBERS' EQUITY....................................... 36,456 -- 36,456
-------- -------- --------
TOTAL LIABILITIES AND MEMBERS' EQUITY....... $150,349 $ 73,085 $223,434
======== ======== ========
</TABLE>
F-4
<PAGE> 127
DIGITAL TELEVISION SERVICES, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------
ACQUISITION OFFERING AND EQUITY TOTAL
ACTUAL(8) ADJUSTMENTS(9) ADJUSTMENTS(2) PRO FORMA
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUE:
Programming
revenue........... $ 3,085 $ 26,600(10) $ -- $ 29,685
Equipment and
installation
revenue........... 324 6,427(10) 6,751
------- -------- -------- --------
Total
revenue..... 3,409 33,027 -- 36,436
------- -------- -------- --------
COST OF REVENUE:
Programming
expense........... 1,596 13,710(10) -- 15,306
Cost of equipment
and
installation...... 398 4,806(10) -- 5,204
Service fees........ 276 2,430(10) -- 2,706
------- -------- -------- --------
Total cost of
revenue..... 2,270 20,946 -- 23,216
------- -------- -------- --------
GROSS PROFIT.......... 1,139 12,081 -- 13,220
------- -------- -------- --------
OPERATING EXPENSES:
Sales and
marketing......... 778 4,692(10) -- 5,470
General and
administrative.... 1,954 7,089(10) -- 11,652
2,609(11)
Depreciation and
amortization...... 1,148 631(10) -- 14,957
13,178(12)
------- -------- -------- --------
Total
operating
expenses.... 3,880 28,199 -- 32,079
------- -------- -------- --------
OPERATING LOSS........ (2,741) (16,118) -- (18,859)
------- -------- -------- --------
OTHER INCOME
(EXPENSE):
Interest Expense.... (818) (1,305) (13) (19,705)(14) (23,115)
(1,287)(15)
Other Income........ 24 7(10) -- 31
------- -------- -------- --------
(794) (1,298) (20,992) (23,084)
------- -------- -------- --------
NET LOSS.............. $(3,535) $(17,416) $(20,992) $(41,943)
======= ======== ======== ========
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------------------------------
ACQUISITION OFFERING AND EQUITY TOTAL
ACTUAL(8) ADJUSTMENTS(9) ADJUSTMENTS(2) PRO FORMA
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUE:
Programming
revenue........... $ 17,013 $ 3,733(16) $ -- $ 20,746
Equipment and
installation
revenue........... 1,481 821(16) -- 2,302
-------- ------- ------- --------
Total
revenue..... 18,494 4,554 -- 23,048
-------- ------- ------- --------
COST OF REVENUE:
Programming
expense........... 8,246 1,802(16) -- 10,048
Cost of equipment
and
installation...... 1,677 564(16) -- 2,241
Service fees........ 1,644 454(16) -- 2,098
-------- ------- ------- --------
Total cost of
revenue..... 11,567 2,820 -- 14,387
-------- ------- ------- --------
GROSS PROFIT.......... 6,927 1,734 -- 8,661
-------- ------- ------- --------
OPERATING EXPENSES:
Sales and
marketing......... 2,844 625(16) -- 3,469
General and
administrative.... 3,613 930(16) -- 4,543
Depreciation and
amortization...... 6,552 231(16) -- 8,205
1,422(12)
-------- ------- ------- --------
Total
operating
expenses.... 13,009 3,208 -- 16,217
-------- ------- ------- --------
OPERATING LOSS........ (6,082) (1,474) -- (7,556)
-------- ------- ------- --------
OTHER INCOME
(EXPENSE):
Interest Expense.... (4,308) (334)(13) (6,646)(14) (11,757)
(469)(15)
Other Income........ 61 -- -- 61
-------- ------- ------- --------
(4,247) (334) (7,115) (11,696)
-------- ------- ------- --------
NET LOSS.............. $(10,329) $(1,808) $(7,115) $(19,252)
======== ======= ======= ========
</TABLE>
F-5
<PAGE> 128
DIGITAL TELEVISION SERVICES, LLC AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
- ---------------
(1) Represents the historical unaudited condensed consolidated balance sheet of
the Company as of June 30, 1997.
(2) Represents the effects of the 1997 Equity, the Offering and the use of the
proceeds from the sale of the Notes.
(3) Proceeds from the Offering net of (i) estimated commissions and debt
offering expenses of approximately $9,008,000, (ii) repayment of borrowings
and accrued interest outstanding at June 30, 1997 related to the Existing
Credit Facility of approximately $79,756,000, and (iii) proceeds from the
Offering placed in the Interest Escrow Account of approximately
$36,219,000.
(4) Proceeds from the Offering placed in Interest Escrow Account.
(5) Estimated Offering expenses to be deferred and amortized over the life of
the Notes.
(6) Repayment of borrowings and accrued interest related to the Existing Credit
Facility with proceeds from the Offering.
(7) Proceeds from the Offering, net of original issue discount.
(8) Represents the historical consolidated statement of operations of the
Company for the period from inception (January 30, 1996) through December
31, 1996 and the historical unaudited condensed consolidated statement of
operations of the Company for the six months ended June 30, 1997.
(9) Represents the effects of the Acquisitions.
F-6
<PAGE> 129
DIGITAL TELEVISION SERVICES, LLC AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(10) The following represents the unaudited combined statements of
operations and pro forma adjustments for the 1996 preacquisition
period for the 1996 Acquisitions, and for the year ended December 31,
1996 for the 1997 Acquisitions:
<TABLE>
<CAPTION>
1996 ACQUISITIONS 1997
JANUARY 1, 1996 PRO FORMA ACQUISITIONS ADJUSTMENTS TO
THROUGH ADJUSTMENTS TO ADJUSTED YEAR ENDED 1997
ACQUISITION DATES 1996 ACQUISITIONS 1996 ACQUISITIONS DECEMBER 31, 1996 ACQUISITIONS
----------------- ----------------- ----------------- ----------------- --------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
REVENUE:
Programming revenue... $4,304 $ $4,304 $22,296 $
Equipment and
installation
revenue............. 486 -- 486 5,941 --
------ ----- ------ ------- -------
Total revenue... 4,790 -- 4,790 28,237 --
------ ----- ------ ------- -------
COST OF REVENUE:
Programming expense... 2,322 2,322 11,388
Cost of equipment and
installations....... 417 -- 417 4,389 --
Service fees.......... 181 -- 181 2,249 --
------ ----- ------ ------- -------
Total cost of
revenue....... 2,920 -- 2,920 18,026 --
------ ----- ------ ------- -------
GROSS PROFIT............ 1,870 -- 1,870 10,211 --
------ ----- ------ ------- -------
OPERATING EXPENSES:
Sales and marketing... 383 -- 383 4,309 --
General and
administrative...... 856 -- 856 6,233 --
Depreciation and
amortization........ 577 (571)(A) 6 2,294 (1,669)(A)
------ ----- ------ ------- -------
Total operating
expenses...... 1,816 (571) 1,245 12,836 (1,669)
------ ----- ------ ------- -------
OPERATING INCOME
(LOSS)................ 54 571 625 (2,625) 1,669
------ ----- ------ ------- -------
OTHER INCOME (EXPENSE):
Interest Expense...... (155) 155(B) -- (472) 472(B)
Other Income
(Expense)........... 7 -- 7 157 (157)(C)
------ ----- ------ ------- -------
(148) 155 7 (315) 315
------ ----- ------ ------- -------
NET INCOME (LOSS)....... $ (94) $ 726 $ 632 $(2,940) $ 1,984
====== ===== ====== ======= =======
<CAPTION>
COMBINED
PRO FORMA
1996
ACQUISITIONS
ADJUSTED AND
1997 1997
ACQUISITIONS ACQUISITIONS
-------------- ---------------
<S> <C> <C>
REVENUE:
Programming revenue... $22,296 $26,600
Equipment and
installation
revenue............. 5,941 6,427
------- -------
Total revenue... 28,237 33,027
------- -------
COST OF REVENUE:
Programming expense... 11,388 13,710
Cost of equipment and
installations....... 4,389 4,806
Service fees.......... 2,249 2,430
------- -------
Total cost of
revenue....... 18,026 20,946
------- -------
GROSS PROFIT............ 10,211 12,081
------- -------
OPERATING EXPENSES:
Sales and marketing... 4,309 4,692
General and
administrative...... 6,233 7,089
Depreciation and
amortization........ 625 631
------- -------
Total operating
expenses...... 11,167 12,412
------- -------
OPERATING INCOME
(LOSS)................ (956) (331)
------- -------
OTHER INCOME (EXPENSE):
Interest Expense...... -- --
Other Income
(Expense)........... -- 7
------- -------
-- 7
------- -------
NET INCOME (LOSS)....... $ (956) $ (324)
======= =======
</TABLE>
(A) Elimination of historical basis amortization expense for
preacquisition contract rights and other intangible assets eliminated in
purchase accounting of the acquired businesses.
(B) Elimination of interest expense on debt not acquired.
(C) Elimination of interest income on lease receivables not acquired.
(11) Annualization of December 1996 home office expense, net of total home
office expense recorded, in order to reflect such expense for the full
year at December level. As Company began operations during 1996, the
Company built its home office infrastructure throughout the year. In
the opinion of management, the December 1996 level of home office
expenses is more indicative of expenses to be incurred in future
operations.
(12) Amortization of capitalized license fees for the acquisitions.
(13) Interest expense on the Notes issued in connection with the
acquisition of the Company's DirecTV markets in Georgia.
(14) Addition to interest expense reflects:
(i) Interest expense on the Notes, including the original issue discount
of approximately $2.16 million on the Notes for 12 months for December 31,
1996 and six months for June 30, 1997,
(ii) Annualization of commitment fees on the Restated Credit Facility,
(iii) Elimination of interest expense recorded on the Existing Credit
Facility,
(iv) Elimination of interest expense recorded for seller notes repaid
prior to and subsequent to December 31, 1996, and
(v) Annualization of interest expense on seller notes outstanding at
December 31, 1996 and June 30, 1997.
(15) Annualization of amortization of debt issuance costs and debt discount
on seller notes (Note 5) and amortization of estimated Offering
expenses.
F-7
<PAGE> 130
DIGITAL TELEVISION SERVICES, LLC AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(16) The following represents the unaudited combined statements of operations
and pro forma adjustments for the 1997 preacquisition period for the 1997
Acquisitions:
<TABLE>
<CAPTION>
1997
ACQUISITIONS
JANUARY 1, 1997
THROUGH PRO FORMA
ACQUISITION ADJUSTMENTS TO ADJUSTED 1997
DATES 1997 ACQUISITIONS ACQUISITIONS
--------------- ----------------- --------------
($ IN THOUSANDS)
<S> <C> <C> <C>
REVENUE:
Programming revenue.................................... $3,733 $ $3,733
Equipment and installation revenue..................... 821 -- 821
------ ------ ------
Total revenue.................................... 4,554 -- 4,554
------ ------ ------
COST OF REVENUE:
Programming expense.................................... 1,802 -- 1,802
Cost of equipment and installations.................... 564 -- 564
Service fees........................................... 454 -- 454
------ ------ ------
Total cost of revenue............................ 2,820 -- 2,820
------ ------ ------
GROSS PROFIT............................................. 1,734 -- 1,734
------ ------ ------
OPERATING EXPENSES:
Sales and marketing.................................... 625 -- 625
General and administrative............................. 930 -- 930
Depreciation and amortization.......................... 467 (236)(A) 231
------ ------ ------
Total operating expenses......................... 2,022 (236) 1,786
------ ------ ------
OPERATING INCOME (LOSS).................................. (288) 236 (52)
------ ------ ------
OTHER INCOME (EXPENSE):
Interest Expense....................................... (11) 11(B) --
Other Income (Expense)................................. (23) 23(C) --
------ ------ ------
(34) 34 --
------ ------ ------
NET INCOME (LOSS)........................................ $ (322) $270 $ (52)
====== ====== ======
</TABLE>
(A) Elimination of historical basis amortization expense for
preacquisition contract rights and other intangible assets eliminated in
purchase accounting of the acquired businesses.
(B) Elimination of interest expense on debt not acquired.
(C) Elimination of interest income on lease receivables not acquired.
F-8
<PAGE> 131
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Managers
of DTS Management, LLC, the sole manager of
Digital Television Services, LLC:
We have audited the accompanying consolidated balance sheet of DIGITAL
TELEVISION SERVICES, LLC (a Delaware limited liability company and formerly DBS
Holdings, L.P.) AND SUBSIDIARIES as of December 31, 1996 and the related
consolidated statements of operations, members' equity, and cash flows for the
period from inception (January 30, 1996) through December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Digital
Television Services, LLC and subsidiaries as of December 31, 1996 and the
results of their operations and their cash flows for the period from inception
(January 30, 1996) through December 31, 1996 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 28, 1997
(except with respect to the matters
discussed in Note 10
as to which the date is July 30, 1997)
F-9
<PAGE> 132
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,595,955 $ 1,874,957
Accounts receivable:
Trade, net of allowance for doubtful accounts of $6,750
and $255,546 at December 31, 1996 and June 30, 1997,
respectively.......................................... 893,950 3,158,066
Other.................................................. 154,840 727,315
Inventory................................................. 244,544 1,155,217
Other (Note 2)............................................ 234,153 1,064,172
----------- ------------
Total current assets.............................. 3,123,442 7,979,727
----------- ------------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements.................................... 81,244 238,185
Furniture and equipment................................... 397,201 1,481,122
----------- ------------
478,445 1,719,307
Less accumulated depreciation............................. (44,339) (234,758)
----------- ------------
434,106 1,484,549
----------- ------------
CONTRACT RIGHTS AND OTHER ASSETS (Note 2)................... 38,604,625 140,884,358
----------- ------------
$42,162,173 $150,348,634
=========== ============
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 1,041,019 $ 3,305,439
Accrued liabilities....................................... 1,380,321 5,201,065
Unearned revenue.......................................... 1,082,601 4,537,518
Current maturities of long-term debt...................... 6,033,732 8,595,402
Other..................................................... 92,279 179,951
----------- ------------
Total current liabilities......................... 9,629,952 21,819,375
----------- ------------
LONG-TERM DEBT, less current maturities..................... 17,542,883 91,989,794
----------- ------------
OTHER LIABILITIES........................................... 83,615 83,615
----------- ------------
COMMITMENTS AND CONTINGENCIES (Notes 5, 6, 8, and 10)
MEMBERS' EQUITY............................................. 14,905,723 36,455,850
----------- ------------
$42,162,173 $150,348,634
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-10
<PAGE> 133
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
INCEPTION INCEPTION SIX MONTHS
(JANUARY 30) TO (JANUARY 30) TO ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1997
--------------- --------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Programming revenue................................ $ 3,085,146 $ 552,956 $ 17,013,270
Equipment and installation revenue................. 323,663 49,727 1,481,153
----------- --------- ------------
Total revenue.............................. 3,408,809 602,683 18,494,423
----------- --------- ------------
COST OF REVENUE:
Programming expense................................ 1,595,963 287,201 8,245,760
Cost of equipment and installation................. 398,144 84,831 1,676,939
Service fees....................................... 275,704 46,546 1,644,535
----------- --------- ------------
Total cost of revenue...................... 2,269,811 418,578 11,567,234
----------- --------- ------------
GROSS PROFIT......................................... 1,138,998 184,105 6,927,189
----------- --------- ------------
OPERATING EXPENSES:
Sales and marketing................................ 778,036 41,530 2,843,593
General and administrative......................... 1,953,635 421,320 3,612,836
Depreciation and amortization...................... 1,147,963 264,198 6,552,266
----------- --------- ------------
Total operating expenses................... 3,879,634 727,048 13,008,695
----------- --------- ------------
OPERATING LOSS....................................... (2,740,636) (542,943) (6,081,506)
----------- --------- ------------
OTHER INCOME (EXPENSE):
Interest expense................................... (817,603) (32,877) (4,307,874)
Other income....................................... 22,980 11,264 60,502
----------- --------- ------------
(794,623) (21,613) (4,247,372)
----------- --------- ------------
NET LOSS............................................. $(3,535,259) $(564,556) $(10,328,878)
=========== ========= ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-11
<PAGE> 134
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 30, 1996) THROUGH DECEMBER 31, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D TOTAL
----------------------- ----------------------- --------------- ---------------- MEMBERS'
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT EQUITY
--------- ----------- --------- ----------- ------ ------ ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 30,
1996............... -- $ -- -- $ -- -- $ -- -- $ -- $ --
Sale of Class B
Units............ -- -- 1,844,098 18,440,982 -- -- -- -- 18,440,982
Issuance of Class C
Units............ -- -- -- -- 87,049 -- -- -- --
Net loss........... -- -- -- (3,535,259) -- -- -- -- (3,535,259)
--------- ----------- --------- ----------- ------ ---- ------- ---- -----------
BALANCE, December 31,
1996............... -- -- 1,844,098 14,905,723 87,049 -- -- -- 14,905,723
Sale of Class A
Units............ 1,333,333 29,820,008 -- -- -- -- -- -- 29,820,008
Sale of Class B
Units............ -- -- 205,902 2,058,997 -- -- -- -- 2,058,997
Issuance of Class D
Units............ -- -- -- -- -- -- 96,500 -- --
Net Loss
(unaudited)...... -- -- -- (10,328,878) -- -- -- -- (10,328,878)
--------- ----------- --------- ----------- ------ ---- ------- ---- -----------
BALANCE, June 30,
1997 (unaudited)... 1,333,333 $29,820,008 2,050,000 $ 6,635,842 87,049 $ -- 96,500 $ -- $36,455,850
========= =========== ========= =========== ====== ==== ======= ==== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-12
<PAGE> 135
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCEPTION INCEPTION SIX MONTHS
(JANUARY 30) TO (JANUARY 30) TO ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1997
--------------- --------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $ (3,535,259) $ (564,556) $(10,328,878)
------------ ----------- ------------
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 1,106,264 264,198 6,058,845
Amortization of capitalized debt costs and debt
discount...................................... 313,329 -- 670,758
Amortization of deferred promotional costs...... 41,699 -- 493,421
Changes in operating assets and liabilities, net
of acquisitions:
Accounts receivable, net...................... (428,281) (107,889) (8,492)
Inventory..................................... (218,140) (5,474) (411,999)
Other current assets.......................... (269,721) (7,192) (1,093,494)
Accounts payable.............................. 877,630 59,492 2,451,503
Accrued liabilities and other liabilities..... 1,099,003 5,086 443,678
Unearned revenue.............................. 379,533 (24,958) (27,337)
------------ ----------- ------------
Total adjustments.......................... 2,901,316 183,263 8,576,883
------------ ----------- ------------
Net cash used in operating activities...... (633,943) (381,293) (1,751,995)
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net of
acquisitions.................................... (382,175) (34,280) (856,307)
Disposals of property and equipment................ (3,930) (3,930) --
Purchase of contract rights and related net assets,
net of amounts financed......................... (12,695,488) (1,491,380) (88,818,803)
Increase in other assets........................... (693,690) (69,310) --
------------ ----------- ------------
Net cash used in investing activities...... (13,775,283) (1,598,900) (89,675,110)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank credit facility................. 9,400,000 -- 69,769,409
Issuance of notes payable.......................... 32,399 -- 304,137
Repayment of seller notes and other notes
payable......................................... (9,047,023) -- (6,027,894)
Capitalized financing fees related to bank credit
facility........................................ (2,821,177) -- (3,658,120)
Sale of Member Units............................... 18,440,982 2,872,375 31,879,005
Other, net......................................... -- -- (560,430)
------------ ----------- ------------
Net cash provided by financing
activities............................... 16,005,181 2,872,375 91,706,107
------------ ----------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS............ 1,595,955 892,184 279,002
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..... -- -- 1,595,955
------------ ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........... $ 1,595,955 $ 892,184 $ 1,874,957
============ =========== ============
SUPPLEMENTAL NONCASH FINANCING ACTIVITY:
NRTC patronage capital declared.................... $ 83,615 $ -- $ --
============ =========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest............................. $ 301,035 $ -- $ 3,178,182
============ =========== ============
Issuance of seller notes in connection with
acquisitions.................................... $ 24,156,000 $ 8,417,000 $ 15,524,198
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-13
<PAGE> 136
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (INFORMATION AS OF JUNE 30, 1997 IS UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS
Digital Television Services, LLC ("DTS") is a limited liability company
organized under the Delaware Limited Liability Company Act (the "LLC Act") and
is successor to DBS Holdings, L.P., a Delaware limited partnership originally
formed on January 30, 1996 by Columbia Capital Corporation ("Columbia") and
senior management of DTS. On November 19, 1996, the limited partnership was
converted into a limited liability company under the applicable provisions of
the LLC Act and Delaware limited partnership laws. All information in the
accompanying consolidated financial statements and notes has been restated for
the conversion to a limited liability company. DTS is owned by its members (Note
7). DTS and its wholly owned subsidiaries (collectively, "the Company") were
formed to acquire and operate the exclusive rights to distribute direct
broadcast satellite ("DBS") services ("DIRECTV Services") offered by DirecTv,
Inc. ("DirecTv") in certain rural markets. The Company completed its first
acquisition of a rural DIRECTV Services provider in March 1996 and has made a
total of 16 acquisitions through May 9, 1997 (Notes 3 and 10).
In connection with the Company's expansion, Columbia and certain of its
affiliates increased their investment in the Company subsequent to December 31,
1996. Additional equity was raised from J.H. Whitney Co. and Fleet Equity
Partners (together with Columbia, the "Equity Investors") and from senior
executives of the Company subsequent to year-end. The Equity Investors and
senior executives, in aggregate, have contributed $50,500,000 of equity capital
to the Company from inception through February 28, 1997 (Note 10).
DTS is a holding company which operates primarily through its wholly owned
subsidiaries. The principal wholly owned subsidiary of DTS is DTS Management,
LLC ("DTS Management"), a Georgia limited liability company. DTS Management is
the sole manager of the Company, and its subsidiaries consist of 10 entities
(the "Operating Subsidiaries") which, except for one subsidiary which is a
Delaware limited liability company and one subsidiary which is a New Mexico
corporation, are limited liability companies organized under the laws of the
state of Georgia. The Operating Subsidiaries are independent providers of
DIRECTV Services. The Company's other wholly owned subsidiary, DTS Capital, Inc.
("DTS Capital"), was formed subsequent to December 31, 1996 and currently has
nominal assets and does not conduct any operations. DTS Capital was formed to
facilitate issuance of certain senior notes (Note 10).
The Company obtained the rights to distribute DIRECTV Services in its
territories pursuant to agreements (the "NRTC Member Agreements") with the
National Rural Telecommunications Cooperative (the "NRTC"). Under the provisions
of the NRTC Member Agreements for the 1996 Acquisitions (Note 3) and the 1997
Acquisitions (Note 10), the Company has the exclusive right to provide DIRECTV
Services within certain rural territories in the United States.
The Company has had a limited operating history during which time it has
generated negative cash flows and net losses. The negative cash flows can be
attributed to the costs incurred to purchase NRTC contract rights and related
assets (Notes 3 and 10) and general corporate overhead expenses. The Company
expects negative cash flows and net losses to continue through at least 1997, as
the Company plans to purchase additional contract rights and to incur
substantial selling and marketing expenses in order to build its subscriber
base. The ability to generate positive cash flow in the future is dependent upon
many factors, including general economic conditions, the level of market
acceptance for the Company's services, and the degree of competition encountered
by the Company. As discussed in Note 5, financing totaling $100 million has been
committed by a syndicate of lenders, of which $79,169,409 was outstanding at
June 30, 1997. The Company also issued $155 million in senior subordinated notes
in July 1997 (Note 10) to refinance certain existing indebtedness and to provide
additional funds for possible future acquisitions and general operating needs.
The success of the Company is dependent on this financing and the future
ability of DTS and its subsidiaries to generate projected revenues through
successful operations. The members have no present plans to discontinue
F-14
<PAGE> 137
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
support of the Company. In the opinion of management, capital on hand, as well
as funds provided from financings (Notes 5 and 10), will be sufficient to meet
the capital and operating needs of the Company through at least 1997. Additional
funding may be required for any future acquisitions. However, there can be no
assurance when or if future operations of the Company will be successful or that
further financing, if needed, will be available with terms acceptable to the
Company, or at all.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of DTS and its
subsidiaries. All significant intercompany transactions and balances have been
eliminated.
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 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.
REVENUE RECOGNITION
The Company earns programming revenue by providing DIRECTV Services to its
subscribers. Programming revenue includes DIRECTV Services purchased by
subscribers in monthly, quarterly, or annual subscriptions; additional premium
programming available on an a la carte basis; sports programming available under
monthly, annual, or seasonal subscriptions; and movies and events programming
available on a pay-per-view basis. Programming purchased on a monthly,
quarterly, annual, or seasonal basis, including premium programming, is billed
in advance and is recorded as unearned revenue. All programming revenue is
recognized when earned.
Equipment and installation revenue primarily consists of the sale of DSS(R)
equipment and accessories and related installation charges. Equipment sales
revenue is recognized upon delivery of the equipment to the customer.
Installation revenue is recognized when the equipment is installed.
COST OF REVENUES
Cost of revenues includes the cost associated with providing DIRECTV
Services to the Company's subscribers. These costs include the direct wholesale
cost of purchasing related programming from DirecTv (through the NRTC (Note 9));
monthly subscriber maintenance fees charged by DirecTV, such as security fees,
ground service fees, system authorization fees, and fees for subscriber
billings; costs of equipment sold; and certain subscriber operating costs.
INVENTORIES
The Company maintains inventories consisting of DSS(R) equipment and
related accessories. Inventory is valued at the lower of cost or market,
generally on a specific identification basis.
F-15
<PAGE> 138
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER CURRENT ASSETS
Other current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------
<S> <C> <C>
Deferred promotional costs.......................... $214,939 $ 918,693
Other............................................... 19,214 145,479
-------- ----------
$234,153 $1,064,172
======== ==========
</TABLE>
Deferred promotional costs consist of costs related to a subscriber rebate
program sponsored by DirecTv. Under the program, new subscribers who agree to
prepay for one year of programming service receive a credit which can be applied
toward equipment or programming. The Company defers the cost of this credit and
amortizes it over the one-year contract period. In addition, as a part of this
program, the Company receives $1 per month for up to five years from the NRTC
for each subscriber whose account remains active.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major property additions,
replacements, and betterments are capitalized, while maintenance and repairs
which do not extend the useful lives of these assets are expensed currently.
Depreciation for property and equipment is provided using the straight-line
method over the estimated useful lives of the respective assets, ranging from
three to seven years. Depreciation expense was $48,269 and $190,419 for the
period from inception (January 30, 1996) through December 31, 1996 and for the
six months ended June 30, 1997, respectively. Upon retirement or disposal of
assets, the cost and related accumulated depreciation are removed from the
balance sheet and any gain or loss is reflected in earnings.
CONTRACT RIGHTS AND OTHER ASSETS
Contract rights and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ------------
<S> <C> <C>
Contract rights.................................. $32,727,697 $140,270,901
Organization costs............................... 599,528 1,117,163
----------- ------------
33,327,225 141,388,064
Accumulated amortization......................... (1,057,995) (6,918,011)
----------- ------------
32,269,230 134,470,053
Deposits on 1997 Acquisitions and Pending
Acquisitions................................... 3,380,961 --
Debt issuance costs, net......................... 2,776,658 4,428,896
Bond issuance costs.............................. -- 1,667,405
NRTC patronage capital........................... 83,615 83,615
Other............................................ 94,161 234,389
----------- ------------
$38,604,625 $140,884,358
=========== ============
</TABLE>
Contract Rights: Contract rights represent the cost of acquiring rights to
distribute DIRECTV Services (Note 3), less net tangible assets acquired.
Contract rights are being amortized over ten years, the estimated remaining
useful life of the satellites operated by DirecTv which provide service under
the related contracts. Amortization expense, included in depreciation and
amortization in the accompanying statement of operations, was $1,021,606 and
$5,765,656 for the period from inception (January 30, 1996) through December 31,
1996 and for the six months ended June 30, 1997, respectively. Accumulated
amortization, included in the accompanying balance sheets, was $1,021,606 and
$6,787,262 for the period from inception (January 30, 1996) through December 31,
1996 and for the six months ended June 30, 1997, respectfully.
F-16
<PAGE> 139
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Organization Costs: Organization costs are costs associated with the
formation of the Company and its subsidiaries and are being amortized over five
years. Amortization expense included in depreciation and amortization in the
accompanying statement of operations was $36,389 and $94,360, for the period
from inception (January 30, 1996) through December 31, 1996 and for the six
months ended June 30, 1997, respectively. Accumulated amortization, included in
the accompanying balance sheets, was $36,389 and $130,749 for the period from
inception (January 30) through December 31, 1996 and for the six months ended
June 30, 1997, respectively.
Deposits on Acquisitions: In accordance with the provisions of asset
purchase agreements entered into by the Company, deposits were made into escrow
accounts for acquisitions of contract rights in Kentucky, Vermont and Kansas,
which were pending at December 31, 1996.
Debt Issuance Costs: Debt issuance costs are amortized over the term of
the related long-term debt facility. Amortization expense, included in interest
expense in the accompanying statement of operations, was $44,520 and $336,472
for the period from inception (January 30, 1996) through December 31, 1996 and
for the six months ended June 30, 1997, respectively. Accumulated amortization,
included in the accompanying balance sheets, was $44,520 and $380,992 for the
period from inception (January 30) through December 31, 1996 and for the six
months ended June 30, 1997, respectively.
Bond Issuance Costs: Bond issuance costs represent deferred costs incurred
in connection with an anticipated bond offering (Note 10) and are capitalized as
incurred. Such costs will be amortized upon issuance of the bonds over the life
of the bonds.
NRTC Patronage Capital: The Company, through its subsidiaries, is an
affiliate of the NRTC. While affiliates have no vote, they do have an interest
in the NRTC in proportion to their prior patronage. NRTC patronage capital
represents the noncash portion of NRTC patronage income. Under its bylaws, the
NRTC declares a patronage dividend of its excess of revenues over expenses each
year. Of the total patronage dividend, 20% is paid in cash and recognized as
income when received and is netted against programming expense in the
accompanying statement of operations. The remaining 80% is distributed in the
form of noncash patronage capital, which will be redeemed in cash only at the
discretion of the NRTC. The Company includes noncash patronage capital as other
assets, with an offsetting deferred patronage income amount included in other
liabilities in the accompanying balance sheet. The patronage capital will be
recognized as income when cash distributions are declared by the NRTC.
INCOME TAXES
The Company is considered a partnership for federal and state income tax
purposes. All taxable income or loss is allocated to the members in accordance
with the terms of the member agreement. Accordingly, no provision for income
taxes is included in the accompanying financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of the fair value of
certain financial instruments for which it is practicable to estimate that
value. For purposes of the following disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties other than in a forced sale or liquidation.
F-17
<PAGE> 140
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The methods and assumptions used to estimate fair value are as follows:
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 approximates fair value due to the
relatively short period to maturity of these instruments.
Long-term debt: Fair value is estimated based on borrowing rates
currently available to the Company for bank loans with similar terms and
average maturities.
The asset and liability amounts recorded in the accompanying balance sheet
at December 31, 1996 for cash and cash equivalents and long-term debt
approximate fair value based on the above assumptions.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk with respect to accounts receivable is limited
due to the large number of geographically dispersed subscribers. As a result, at
December 31, 1996, management does not believe any significant concentration of
credit risk exists.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. When
events or changes in circumstances occur related to long-lived assets,
management estimates the future cash flows expected to result from the use of
the asset and its eventual disposition. Having found no instances whereby the
sum of expected future cash flows (undiscounted and without interest charges)
was less than the carrying amount of the asset and thus requiring the
recognition of an impairment loss, management believes that the long-lived
assets in the accompanying balance sheet are appropriately valued.
3. CONTRACT RIGHTS
During 1996, the Company acquired the rights to distribute DIRECTV Services
in eight rural DirecTv markets in certain rural areas in the United States (the
"1996 Acquisitions"). The aggregate consideration was approximately $32.3
million, including closing date working capital and other adjustments as defined
in the purchase agreements and fair value adjustments related to the seller
notes (Note 5), subject to increase based on the number of subscribers in one of
the markets on October 1, 1998 (Note 5). Of the total purchase price,
approximately $9.3 million was paid in cash and approximately $24.2 million
(before fair value adjustments related to the seller notes of $1.2 million (Note
5)) was financed through the issuance of promissory notes to the sellers of the
contract rights (Note 5). Under the 1996 Acquisitions, rights were acquired in
the following markets:
- In March 1996, the Company acquired the outstanding common stock of
Spacenet, Inc. and the rights to provide DIRECTV Services in certain
counties in New Mexico.
- In April 1996, the Company acquired the rights to provide DIRECTV
Services in certain counties in California from Pacific Coast DBS, Inc.
- In August 1996, the Company acquired the rights to provide DIRECTV
Services in certain counties in New Mexico from Teg DBS Services, Inc., in
certain counties in New York from Northeast Cable Services, Inc. and Falls
Earth Station, Inc., and in certain counties in Colorado from Omega Cable.
F-18
<PAGE> 141
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- In November 1996, the Company acquired the rights to provide DIRECTV
Services in certain counties in South Carolina from Pee Dee Electric
Cooperative, Inc. and Santee Electric Cooperative, Inc.
When the Company purchases the exclusive rights to provide DIRECTV Services
in a rural DirecTv market, it acquires the NRTC Member Agreement and related
agreements providing for the exclusive rights to provide DIRECTV Services within
that market, all net assets related to the provision of DIRECTV Services in such
market, and any residual rights to provide DBS services which the NRTC may grant
the owner of such market after the termination or expiration of the NRTC Member
Agreement. The purchase price of the above acquisitions was allocated to the
fair values of the net assets acquired as follows (in thousands):
<TABLE>
<S> <C>
Current assets.............................................. $ 751
Property and equipment...................................... 96
Contract rights, net of fair value adjustments of $1.2
million................................................... 32,728
Current liabilities......................................... (1,240)
-------
Total consideration............................... $32,335
=======
</TABLE>
Any additional contingent consideration will be recorded as an increase in
contract rights.
During the first six months of 1997, the Company acquired the rights to
distribute DIRECTV Services in seven additional rural DirecTv markets. The
aggregate consideration was approximately $105.0 million including closing date
working capital and other adjustments as defined in the purchase agreements and
fair value adjustments related to the seller notes (Note 5). Of the total price,
approximately $29.7 million was paid in cash, approximately $59.8 million was
financed through borrowings under the Credit Facility and approximately $15.5
million (before fair value adjustments related to the seller notes of $3.0
million (Note 5)) was financed through the issuance of promissory notes to the
sellers of the contract rights (Note 5). Under these acquisitions, rights were
acquired in the following markets:
- In January 1997, the Company acquired the rights to provide DIRECTV
Services in certain counties in Kentucky from Direct Programming Services
Limited Partnership
- In January 1997, the Company also acquired the rights to provide DIRECTV
Services in certain counties in Kansas from Kansas DBS, L.L.C. and Skywave
Communications, Inc.
- In February 1997, the Company acquired the rights to provide DIRECTV
Services in certain counties in Vermont from Northeast DBS Enterprises,
L.P.
- In May 1997, the Company acquired the rights to provide DIRECTV Services
in certain counties in Georgia from Mitchell Electric Membership
Corporation, Washington Electric Membership Corporation, Planters Electric
Membership Corporation and DigiCom Services, Inc.
The purchase price of the above acquisitions was allocated to the fair
values of the net assets acquired as follows (in thousands):
<TABLE>
<S> <C>
Current assets.............................................. $ 3,529
Property and equipment...................................... 385
Contract rights, net of fair value adjustments of $3.0
million................................................... 108,081
Current liabilities......................................... (6,967)
--------
Total consideration............................... $105,028
========
</TABLE>
F-19
<PAGE> 142
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. RELATED-PARTY TRANSACTIONS
Columbia, which is owned by certain members of the Company holding Class A
and Class B interests, provides financial, managerial, and other services to the
Company. Total fees and expenses paid to Columbia were approximately $322,000
and $36,000 for the period from inception (January 30, 1996) through December
31, 1996 and for the six months ended June 30, 1997, respectively. Such fees are
included in general and administrative expenses in the accompanying statement of
operations.
5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1997
------------------------- --------------------------
UNAMORTIZED UNAMORTIZED
PRINCIPAL DISCOUNT PRINCIPAL DISCOUNT
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Seller notes and commitments......... $15,113,250 $965,011 $ 24,637,448 $3,526,667
Credit facility...................... 9,400,000 -- 79,169,409 --
Installment notes.................... 28,376 -- 305,006 --
----------- -------- ------------ ----------
24,541,626 965,011 104,111,863 3,526,667
Less current maturities.............. 6,130,183 96,451 9,715,622 1,120,220
----------- -------- ------------ ----------
$18,411,443 $868,560 $ 94,396,241 $2,406,447
=========== ======== ============ ==========
</TABLE>
THE SELLER NOTES
In connection with the acquisition of the Company's California rural
DirecTv market, one of the Operating Subsidiaries, Digital Television Services
of California, LLC ("DTS California"), entered into a promissory note dated
April 1, 1996, as modified as of December 31, 1996 (as so modified, the "DTS
California Note"), in favor of Pacific Coast DBS, Inc. ("Pacific"). Pursuant to
the DTS California Note, DTS California is obligated to pay to Pacific the sum
of (i) $480,000, payable in 24 equal monthly installments commencing May 1,
1996, and (ii) an amount payable on October 1, 1998 equal to the greater of $4.0
million or the Contingent Payment Amount. The Contingent Payment Amount is
determined by multiplying the number of subscribers to DIRECTV Services in DTS
California's rural DirecTv market as of October 1, 1998 by certain dollar
amounts. As of December 31, 1996 and June 30, 1997, the Contingent Payment
Amount is recorded as $4,223,250, which is based on subscriber levels at
December 31, 1996. The obligations of DTS California pursuant to the DTS
California Note are secured by a $6,000,000 irrevocable letter of credit (the
"DTS California Letter of Credit") issued in favor of Pacific pursuant to the
Credit Facility, as subsequently defined. The stated amount of the DTS
California Letter of Credit will increase so that it will at all times be at
least equal to 110% of the Contingent Payment Amount. The DTS California Note
contains certain covenants which, among other things, prohibit the payment of
dividends or other distributions by DTS California and payments by DTS
California to Columbia. A failure to make any payment due under the DTS
California Note will allow Pacific to draw under the DTS California Letter of
Credit.
In connection with the acquisition of one of the Company's rural DirecTv
markets in South Carolina (the "South Carolina Rural DirecTv Markets"), one of
the Operating Subsidiaries, Digital Television Services of South Carolina I, LLC
("DTS South Carolina I"), entered into a promissory note dated November 26, 1996
(the "South Carolina I Note") payable to Pee Dee Electricom, Inc. ("Pee Dee") in
the amount of $7,955,000, of which $3,265,000 was paid in January 1997. The
balance is due on January 2, 1998. The note bears interest at a rate of 4% per
annum, payable quarterly. The obligations of DTS South Carolina I with respect
to the South Carolina I Note are secured by an irrevocable letter of credit (the
"South Carolina I Letter of Credit") issued in favor of Pee Dee pursuant to the
Credit Facility. The South Carolina I Note does not contain any covenants;
however, a failure to make any payment due under the South Carolina I Note will
allow Pee Dee to draw under the South Carolina I Letter of Credit.
F-20
<PAGE> 143
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the acquisition of the Company's other South Carolina
rural DirecTv market, one of the Operating Subsidiaries, Digital Television
Services of South Carolina II, LLC, entered into a promissory note dated
November 26, 1996 (the "South Carolina II Note") payable to Santee Satellite
Systems, Inc. ("Santee") in the amount of $2,200,000, of which $1,100,000 was
due on November 26, 1997, with the balance due on November 26, 1998. The entire
balance was paid in January 1997 and thus is classified as current maturities in
the accompanying consolidated balance sheet at December 31, 1996. The note bears
interest at 6% per annum, payable quarterly. The note is secured by an
irrevocable letter of credit issued pursuant to the Credit Facility (the "South
Carolina II Letter of Credit") issued in favor of Santee. The South Carolina II
Note does not contain any covenants; however, a failure to make any payment due
under the South Carolina II Note will allow Santee to draw under the South
Carolina II Letter of Credit.
In connection with the acquisition of one of the Company's New Mexico rural
DirecTv markets, the Company entered into a promissory note dated March 1, 1996,
as modified as of November 27, 1996 (as so modified, the "New Mexico Note"), in
favor of Edward Botefuhr and Janet Blakeley Botefuhr in the amount of $415,000,
payable in equal installments on April 1, 1998 and April 1, 1999. The note bears
interest at 15% per annum, payable monthly. The note is secured by an
irrevocable letter of credit issued pursuant to the Credit Facility (the "New
Mexico Letter of Credit") issued in favor of the Botefuhrs. The New Mexico Note
does not contain any covenants; however, a failure to make any payment due under
the New Mexico Note will allow the Botefuhrs to draw under the New Mexico Letter
of Credit. The entire balance was paid in January 1997 and thus is classified as
current maturities in the accompanying consolidated balance sheet at December
31, 1996.
In connection with the acquisition of the Company's Rural DirecTv Markets
in Georgia (the "Georgia Rural DirecTv Markets"), one of the Subsidiaries,
Digital Television Services of Georgia, LLC ("DTS Georgia"), issued three
promissory notes, each of which represents a portion of the purchase price for
one of the Georgia Rural DirecTv Markets. DTS Georgia issued (i) a promissory
note dated May 9, 1997 (the "Planters Notes") payable to Planters Electric
Membership Corporation ("Planters") in the amount of approximately $850,000,
(ii) a promissory note dated May 9, 1997 (the "Mitchell Note") payable to
Mitchell Electric Membership Corporation ("Mitchell") in the amount of
approximately $9.4 million and (iii) a promissory note dated May 9, 1997 (the
"Washington Note") payable to Washington Electric Membership Corporation
("Washington") in the amount of approximately $5.2 million. The principal amount
of the Planters Note is payable on January 2, 1998 and bears interest at a rate
of 3% per annum; provided that if DTS Georgia acquires a certain Rural DirecTv
Market, the interest rate will increase as of the date of such acquisition to
3 1/2% per annum. The principal amount of each of the Mitchell Note and the
Washington Note is payable on January 2, 2001 and bears interest at a rate of 3%
per annum until May 9, 2000 and at a rate of 3 1/2% per annum thereafter;
provided that if DTS Georgia acquires a certain Rural DirectTv Market, the
interest rate will increase as of the date of such acquisition to 3 1/2% per
annum, until May 9, 2000, and to 4% thereafter. The obligations of DTS Georgia
with respect to the Georgia Notes are secured by three irrevocable letters of
credit issued pursuant to the Credit Facility (the "Georgia Letters of Credit"),
each of which has been issued for the benefit of one of Planters, Mitchell and
Washington. The Georgia Notes do not contain any affirmative or negative
covenants regarding the Company, DTS Georgia or the operation of the Georgia
Rural DirecTv Markets; however, a failure to make any payment due under a
Georgia Note will allow the payee of such Georgia Note to draw under the
applicable Georgia Letter of Credit.
CREDIT FACILITY
The Company is party to a credit agreement (the "Credit Facility") dated
November 27, 1996 with the banks and other lenders party thereto from time to
time. The Credit Facility is a revolving credit facility in the amount of $100.0
million, with a $25.0 million sublimit for letters of credit. Proceeds from the
Credit Facility can be used to refinance certain existing indebtedness, to
finance the acquisition of contract rights, to finance capital expenditures and
for general corporate purposes and working capital needs.
F-21
<PAGE> 144
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Borrowings under the Credit Facility are available until November 30, 2001;
however, the commitments thereunder shall be reduced on December 31, 1998 by an
amount equal to 75% of the available commitments of all lenders on such date,
provided that the reduction shall not be made unless the aggregate amount of
available commitments exceeds $5,000,000, and thereafter available commitments
shall be reduced quarterly commencing on March 31, 1999 at a rate of 1.250%
through 1999, 1.875% through 2000 and 5% through September 30, 2001. On November
30, 2001, all of the loans outstanding will be repayable. The making of each
loan under the Credit Facility is subject to the satisfaction of certain
conditions, including (i) meeting a certain "borrowing base" calculation based
on the number of paying subscribers and households within the rural DirecTv
markets served by the Company, (ii) maintaining minimum subscriber penetration
and Annualized Contribution (as defined therein) per paying subscriber, and
(iii) maintaining defined annualized operating cash flow levels. In addition,
the Company is required to make mandatory prepayments of the Credit Facility
from, subject to certain exceptions, the net proceeds of certain sales or other
dispositions of material assets by the Company or any of its subsidiaries. At
December 31, 1996, the borrowing base, as defined, was approximately $92.5
million and approximately $80.0 million was available under the Credit Facility.
Borrowings under the Credit Facility are secured by (i) an equal and
ratable pledge of all of the equity interests in the Company, DTS Management and
the Operating Subsidiaries, (ii) a first priority security interest in all of
their assets, and (iii) a collateral pledge of the Company's NRTC Member
Agreements.
The Company may elect that all or a portion of the borrowings under the
Credit Facility bear interest at a rate per annum based on the base rate of the
Canadian Imperial Bank of Commerce ("CIBC") or the Eurodollar rate, in each case
plus an applicable margin as defined in the Credit Facility.
At December 31, 1996 and June 30, 1997, borrowings under the Credit
Facility accrued interest at the rate of 9% and at a rate ranging from 9 3/16%
to 9 7/16%, respectively.
At any time when the Company is in default of the payment of any amount due
under the Credit Facility, the principal of all loans made under the Credit
Facility is subject to acceleration and will bear interest at 2% per annum above
the rate otherwise applicable thereto.
The Company has paid and will pay a commitment fee on the unused amounts
under the Credit Facility calculated at a rate of .375% to .50% per annum,
payable quarterly in arrears. The Company also paid the arrangers of the Credit
Facility a customary structuring and syndication fee and paid certain agency
fees to the agents.
The Credit Facility contains a number of significant covenants that, among
other things, limit the ability of the Company and its subsidiaries to incur
additional indebtedness and guaranty obligations; create liens and other
encumbrances; make certain payments, investments, loans and advances; pay
dividends or make other distributions in respect to its equity interests; sell
or otherwise dispose of assets; make capital expenditures; merge or consolidate
with another entity; make amendments to its organizational documents; or
transact with affiliates. In addition, the Credit Facility requires the
maintenance of certain specified financial and operating covenants, including
minimum interest coverage and leverage ratios and limits on general and
administrative expenses as a percentage of revenue.
INSTALLMENT NOTES
The installment notes represent notes payable to certain financial
institutions for certain property and equipment. The notes are payable in equal
monthly installments through May 2000 and bear interest at rates ranging from
8.5% to 10.3%.
F-22
<PAGE> 145
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAMORTIZED DISCOUNT
The Company has discounted the DTS California Note, the South Carolina I
Note, the South Carolina II Note and the seller notes issued in conjunction with
the acquisitions of certain Rural DirecTv markets in Georgia to reflect the fair
market value based on average interest rates available to the Company. The
estimated fair value interest rate used to record the discount was 9%. The
unamortized discount is being amortized over the life of the notes using the
effective interest method. Amortization expense, included in interest expense in
the accompanying statement of operations, is $268,544 and $670,758 for the
period from inception (January 30, 1996) through December 31, 1996 and for the
six months ended June 30, 1997, respectively.
Future maturities of long-term debt are as follows at December 31, 1996:
<TABLE>
<S> <C>
1997........................................................ $ 6,130,183
1998........................................................ 9,004,332
1999........................................................ 7,111
2000........................................................ 0
2001........................................................ 9,400,000
-----------
$24,541,626
===========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases office and retail space and certain equipment under
noncancelable operating leases which expire in various years through 2001.
Future minimum lease payments for noncancelable operating leases in effect at
December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 298,000
1998........................................................ 297,000
1999........................................................ 300,000
2000........................................................ 148,000
2001........................................................ 106,000
----------
Total future minimum lease payments............... $1,149,000
==========
</TABLE>
Rental expense charged to operations totaled approximately $83,000 and
$269,000 during the period from inception (January 30, 1996) through December
31, 1996 and during the six months ended June 30, 1997, respectively, and is
included in general and administrative expense in the accompanying consolidated
statement of operations.
MINIMUM SUBSCRIBERS
As part of the NRTC Member Agreements, the Company is required to pay
certain fees based on a minimum number of subscribers beginning in the fourth
year of operations of the NRTC Member Agreement. Six of the Operating
Subsidiaries had achieved the minimum subscriber requirement at December 31,
1996. Two of the Operating Subsidiaries had achieved approximately 75% of the
minimum subscriber requirement at December 31, 1996. Based on the subscriber
growth rates of these two Operating Subsidiaries to date, management anticipates
that the two Operating Subsidiaries will meet the minimum subscriber requirement
prior to the fourth year of operations of the related NRTC Member Agreements.
F-23
<PAGE> 146
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. MEMBERS' EQUITY
UNITS
There are four classes of equity interests in the Company, denominated as
"Class A Units," "Class B Units," "Class C Units," and "Class D Units." The
classes have different voting and distribution rights per the Company's Limited
Liability Company Agreement (the "LLC Agreement").
Class A Units are held by the Equity Investors. Each Class A Unit
represents the contribution by its holder of $22.50 to the Company. Class A
Units constitute approximately 37% of the units outstanding at June 30, 1997
(assuming issuance of 180,000 Class D Units pursuant to the Employee Unit Plan).
In addition to the special voting rights defined in the LLC Agreement, the Class
A Unit holders are entitled to certain preemptive rights and protection against
dilution. The Class A Units rank senior to the other classes of Units with
respect to interim and liquidating distributions. On February 10, 1997, the
Company sold 1,333,333 Class A Units to the Equity Investors, raising $30
million of equity capital. No Class A Units and 1,333,333 Class A Units were
outstanding at December 31, 1996 and June 30, 1997, respectively.
Class B Units are held by Columbia DBS, Inc. and Columbia DBS Investors,
L.P., which are affiliates of Columbia, and by certain senior executives of the
Company. Each Class B Unit represents an interest in the Company received in
exchange for the contribution of $10. Class B Units constitute approximately 57%
of the units outstanding at June 30, 1997 (assuming issuance of 180,000 Class D
Units pursuant to the Employee Unit Plan). Class B Units are entitled to certain
preemptive rights and rank senior with respect to interim and liquidating
distributions to the Class C and Class D Units and junior to the Class A Units.
Columbia and senior management of the Company purchased 205,902 Class B Units on
January 2, 1997 for a total investment of $2,059,000. At December 31, 1996 and
June 30, 1997, 1,844,098 and 2,050,000 Class B Units, respectively were
outstanding.
Class C Units are held by certain senior executives of the Company and are
subject to certain vesting requirements related to employment. Each Class C Unit
represents a restricted interest in the Company received in exchange for the
performance of services. Class C Units constitute approximately 2% of the units
outstanding at June 30, 1997 (assuming issuance of 180,000 Class D Units
pursuant to the Employee Unit Plan). Class C Units are entitled to certain
preemptive rights. The Class C Units rank senior to the Class D Units with
respect to interim and liquidating distributions and junior to the Class A and
Class B Units. At December 31, 1996 and June 30, 1997, 87,049 Class C Units had
been issued. Of these, a total of 34,876 Class C Units were vested at December
31, 1996 and a total of 68,302 were vested at June 30, 1997.
EMPLOYEE UNIT PLAN
In March 1997, DTS Management adopted an Employee Unit Plan (the "Employee
Unit Plan") pursuant to which up to 180,000 Class D Units (or such larger number
of Units as may be approved by the Company and the holders of at least 70% of
the Class A Units) may be issued to employees or independent contractors of DTS
Management or the Subsidiaries at prices equal to the market value thereof as of
the date of issuance and pursuant to such terms and conditions (including
vesting) as the Company shall determine. As of June 30, 1997, 96,500 Class D
Units have been issued pursuant to the Employee Unit Plan. Such Units will vest
25% annually commencing March 1998 through May 2001, subject to acceleration
under certain circumstances.
DISTRIBUTIONS
Tax Distributions: The Company intends to pay cash distributions in
amounts approximately equal to the income tax liabilities of the members
resulting from the pass-through of taxable income to the members ("Tax
Distributions"). Tax Distributions will be made quarterly.
F-24
<PAGE> 147
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Interim Distributions: The holders of the Class A Units are entitled
to a cumulative compounded annual rate of return equal to 8% applied to their
Class A Capital (defined as the aggregate capital contributions of holders of
Class A Units, less aggregate distributions in return of such capital) (the
"Preferred Return").
Once the holders of Class A Units have received their Preferred Return, the
holders of the Class A and Class B Units are entitled to distributions in
proportion to such units held by them until they have received cumulative
distributions equal to $10 per such unit. Distributions are then made to the
holders of the Class A Units, Class B Units, and Class C Units in proportion to
such Units held by them until they have received cumulative distributions equal
to $12.50 per such unit. Finally, distributions are made to all members in
proportion to the number of units held.
Class A Unit Liquidation Preference and Dissolution Rights: Upon the
dissolution of the Company after distributions are made to the Company's
creditors in satisfaction of liabilities of the Company, distributions in
liquidation are made first to the holders of the Class A Units in an amount
equal to the remaining balance of their Class A capital and accumulated unpaid
Preferred Return. Any remaining amounts available for distribution to the
members are distributed in the same manner as interim distributions.
If, after February 6, 2003, $7.5 million or more of the Class A capital
remains unreturned, then upon the vote of the holders of at least a majority of
the Class A Units, the Company shall be dissolved. If such a dissolution will
result in an event of default under any existing indebtedness of the Company or
any of the Company's subsidiaries with an outstanding balance of $10 million or
more, then such a vote will not cause the dissolution of the Company but,
rather, will be considered a notice by the holders of the Class A Units to the
Company that the holders desire that the Company promptly arrange for the sale
of the Company (including its subsidiaries) or sale of substantially all of its
assets.
ALLOCATIONS
Losses are first allocated (the "Initial Losses") to the members in
proportion to their units until the cumulative losses allocated equal the
cumulative prior allocations of profits, next (the "Additional Losses") to the
holders of Class B Units (and to the holders of Class C and Class D Units to the
extent that they may have positive capital accounts) in proportion to such units
until their capital account balances are reduced to zero, and finally (the
"Final Losses") to the holders of the Class A Units in proportion to such units
until their capital account balances are reduced to zero.
Profits are first allocated to the holders of Class A Units in proportion
to their units until the cumulative profits allocated equal the cumulative prior
allocations of the Final Losses, next to the holders of Class B Units (and to
the holders of Class C Units and Class D Units if they have been allocated
Additional Losses) until the cumulative profits allocated equal the cumulative
prior allocation of the Additional Losses, next to the holders of Class A Units
in proportion to such units until the cumulative profits allocated equal the
cumulative distributions of the Preferred Return, and next to the holders of
Class B Units and Class C Units in proportion to such units until the cumulative
amount allocated equals the cumulative distributions with respect to Class B
Units and Class C Units. All remaining profits are allocated to the members in
accordance with their relative total units.
CORPORATE CONVERSIONS
Under the Company's LLC Agreement, DTS Management, the sole manager of the
Company, has the authority to convert the Company from a Delaware limited
liability company into a Delaware corporation in connection with the
consummation of a qualified initial public offering ("Qualified IPO"). In such a
case, all of the equity interests of the Company would be converted into common
stock in amounts specified in the LLC Agreement. DTS Management also has
authority to convert the Company from a Delaware limited liability company to a
Delaware corporation other than in connection with the consummation of a
Qualified IPO. In such
F-25
<PAGE> 148
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
case, the Class A Units would be converted into convertible payment-in-kind
preferred stock and the other units would be converted into common stock in
amounts specified in the LLC Agreement.
8. EMPLOYEE BENEFITS
EMPLOYMENT AGREEMENTS
DTS Management has entered into employment agreements with certain
executive officers of DTS Management (the "Employment Agreements"). The initial
term of the Employment Agreements are one year, with automatic extensions of one
year unless terminated by DTS Management or the executive. The Employment
Agreements provide for base salaries and bonuses at the discretion of the board
of managers of DTS Management.
Pursuant to the Employment Agreements, the Company issued the executives an
aggregate of 87,049 Class C Units, which vest based on the Company's reaching
defined numbers of subscribers and/or on defined vesting dates. Any units not
vested at the earlier of (i) the date on which the Company completes an initial
public offering; (ii) the date upon which Columbia and its officers, directors,
stockholders and employees cease to own, directly or indirectly, in the
aggregate at least 50% of the equity interests of the Company held by them on
November 19, 1996; or (iii) March 31, 1998 shall become fully vested and cease
to be restricted so long as the executive has remained employed by DTS
Management through such date. No value was assigned to the Class C Units on the
date of grant due to the subordinated nature of any distributions which may be
made to such units (Note 7).
The Employment Agreements also permit the executives to purchase Class B
Units at a price of $10 per unit. Pursuant to rights under the Employment
Agreements and the Company's LLC Agreement, the executives have purchased an
aggregate of 100,500 Class B Units through June 30, 1997.
The Employment Agreements provide that the Company has the option to
repurchase all of the Class C Units held by an executive which have vested and
all of the Class B Units held by an executive if the executive's employment is
terminated voluntarily or with cause (as defined) prior to April 1, 1998. At
such time, all unvested Class C Units of the executive shall be forfeited. If
the executive is terminated for any reason other than cause, the executive's
Class C Units will become fully vested and unrestricted.
Simultaneous with the execution of the Employment Agreements, the subject
executive officers also entered into loan agreements with Columbia for an
aggregate of $430,000 to fund a portion of the equity purchases by the
executives. The loans bear interest at 10% per annum and mature on the earlier
of April 1, 2001 or receipt by the executive of proceeds from the sale of the
purchased units. The loans are secured by a portion of the executive's purchased
Class B Units.
DIGITAL TELEVISION SERVICES 401(K) PLAN
In January 1997, the Company established the Digital Television Services
401(k) Plan (the "Plan") covering all of its employees. As part of the Plan, the
Company provides matching contributions of 20% of the participant's
contributions up to a maximum of 5% of the participant's pay. The Plan also
provides for additional contributions at the discretion of the Company. The
Company incurs the cost of administering this plan.
9. RELIANCE ON DIRECTV AND THE NRTC AND OTHER MATTERS
The NRTC has contracted with third parties to provide the NRTC members with
certain services, including billing services and centralized remittance
processing services. The NRTC bills the Company for these services on a monthly
basis. These fees are recorded as service fees in the accompanying statement of
operations. The NRTC also sells DSS(R) equipment to its members.
F-26
<PAGE> 149
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Because the Company is, through the NRTC, a distributor of DIRECTV
Services, the Company would be adversely affected by any material adverse
changes in the assets, financial condition, programming, technological
capabilities or services of DirecTv or its parent corporation, Hughes
Communication Galaxy, Inc. ("Hughes"), including DirecTv's failure to retain or
renew its Federal Communication Commission ("FCC") licenses to transmit radio
frequency signals from the orbital slots occupied by its satellites.
The NRTC is a cooperative organization whose members are engaged in the
distribution of telecommunications and other services in predominantly rural
areas of the United States. Pursuant to an agreement between the NRTC and Hughes
(the "Hughes Agreement") and the NRTC Member Agreements, participating NRTC
members acquired the exclusive rights to provide DIRECTV Services to residential
and commercial subscribers in certain rural DirecTv markets. In general, upon
default by the NRTC under the Hughes Agreement, the Company would have the right
to acquire DIRECTV Services directly from DirecTv. The NRTC has contracted with
third parties to provide the NRTC members with certain services, including
billing services and centralized remittance processing services. If the NRTC is
unable to provide these services for whatever reason, the Company would be
required to acquire the services from other sources. There can be no assurance
that the cost to the Company to obtain these services elsewhere would not exceed
the amounts currently payable to the NRTC.
The Company would also be adversely affected by the termination of the NRTC
Member Agreements by the NRTC prior to the expiration of their respective terms.
If the NRTC Member Agreements are terminated by the NRTC, the Company would no
longer have the right to provide DIRECTV Services. There can be no assurance
that the Company would be able to obtain similar DBS services from other
sources.
Both the Hughes Agreement and the NRTC Member Agreements expire when Hughes
removes its current satellites from their assigned orbital locations. Although,
according to Hughes, the three DirecTv satellites have estimated orbital lives
of approximately 15 years from their respective launches in December 1993 and
1994, there can be no assurance as to the longevity of the satellites and thus
no assurance as to how long the Company will be able to continue to acquire DBS
services pursuant to the NRTC Member Agreements.
While the Company believes it will have access to DIRECTV Services
following the expiration of the current Hughes Agreement by virtue of the NRTC's
right of first refusal in the Hughes Agreement and the Company's existing
contractual and membership relationship with the NRTC, there can be no assurance
that such services will be available to the Company from Hughes or the NRTC,
and, if available, there can be no assurance with regard to the financial and
other terms under which the Company could acquire the services.
The Company's DBS business is a new business with a limited operating
history. There are numerous risks associated with satellite transmission
technology. There can be no assurance as to the longevity of the satellites or
that loss, damage, or changes in the satellites will not occur and have a
material adverse effect on DirecTv and the Company's DBS business.
DirecTv, and therefore the Company, is dependent on third parties to
provide high-quality programming that appeals to mass audiences. DirecTv's
programming agreements have terms which expire on various dates and have
different renewal and cancellation provisions. There can be no assurance that
any such agreements will be renewed or will not be canceled prior to expiration
of their original terms.
DBS operators, such as DirecTv, are free to set prices and serve
subscribers according to their business judgment, without rate of return and
other regulation. However, DirecTv is subject to the regulatory jurisdiction of
the FCC.
F-27
<PAGE> 150
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. SUBSEQUENT EVENTS
THE OFFERING
Subsequent to year-end, the Company sold, in a transaction exempt from
registration under the Securities Act, $155.0 million senior subordinated notes
(the "Private Notes") as described elsewhere in this Prospectus. The Notes are
the joint and several obligations of the Company and DTS Capital. DTS Capital
has nominal assets, does not conduct any operations and will not provide any
additional security for the Notes. DTS Capital was formed solely to provide a
corporate co-issuer in addition to a limited liability company issuer (the
Company). Accordingly, financial information for DTS Capital is not provided.
The Notes mature in 2007. The Company raised approximately $146.0 million, net
of underwriting discount and estimated expenses, through the issuance of the
Notes. The Company used the net proceeds to fund the Interest Escrow Account and
to repay outstanding indebtedness under the Company's Credit Facility (Note 5)
as described elsewhere in this Prospectus.
The Company plans to proceed with an offering (the "Exchange Offer") to
exchange the Private Notes with new senior subordinated notes (the "Exchange
Notes") registered under the Securities Act of 1933, as amended (the "Securities
Act"). The terms of the Exchange Notes will be identical in all material
respects (including principal amount, interest rate, maturity, security and
ranking) to the terms of the Private Notes (which they replace), except that the
Exchange Notes: (i) will bear a Series B designation, (ii) will have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer, and (iii) will not be entitled to certain
registration rights and certain liquidated damages which were applicable to the
Private Notes in certain circumstances under the Registration Rights Agreement.
The Exchange Notes will be unconditionally guaranteed, on a senior
subordinated basis, as to payment of principal, premium, if any, and interest,
jointly and severally, by all direct and indirect subsidiaries of DTS (the
"Guarantors"). The Guarantors consist of all of the subsidiaries of DTS, except
DTS Capital, which is a co-issuer of the Exchange Notes and has no separate
assets or operations. DTS does not have assets or operations apart from the
assets and operations of the subsidiaries. Accordingly, separate financial
information for the Guarantors is not provided.
RESTATED CREDIT FACILITY
The Company is a party to an Amended and Restated Credit Agreement dated as
of July 30, 1997 (the "Restated Credit Facility") by and among the Company, the
banks and other lenders party from time to time thereto (the "Lenders"), CIBC,
as Administrative Agent, CIBC Wood Gundy Securities Corp. ("CIBCWG"), as
Arranger, Morgan, as Syndication Agent, and Fleet, as Documentation Agent, which
provides for a revolving credit facility in the amount of $70.0 million, with a
$50.0 million sublimit for letters of credit, and a $20.0 million term loan
facility. The proceeds of the Restated Credit Facility may be used (i) to
refinance certain existing indebtedness, (ii) prior to December 31, 1998, to
finance the acquisition of certain Rural DirecTv Markets and related costs and
expenses, (iii) to finance capital expenditures of the Company and its
subsidiaries and (iv) for the general corporate purposes and working capital
needs of the Company and its subsidiaries.
The $20.0 million term loan facility must be drawn within 12 months of the
closing of the Restated Credit Facility and any amounts not so drawn by that
date will be cancelled. The term loan shall be repaid in 20 consecutive
quarterly installments of $200,000 each commencing September 30, 1998 with the
remaining balance due July 31, 2003. Borrowings under the revolving credit
facility established pursuant to the Restated Credit Facility will be available
to the Company until July 31, 2003; however, if the then unused portion of the
commitments exceeds $10.0 million on December 31, 1998, the commitments will be
reduced on such date by an amount equal to the unused portion of such
commitments minus $10.0 million. Thereafter, the commitments thereunder will
reduce quarterly commencing on September 30, 1999 at a rate of 3.50% through
1999, 5.75% in 2000, 7.0% in 2001, 9.0% in 2002 and 3.0% until June 30, 2003.
All of the loans outstanding will be repayable
F-28
<PAGE> 151
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on July 31, 2003. The making of each loan under the Restated Credit Facility is
subject to the satisfaction of certain conditions, including not exceeding a
certain "borrowing base" based on the number of paying subscribers and
households within the Rural DirecTv Markets served by the Company, maintaining
minimum subscriber penetration and Annualized Contribution (as defined therein)
per paying subscriber, and maintaining maximum ratio of total debt to equity and
a maximum ratio of total debt to annualized operating cash flow and a ratio of
senior debt to annualized operating cash flow. In addition, the Restated Credit
Facility provides that the Company will be required to make mandatory
prepayments of the Restated Credit Facility from, subject to certain exceptions,
the net proceeds of certain sales or other dispositions by the Company or any of
its subsidiaries of material assets and with 50% of any excess operating cash
flow with respect to any fiscal year after the fiscal year ending December 31,
1998.
Borrowings by the Company under the Restated Credit Facility are
unconditionally guaranteed by each of the Company's direct and indirect
subsidiaries, and such borrowings are secured by (i) an equal and ratable pledge
of all of the equity interests in the Company's subsidiaries, (ii) a first
priority security interest in all of their assets, and (iii) a collateral pledge
of the Company's NRTC Member Agreements.
The Restated Credit Facility provides that the Company may elect that all
or a portion of the borrowings under the Restated Credit Facility bear interest
at a rate per annum equal to either (i) the CIBC Alternate Base Rate plus the
Applicable Margin or (ii) the Eurodollar Rate plus the Applicable Margin. When
applying the CIBC Alternate Base Rate with respect to borrowings pursuant to the
revolving credit facility, the Applicable Margin will be (w) 2.25% per annum
(when the Leverage Ratio (as defined in the Credit Facility) is greater than or
equal to 6.75 to 1.00), (x) 2.00% (when the Leverage Ratio is less than 6.75 to
1.00 but greater than or equal to 6.25 to 1.00), (y) 1.50% (when the Leverage
Ratio is less than 6.25 to 1.00 but greater than or equal to 5.75 to 1.00) or
(z) 1.25% (when the Leverage Ratio is less than 5.75 to 1.00). When applying the
Eurodollar Rate with respect to borrowings pursuant to the revolving credit
facility, Applicable Margin will be (w) 3.50% per annum (when the Leverage Ratio
is greater than or equal to 6.75 to 1.00), (x) 3.25% (when the Leverage Ratio is
less than 6.75 to 1.00 but greater than or equal to 6.25 to 1.00), (y) 2.75%
(when the Leverage Ratio is less than 6.25 to 1.00 but greater than or equal to
5.75 to 1.00) or (z) 2.50% (when the Leverage Ratio is less than 5.75 to 1.00).
The Applicable Margin for borrowings pursuant to the term loan facility will be
the Applicable Margin for borrowings pursuant to the revolving credit facility,
plus 0.25%. As used herein, "CIBC Alternate Base Rate" means the higher of (i)
CIBC's prime rate and (ii) the federal funds effective rate from time to time
plus 1/2% per annum. As used herein, "Eurodollar Rate" means the rate at which
eurodollar deposits for one, two, three and six months (as selected by the
Company) are offered to CIBC in the interbank eurodollar market. The Restated
Credit Facility will also provide that at any time when the Company is in
default in the payment of any amount due thereunder, the principal of all loans
made under the Restated Credit Facility will bear interest at 2% per annum above
the rate otherwise applicable thereto and overdue interest and fees will bear
interest at a rate of 2% per annum over the CIBC Alternative Base Rate.
The Restated Credit Facility will also contain a number of significant
covenants that, among other things, limit the ability of the Company and its
subsidiaries to incur additional indebtedness and guaranty obligations, create
liens and other encumbrances, make certain payments, investments, loans and
advances, pay dividends or make other distributions in respect of its equity
interests, sell or otherwise dispose of assets, make capital expenditures, merge
or consolidate with another entity, make amendments to its organizational
documents or transact with affiliates. In addition, the Restated Credit Facility
will require the maintenance of certain specified financial and operating
covenants, including minimum interest coverage ratios and limits on general and
administrative expenses as a percentage of revenue.
The Company will pay a commitment fee on the unused amounts under the
Restated Credit Facility calculated at 0.5% per annum, payable quarterly in
arrears.
F-29
<PAGE> 152
DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pursuant to a recent amendment to the NRTC Member Agreements, the Company
and all other NRTC Members whose monthly obligations to the NRTC have exceeded
$500,000 in the past six months are required to keep and maintain in full force
and effect a standby letter of credit in favor of the NRTC to secure their
respective payment obligations to the NRTC under the NRTC Member Agreements. The
amount of the letter of credit issued at the request of the Company pursuant to
the Restated Credit Facility, is equal to three times the Company's single
largest monthly invoice from the NRTC, exclusive of amounts payable for DSS(R)
equipment purchased by the Company from the NRTC, or $6.3 million, and must be
increased as the Company makes additional acquisitions of Rural DirecTv Markets
and when the Company's obligations to the NRTC exceed the amount of the original
letter of credit by 167%.
NRTC MEMBER AGREEMENTS
Pursuant to a recent amendment to the NRTC Member Agreements, the Company
and all other NRTC Members whose monthly obligations to the NRTC have exceeded
$500,000 in the past six months are required to keep and maintain in full force
and effect a standby letter of credit in favor of the NRTC to secure their
respective payment obligations to the NRTC under the NRTC Member Agreements. The
initial amount of the letter of credit issued at the request of the Company will
be equal to three times the Company's single largest monthly invoice from the
NRTC, exclusive of amounts payable for DSS(R) equipment purchased by the Company
from the NRTC, and must be increased as the Company makes additional
acquisitions of Rural DirecTv Markets and when the Company's obligations to the
NRTC exceed the amount of the original letter of credit by 167%. This letter of
credit to the NRTC was issued pursuant to the Existing Credit Facility in May
1997 and has an initial stated amount of approximately $6.3 million.
EMPLOYEE UNIT PLAN
Subsequent to June 30, 1997, the Company issued to certain employees an
additional 7,500 Class D Units pursuant to the Employee Unit Plan. Class D Units
are not entitled to vote on any matter.
PRO FORMA INFORMATION (UNAUDITED)
See pages F-3 through F-8 elsewhere in this Offering Memorandum for
condensed pro forma information which includes the effects of the 1996
Acquisitions, the Restated Credit Facility, the 1997 Acquisitions, the Pending
Acquisitions, the 1997 Equity, and the Offering as if each transaction had
occurred on January 1, 1996 and January 1, 1997 (for pro forma statement of
operations purposes) or June 30, 1997 (for pro forma balance sheet purposes).
F-30
<PAGE> 153
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Direct Programming
Services Limited Partnership:
We have audited the accompanying balance sheets of DIRECT PROGRAMMING
SERVICES LIMITED PARTNERSHIP (a Kentucky limited partnership) as of December 31,
1995 and 1996 and the related statements of operations, changes in partners'
capital, and cash flows for the years ended December 31, 1994, 1995 and 1996.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Direct Programming Services
Limited Partnership as of December 31, 1995 and 1996 and the results of its
operations and its cash flows for the years ended December 31, 1994, 1995 and
1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 21, 1997
F-31
<PAGE> 154
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 242,260 $ 176,280
Trade accounts receivable, net of allowances for doubtful
accounts of $50,000 and $123,574 at December 31, 1995
and 1996, respectively................................. 483,559 1,166,657
Inventory................................................. 33,715 89,007
Other, net (Note 2)....................................... 5,506 487,604
---------- ----------
Total current assets.............................. 765,040 1,919,548
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements.................................... -- 68,474
Furniture and equipment................................... 138,959 197,070
---------- ----------
138,959 265,544
Less accumulated depreciation.......................... (34,385) (59,939)
---------- ----------
104,574 205,605
---------- ----------
CONTRACT RIGHTS AND OTHER ASSETS (Note 2)................... 4,586,544 4,168,753
---------- ----------
$5,456,158 $6,293,906
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable.......................................... $ 582,133 $ 676,132
Accrued liabilities....................................... 228,099 625,049
Unearned revenue.......................................... 337,742 1,219,798
Current maturities of long-term debt and obligations under
capital leases......................................... 95,393 19,498
---------- ----------
Total current liabilities......................... 1,243,367 2,540,477
---------- ----------
OTHER LIABILITIES........................................... 51,850 191,207
---------- ----------
LONG-TERM DEBT and obligations under capital leases,
less current maturities................................... 19,498 --
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, and 5)
PARTNERS' CAPITAL:
General Partner........................................... 690,620 519,071
Limited Partners.......................................... 3,450,823 3,043,151
---------- ----------
Total partners' capital........................... 4,141,443 3,562,222
---------- ----------
$5,456,158 $6,293,906
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-32
<PAGE> 155
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ---------- ----------
<S> <C> <C> <C>
REVENUE:
Programming revenue................................. $ 342,843 $3,645,040 $7,216,027
Equipment and installation revenue.................. 79,821 764,338 56,536
----------- ---------- ----------
Total revenue............................... 422,664 4,409,378 7,272,563
----------- ---------- ----------
COST OF REVENUE:
Programming expense................................. 187,725 1,528,547 3,454,540
Cost of equipment and installation.................. 111,064 714,753 20,891
Service fees........................................ 43,637 363,499 769,426
----------- ---------- ----------
Total cost of revenue....................... 342,426 2,606,799 4,244,857
----------- ---------- ----------
GROSS PROFIT.......................................... 80,238 1,802,579 3,027,706
----------- ---------- ----------
OPERATING EXPENSES:
Sales and marketing................................. 24,183 663,578 622,129
General and administrative.......................... 633,566 1,437,885 1,973,947
Depreciation and amortization....................... 426,847 583,034 591,738
----------- ---------- ----------
Total operating expenses.................... 1,084,596 2,684,497 3,187,814
----------- ---------- ----------
OPERATING LOSS........................................ (1,004,358) (881,918) (160,108)
----------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense.................................... (4,286) (19,003) (8,865)
Other income........................................ 16,888 30,815 39,752
----------- ---------- ----------
12,602 11,812 30,887
----------- ---------- ----------
NET LOSS.............................................. $ (991,756) $ (870,106) $ (129,221)
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-33
<PAGE> 156
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
---------- ----------- -----------
<S> <C> <C> <C>
BALANCE, December 31, 1993............................... $1,001,102 $ 4,902,203 $ 5,903,305
Partner contributions.................................. -- 100,000 100,000
Net loss............................................... (165,384) (826,372) (991,756)
---------- ----------- -----------
BALANCE, December 31, 1994............................... 835,718 4,175,831 5,011,549
Net loss............................................... (145,098) (725,008) (870,106)
---------- ----------- -----------
BALANCE, December 31, 1995............................... 690,620 3,450,823 4,141,443
Partnership distribution............................... (150,000) (300,000) (450,000)
Net loss............................................... (21,549) (107,672) (129,221)
---------- ----------- -----------
BALANCE, December 31, 1996............................... $ 519,071 $(3,043,151) $ 3,562,222
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-34
<PAGE> 157
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
--------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(991,756) $ (870,106) $(129,221)
--------- ---------- ---------
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:......................
Depreciation and amortization.......................... 426,847 583,034 591,738
Changes in operating assets and liabilities:...........
Trade accounts receivable, net....................... (130,660) (161,061) (683,098)
Inventory............................................ (129,395) 95,680 (55,292)
Other, net........................................... (794) (4,712) (482,098)
Accounts payable..................................... 252,570 324,628 93,999
Accrued liabilities.................................. 354,494 (126,395) 396,950
Unearned revenue..................................... 49,000 288,742 882,056
--------- ---------- ---------
Total adjustments................................. 822,062 999,916 744,255
--------- ---------- ---------
Net cash (used in) provided by operating
activities...................................... (169,694) 129,810 615,034
--------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net.................. (40,094) (58,375) (135,621)
--------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line of credit.......... -- 70,000 (70,000)
Proceeds from long-term debt.............................. -- 22,000 --
Repayments on long-term debt and obligations under capital
leases................................................. (3,776) (10,783) (25,393)
Partnership contributions................................. 100,000 -- --
Partnership distributions................................. -- -- (450,000)
--------- ---------- ---------
Net cash provided by (used in) financing
activities...................................... 96,224 81,217 (545,393)
--------- ---------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (113,564) 152,652 (65,980)
CASH AND CASH EQUIVALENTS at beginning of year.............. 203,172 89,608 242,260
--------- ---------- ---------
CASH AND CASH EQUIVALENTS at end of year.................... $ 89,608 $ 242,260 $ 176,280
========= ========== =========
SUPPLEMENTAL NONCASH FINANCING ACTIVITY:
NRTC patronage capital declared........................... $ -- $ 51,850 $ 139,357
========= ========== =========
Capital lease obligations incurred........................ $ 30,665 $ 6,785 $ --
========= ========== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 4,286 $ 19,003 $ 8,866
========= ========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-35
<PAGE> 158
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
1. ORGANIZATION AND NATURE OF BUSINESS
Direct Programming Services Limited Partnership (the "Partnership") is a
limited partnership organized in Kentucky. The Partnership was formed on January
6, 1993 to acquire and operate rights to distribute direct broadcast satellite
("DBS") services ("DIRECTV Services") offered by DirecTv, Inc. ("DirecTv").
The term of the Partnership is through December 31, 2042, unless terminated
sooner. The Partnership has a General Partner in addition to its Limited
Partners. The Limited Partners may not take part in the management of the
Partnership and are not liable for any debts, obligations or losses of the
Partnership in excess of their capital contributions and their shares of the
undistributed profits. The interest of the Limited Partners was divided into 60
units, each of which required a capital contribution of $100,000. Contributed
capital of the General Partner was $1,000,000. The ownership interests of the
Partnership at December 31, 1996 is as follows: General Partner, 14.71%; Limited
Partner, 85.29%.
The partnership agreement provides that net losses are allocated to the
General and Limited Partners in accordance with their respective percentage
interests; however, no net losses will be allocated to a Limited Partner in
excess of the balance of the Limited Partner's capital account. Such net losses
would be allocated to the General Partner. Net income is allocated first to the
General Partner until such time as net income specifically allocated to the
General Partner equals the net losses allocated to the General Partner, then 20%
to the General Partner and 80% to the General and Limited Partners in accordance
with their respective percentage interests.
The Partnership obtained the rights to distribute DIRECTV Services in
certain rural markets in Kentucky pursuant to agreements (the "NRTC Member
Agreements") with the National Rural Telecommunications Cooperative ("NRTC") in
exchange for approximately $5.4 million.
In October 1996, the Partnership entered into an asset purchase agreement
(the "Agreement") with Digital Television Services of Kentucky, LLC ("DTS
Kentucky"), a subsidiary of DTS Management, LLC ("DTS"). DTS is a subsidiary of
Digital Television Services, LLC. The Agreement provides that DTS Kentucky will
purchase the Partnership's NRTC Member Agreement and other assets used in
connection with the Partnership's business, as defined in the Agreement, and
will assume certain liabilities of the Partnership, as defined in the Agreement.
The purchase price is subject to an adjustment for working capital at the date
of closing of the Agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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.
REVENUE RECOGNITION
The Partnership earns programming revenue by providing DIRECTV Services to
its subscribers. Programming revenue includes DIRECTV Services purchased by
subscribers in monthly, quarterly, or annual subscriptions; additional premium
programming available on an a la carte basis; sports programming available under
monthly, annual or seasonal subscriptions; and movies and events programming
available on a pay-per-view basis. Programming purchased on a monthly,
quarterly, annual or seasonal basis, including premium programming, is billed in
advance and recorded as unearned revenue. All programming revenue is recognized
when earned.
F-36
<PAGE> 159
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Equipment and installation revenue primarily consists of the sale of DSS(R)
equipment and accessories and related installation charges. Equipment sales
revenue is recognized upon delivery of the equipment to the customer.
Installation revenue is recognized when the equipment is installed.
COST OF REVENUES
Cost of revenues includes the cost associated with providing DIRECTV
Services to the Partnership's subscribers. These costs include the direct
wholesale cost of purchasing related programming from DirecTv (through the NRTC
[Note 5]); monthly subscriber maintenance fees charged by DirecTv, such as
security fees, ground service fees, system authorization fees, and fees for
subscriber billings; costs of equipment sold; and certain subscriber operating
costs.
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The carrying amount
approximates fair value due to the relatively short period to maturity of these
instruments.
INVENTORIES
The Partnership maintains inventories consisting of DSS(R) equipment and
related accessories. Inventory is valued at the lower of cost or market,
generally on a specific identification basis.
OTHER CURRENT ASSETS
Other current assets consist of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Deferred promotional costs, net.......................... $ -- $484,957
Other.................................................... 5,506 2,647
------ --------
$5,506 $487,604
====== ========
</TABLE>
Deferred promotional costs consist of costs related to a subscriber rebate
program sponsored by DirecTv. Under the program, new subscribers who agree to
prepay for one year of programming service receive a credit which can be applied
toward equipment or programming. The Partnership defers the cost of this credit
and amortizes it over the one-year contract period. In addition, as a part of
this program, the Partnership receives $1 per month for up to five years from
the NRTC for each subscriber whose account remains active. Such amounts are
recorded as a reduction in selling expenses in the accompanying statements of
operations.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major property additions,
replacements, and betterments are capitalized, while maintenance and repairs
which do not extend the useful lives of these assets are expensed currently.
Depreciation for property and equipment is provided using the straight-line
method over the estimated useful lives of the respective assets, ranging from
three to seven years. Depreciation expense for the years ended December 31,
1994, 1995 and 1996 was $8,642, $25,428 and $34,590, respectively. Upon
retirement or disposal of assets, the cost and related accumulated depreciation
are removed from the balance sheet and any gain or loss is reflected in
earnings.
F-37
<PAGE> 160
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CONTRACT RIGHTS AND OTHER ASSETS
Contract rights and other assets consist of the following at December 31,
1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Contract rights..................................... $5,434,948 $5,434,948
Organization costs.................................. 70,557 70,557
---------- ----------
5,505,505 5,505,505
Accumulated amortization............................ (975,811) (1,532,959)
---------- ----------
4,529,694 3,972,546
NRTC patronage capital.............................. 51,850 191,207
Other............................................... 5,000 5,000
---------- ----------
$4,586,544 $4,168,753
========== ==========
</TABLE>
Contract Rights: Contract rights represent the cost of acquiring rights to
distribute DIRECTV Services. Contract rights are being amortized over ten years,
the estimated remaining useful life of the satellites operated by DirecTv which
provide service under the related contracts. Amortization expense, included in
depreciation and amortization on the accompanying statements of operations, for
the years ended December 31, 1994, 1995 and 1996 was $407,621, $543,495 and
$543,495, respectively. Accumulated amortization at December 31, 1995 and 1996
was $951,116 and $1,494,611, respectively.
Organization Costs: Organization costs are costs associated with the
formation of the Partnership and are being amortized over five years.
Amortization expense, included in depreciation and amortization on the
accompanying statements of operations, for the years ended December 31, 1994,
1995 and 1996 was $10,584, $14,111, and $13,653. Accumulated amortization at
December 31, 1995 and 1996, was $24,695 and $38,348.
NRTC Patronage Capital: The Partnership is an affiliate of the NRTC. While
affiliates have no vote, they do have an interest in the NRTC in proportion to
their prior patronage. NRTC patronage capital represents the non-cash portion of
NRTC patronage income. Under its bylaws, the NRTC declares a patronage dividend
of its excess of revenues over expenses each year. Of the total patronage
dividend, 20% is paid in cash and recognized as income when received and is
netted against programming expense in the accompanying statements of operations.
The remaining 80% is distributed in the form of non-cash patronage capital,
which will be redeemed in cash only at the discretion of the NRTC. The
Partnership includes non-cash patronage capital as other assets, with an
offsetting deferred patronage income amount included in other liabilities on the
accompanying balance sheets. The patronage capital will be recognized as income
when cash distributions are declared by the NRTC.
ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Accrued commissions................................. $ 148,460 $ 153,907
Accrued service fees................................ 59,224 108,788
Other............................................... 20,415 362,354
---------- ----------
$ 228,099 $ 625,049
========== ==========
</TABLE>
F-38
<PAGE> 161
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
The Partnership is not considered a taxable entity for federal and state
income tax purposes. All taxable income or loss is allocated to the partners in
accordance with the terms of the partnership agreement. Accordingly, no
provision for income taxes is included in the accompanying financial statements.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk with respect to accounts receivable is limited
due to the large number of subscribers. As a result, at December 31, 1996,
management does not believe any significant concentration of credit risk exists.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. When
events or changes in circumstances occur related to long-lived assets,
management estimates the future cash flows expected to result from the use of
the asset and its eventual disposition. Having found no instances whereby the
sum of expected future cash flows (undiscounted and without interest charges)
was less than the carrying amount of the asset and thus requiring the
recognition of an impairment loss, management believes that the long-lived
assets in the accompanying balance sheets are appropriately valued.
3. COMMITMENTS AND CONTINGENCIES
LEASES
The Partnership leases office and warehouse space under cancelable leases
and certain equipment under noncancelable operating leases which expire through
1998. Future minimum lease payments for noncancelable operating leases in effect
at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................ $5,520
1998........................................................ 2,300
------
Total future minimum lease payments............... $7,820
======
</TABLE>
Rental expense charged to general and administrative expenses in the
accompanying statements of operations for the years ended December 31, 1994,
1995 and 1996 totaled $11,218, $46,739 and $68,705, respectively.
MINIMUM SUBSCRIBERS
As part of the NRTC Member Agreements, the Partnership is required to pay
certain fees based on a minimum number of subscribers beginning in the fourth
year of operations of the NRTC Member Agreement. The Partnership had achieved
the minimum subscriber requirement at December 31, 1996.
LITIGATION
The Partnership is involved in certain litigation arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
these matters will not have a material adverse effect on the Partnership's
financial position and results of operations.
F-39
<PAGE> 162
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT
In September 1994, the Partnership obtained a line of credit from a bank in
the amount of $400,000. Borrowings under this line of credit were $70,000 at
December 31, 1995. Amounts due under the line of credit were repaid during 1996
and the line of credit is no longer outstanding. The Partnership also had notes
payable and obligations under capital leases of $18,029 and $26,873,
respectively, outstanding at December 31, 1995. The notes payable were repaid
during 1996 and $19,498 remained outstanding under the capital leases. The
capital leases accrued interest at 11.07% at December 31, 1996 and were repaid
subsequent to year-end. The carrying amount of long-term debt approximates fair
value based on borrowing rates available to the Partnership.
5. RELIANCE ON DIRECTV AND THE NRTC AND OTHER MATTERS
The NRTC has contracted with third parties to provide the NRTC members with
certain services, including billing services and centralized remittance
processing services. The NRTC bills the Company for these services on a monthly
basis. These fees are recorded as service fees on the accompanying statements of
operations. The NRTC also sells DSS(R) equipment to its members.
Because the Partnership is, through the NRTC, a distributor of DIRECTV
Services, the Partnership would be adversely affected by any material adverse
changes in the assets, financial condition, programming, technological
capabilities or services of DirecTv or its parent corporation, Hughes
Communication Galaxy, Inc. ("Hughes"), including DirecTv's failure to retain or
renew its Federal Communication Commission (the "FCC") licenses to transmit
radio frequency signals from the orbital slots occupied by its satellites.
The NRTC is a cooperative organization whose members are engaged in the
distribution of telecommunications and other services in predominantly rural
areas of the United States. Pursuant to an agreement between the NRTC and Hughes
(the "Hughes Agreement"), and the NRTC Member Agreements, participating NRTC
members acquired the exclusive rights to provide DIRECTV Services to residential
and commercial subscribers in certain rural DirecTv markets. In general, upon
default by the NRTC under the Hughes Agreement, the Partnership would have the
right to acquire DIRECTV Services directly from DirecTv. The NRTC has contracted
with third parties to provide the NRTC members with certain services, including
billing services and centralized remittance processing services. If the NRTC is
unable to provide these services for whatever reason, the Partnership would be
required to acquire the services from other sources. There can be no assurance
that the cost to the Partnership to obtain these services elsewhere would not
exceed the amounts currently payable to the NRTC.
The Partnership would also be adversely affected by the termination of the
NRTC Member Agreements by the NRTC prior to the expiration of their respective
terms. If the NRTC Member Agreements are terminated by the NRTC, the Partnership
would no longer have the right to provide DIRECTV Services. There can be no
assurance that the Partnership would be able to obtain similar DBS services from
other sources.
Both the Hughes Agreement and the NRTC Member Agreements expire when Hughes
removes its current satellites from their assigned orbital locations. Although,
according to Hughes, the three DirecTv satellites have estimated orbital lives
of approximately 15 years from their respective launches in December 1993 and
1994, there can be no assurance as to the longevity of the satellites and thus
no assurance as to how long the Partnership will be able to continue to acquire
DBS services pursuant to the NRTC Member Agreements.
While the Partnership believes that it will have access to DIRECTV Services
following the expiration of the current Hughes Agreement by virtue of the NRTC's
right of first refusal in the Hughes Agreement and the Partnership's existing
contractual and membership relationship with the NRTC, there can be no assurance
that such services will be available to the Partnership from Hughes or the NRTC;
and, if available, there can be no assurance with regard to the financial and
other terms under which the Partnership could acquire the services.
The Partnership's DBS business is a new business with a limited operating
history. There are numerous risks associated with satellite transmission
technology. There can be no assurance as to the longevity of the satellites or
F-40
<PAGE> 163
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
that loss, damage, or changes in the satellites will not occur and have a
material adverse effect on DirecTv and the Partnership's DBS business.
DirecTv, and therefore the Partnership, is dependent on third parties to
provide high quality programming that appeals to mass audiences. DirecTv's
programming agreements have terms which expire on various dates and different
renewal and cancellation provisions. There can be no assurance that any such
agreements will be renewed or will not be canceled prior to expiration of their
original terms.
DBS operators, such as DirecTv, are free to set prices and serve
subscribers according to their business judgment, without rate of return and
other regulation. However, DirecTv is subject to the regulatory jurisdiction of
the FCC.
F-41
<PAGE> 164
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of Kansas DBS, L.L.C.:
We have audited the accompanying balance sheets of KANSAS DBS, L.L.C. (a
Kansas limited liability company) as of December 31, 1995 and 1996 and the
related statements of operations and changes in accumulated deficit, and cash
flows for the years ended December 31, 1995, and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Kansas DBS, L.L.C. as of
December 31, 1995 and 1996 and the results of its operations and its cash flows
for the years ended December 31, 1995, and 1996 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 21, 1997
F-42
<PAGE> 165
KANSAS DBS, L.L.C.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 89,436 $ 462,263
Trade accounts receivable, net of allowances of $24,873
and $29,426 at December 31, 1995 and 1996,
respectively........................................... 246,166 417,973
Current portion of lease receivables, net of allowances of
$16,635 and $54,732, at December 31, 1995 and 1996,
respectively........................................... 129,609 63,316
Inventory................................................. 332,114 191,891
Other..................................................... 25,373 254,773
----------- -----------
Total current assets.............................. 822,698 1,390,216
----------- -----------
LEASE RECEIVABLES, net of current portion................... 383,392 320,428
----------- -----------
PROPERTY AND EQUIPMENT, at cost:
Vehicles.................................................. 42,238 32,537
Showroom and demonstration equipment...................... 108,792 54,953
Furniture, fixtures, and equipment........................ 78,141 80,090
----------- -----------
229,171 167,580
Less accumulated depreciation.......................... (73,424) (67,918)
----------- -----------
155,747 99,662
----------- -----------
CONTRACT RIGHTS AND OTHER ASSETS (Note 2)................... 2,224,834 2,017,828
----------- -----------
$ 3,586,671 $ 3,828,134
=========== ===========
LIABILITIES AND ACCUMULATED DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 200,241 $ 347,522
Accrued liabilities....................................... 175,172 170,489
Book overdraft............................................ 243,614 --
Unearned revenue.......................................... 128,644 467,890
Current portion of long-term debt......................... 176,732 4,285,046
----------- -----------
Total current liabilities......................... 924,403 5,270,947
OTHER LIABILITIES........................................... 48,659 102,980
LONG-TERM DEBT.............................................. 3,723,012 --
COMMITMENTS AND CONTINGENCIES (Notes 2, 5, and 6)
ACCUMULATED DEFICIT......................................... (1,109,403) (1,545,793)
----------- -----------
$ 3,586,671 $ 3,828,134
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-43
<PAGE> 166
KANSAS DBS, L.L.C.
STATEMENTS OF OPERATIONS AND CHANGES IN ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
REVENUE:
Programming revenue....................................... $ 1,502,154 $ 3,156,791
Equipment and installation revenue........................ 1,580,245 1,036,929
----------- -----------
Total revenue..................................... 3,082,399 4,193,720
----------- -----------
COST OF REVENUE:
Programming expense....................................... 775,323 1,662,627
Cost of equipment and installation........................ 1,277,652 973,470
Service fees.............................................. 139,407 292,828
----------- -----------
Total cost of revenue............................. 2,192,382 2,928,925
----------- -----------
GROSS PROFIT................................................ 890,017 1,264,795
----------- -----------
OPERATING EXPENSES:
Sales and marketing....................................... 451,473 416,731
General and administrative................................ 770,296 798,060
Depreciation and amortization............................. 308,220 303,090
----------- -----------
Total operating expenses.......................... 1,529,989 1,517,881
----------- -----------
OPERATING LOSS.............................................. (639,972) (253,086)
OTHER INCOME (EXPENSE):
Interest expense.......................................... (240,403) (278,768)
Other income.............................................. 36,793 95,464
----------- -----------
(203,610) (183,304)
----------- -----------
NET LOSS.................................................... (843,582) (436,390)
ACCUMULATED DEFICIT, beginning of year...................... (402,218) (1,109,403)
CAPITAL CONTRIBUTION........................................ 136,397 --
----------- -----------
ACCUMULATED DEFICIT, end of year............................ $(1,109,403) $(1,545,793)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-44
<PAGE> 167
KANSAS DBS, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (843,582) $(436,390)
---------- ---------
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization.......................... 308,220 303,090
Amortization of deferred promotional costs............. -- 33,800
Changes in operating assets and liabilities:
Trade accounts receivable, net....................... (109,457) (171,807)
Inventory............................................ 387,218 140,223
Other................................................ 24,467 (225,103)
Accounts payable..................................... (266,202) 147,281
Accrued liabilities.................................. 84,636 (4,683)
Unearned revenue..................................... 27,711 339,246
---------- ---------
Total adjustments................................. 456,593 562,047
---------- ---------
Net cash (used in) provided by operating
activities...................................... (386,989) 125,657
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (46,009) (44,471)
Disposals of property and equipment....................... 52,808 58,793
Additions to lease receivables............................ (565,437) (186,973)
Collections of lease receivables.......................... 35,801 278,133
---------- ---------
Net cash (used in) provided by investing
activities...................................... (522,837) 105,482
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceed from long term debt............................... 4,349,920 550,000
Repayments of long term debt.............................. (3,813,085) (164,698)
Book overdraft............................................ 243,614 (243,614)
Capital contribution...................................... 136,397 --
---------- ---------
Net cash provided by financing activities......... 916,846 141,688
---------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 7,020 372,827
CASH AND CASH EQUIVALENTS at beginning of year.............. 82,416 89,436
---------- ---------
CASH AND CASH EQUIVALENTS at end of year.................... $ 89,436 $ 462,263
========== =========
SUPPLEMENTAL NONCASH FINANCING ACTIVITY:
NRTC patronage capital declared........................... $ 48,659 $ 54,321
========== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 190,590 $ 339,252
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-45
<PAGE> 168
KANSAS DBS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
1. ORGANIZATION AND NATURE OF BUSINESS
Kansas DBS, L.L.C. (the "Company") is a limited liability company organized
in Kansas. The Company was formed in September 1993 by five members of the NRTC
to acquire and operate rights to distribute direct broadcast satellite ("DBS")
services ("DIRECTV Services") offered by DirecTv, Inc. ("DirecTv").
The term of the Company is through October 2018, unless terminated sooner.
The operating agreement of the Company provides that distributions, profits, and
losses shall be allocated among the members in proportion to their respective
ownership percentages.
In October and November 1993, the Company obtained the rights to distribute
DIRECTV Services in certain markets in Kansas pursuant to agreements (the "NRTC
Member Agreements") with the National Rural Telecommunications Cooperative
("NRTC") in exchange for approximately $2.6 million.
In November 1996, the Company entered into an asset purchase agreement (the
"Agreement") with Digital Television Services of Kansas, LLC ("DTS Kansas"), a
subsidiary of DTS Management, LLC ("DTS"). DTS is a subsidiary of Digital
Television Services, LLC. The Agreement provides that DTS Kansas will purchase
the Company's NRTC Member Agreements and other assets used in connection with
the Company's business, as defined in the Agreement, and will assume certain
liabilities of the Company, as defined in the Agreement. The purchase price is
subject to an adjustment for working capital at the date of closing of the
Agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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.
REVENUE RECOGNITION
The Company earns programming revenue by providing DIRECTV Services to its
subscribers. Programming revenue includes DIRECTV Services purchased by
subscribers in monthly, quarterly, or annual subscriptions; additional premium
programming available on an a la carte basis; sports programming available under
monthly, annual, or seasonal subscriptions; and movies and events programming
available on a pay-per-view basis. Programming purchased on a monthly,
quarterly, annual, or seasonal basis, including premium programming, is billed
in advance and is recorded as unearned revenue. All programming revenue is
recognized when earned.
Equipment and installation revenue primarily consists of the sale of DSS(R)
equipment and accessories and related installation charges. Equipment sales
revenue is recognized upon delivery of the equipment to the customer.
Installation revenue is recognized when the equipment is installed.
COST OF REVENUES
Cost of revenues includes the cost associated with providing DIRECTV
Services to the Company's subscribers. These costs include the direct wholesale
cost of purchasing related programming from DirecTv (through the NRTC [Note 6]);
monthly subscriber maintenance fees charged by DirecTv, such as security fees,
ground service fees, system authorization fees, and fees for subscriber
billings; costs of equipment sold; and certain subscriber operating costs.
F-46
<PAGE> 169
KANSAS DBS, L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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
approximates fair value due to the relatively short period to maturity of these
instruments.
INVENTORIES
The Company maintains inventories consisting of DSS(R) equipment and
related accessories. Inventory is valued at the lower of cost or market,
generally on a specific identification basis.
OTHER CURRENT ASSETS
Other current assets consist of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Deferred promotional costs, net......................... $ -- $236,800
Other................................................... 25,373 17,973
------- --------
$25,373 $254,773
======= ========
</TABLE>
Deferred promotional costs consist of costs related to a subscriber rebate
program sponsored by DirecTv. Under the program, new subscribers who agree to
prepay for one year of programming service receive a credit which can be applied
toward equipment or programming. The Company defers the cost of credit and
amortizes it over the one-year contract period. In addition, as a part of this
program, the Company receives $1 per month for up to five years from the NRTC
for each subscriber whose account remains active. Such amounts are recorded as
received as a reduction in selling expenses in the accompanying statement of
operations and changes in accumulated deficit.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major property additions,
replacements, and betterments are capitalized, while maintenance and repairs
which do not extend the useful lives of these assets are expensed currently.
Depreciation for property and equipment is provided using the straight-line
method over the estimated useful lives of the respective assets, ranging from
three to seven years. Depreciation expense for the years ended December 31, 1995
and 1996 was $46,893 and $41,763, respectively. Upon retirement or disposal of
assets, the cost and related accumulated depreciation are removed from the
balance sheet and any gain or loss is reflected in earnings.
CONTRACT RIGHTS AND OTHER ASSETS
Contract rights and other assets consist of the following at December 31,
1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Contract rights..................................... $2,574,949 $2,574,949
Organization costs.................................. 16,659 16,659
---------- ----------
2,591,608 2,591,608
Accumulated amortization............................ (415,433) (676,760)
---------- ----------
2,176,175 1,914,848
NRTC patronage capital.............................. 48,659 102,980
---------- ----------
$2,224,834 $2,017,828
========== ==========
</TABLE>
F-47
<PAGE> 170
KANSAS DBS, L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Contract Rights: Contract rights represent the cost of acquiring rights to
distribute DIRECTV Services less net tangible assets acquired. Contract rights
are being amortized over ten years, the estimated remaining useful life of the
satellites operated by DirecTv which provide service under the related
contracts. Amortization expense, included in depreciation and amortization on
the accompanying statements of operations and changes in accumulated deficit,
for the years ended December 31, 1995 and 1996 was $257,995, and $257,995,
respectively. Accumulated amortization at December 31, 1995 and 1996 was
$408,492 and $666,487, respectively.
Organization Costs: Organization costs are costs associated with the
formation of the Company and are being amortized over five years. Amortization
expense, included in depreciation and amortization on the accompanying
statements of operations and changes in accumulated deficit, for the years ended
December 31, 1995 and 1996 was $3,332 and $3,332, respectively. Accumulated
amortization at December 31, 1995 and 1996 was $6,941 and $10,273, respectively.
NRTC Patronage Capital: The Company is a voting member of the NRTC with an
ownership interest in the NRTC in proportion to its prior patronage. NRTC
patronage capital represents the noncash portion of NRTC patronage income. Under
its bylaws, the NRTC declares a patronage dividend of its excess of revenues
over expenses each year. Of the total patronage dividend, 20% is paid in cash
and recognized as income when received and is netted against programming expense
in the accompanying statements of operations and changes in accumulated deficit.
The remaining 80% is distributed in the form of noncash patronage capital, which
will be redeemed in cash only at the discretion of the NRTC. The Company
includes noncash patronage capital as other assets, with an offsetting deferred
patronage income amount included in other liabilities in the accompanying
balance sheets. The patronage capital will be recognized as income when cash
distributions are declared by the NRTC.
ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Accrued interest...................................... $ 60,484 $ --
Accrued NRTC programming costs and service fees....... 72,430 41,107
Other................................................. 42,258 129,382
-------- --------
$175,172 $170,489
======== ========
</TABLE>
INCOME TAXES
The Company is not considered a taxable entity for federal and state income
tax purposes. All taxable income or loss is allocated to the members in
accordance with the terms of the Company's operating agreement. Accordingly, no
provision for income taxes is included in the accompanying financial statements.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk with respect to accounts receivable is limited
due to the large number of subscribers. As a result, at December 31, 1996,
management does not believe any significant concentration of credit risk exists.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. When
events or changes in circumstances occur
F-48
<PAGE> 171
KANSAS DBS, L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
related to long-lived assets, management estimates the future cash flows
expected to result from the use of the asset and its eventual disposition.
Having found no instances whereby the sum of expected future cash flows
(undiscounted and without interest charges) was less than the carrying amount of
the asset and thus requiring the recognition of an impairment loss, management
believes that the long-lived assets in the accompanying balance sheets are
appropriately valued.
401(K) PROFIT-SHARING PLAN
Effective January 1, 1994, the Company offered its employees a contributory
401(k) profit-sharing plan. Under the plan, the Company matches a portion of
participant contributions. Company contributions to the plan were $340 and
$3,467 for the years ended December 31, 1995, and 1996, respectively.
3. RECEIVABLES UNDER SALES-TYPE LEASES
The Company leases DSS(R) equipment to customers through long-term
sales-type leases, collateralized by the equipment. The leases range from three
to five years and are discounted at 9.75%. Receivables under sales-type leases
consist of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Minimum lease payments receivables.................... $ 665,376 $ 548,943
Less unearned interest income......................... (135,740) (110,467)
Less allowance for doubtful accounts.................. (16,635) (54,732)
--------- ---------
513,001 383,744
Less current portion.................................. 129,609 63,316
--------- ---------
$ 383,392 $ 320,428
========= =========
</TABLE>
4. LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1996 consisted of notes payable to
National Cooperative Services Corporation which provided for borrowings of up to
$4,875,000 with interest at the lender's variable rate (6.25% at December 31,
1996). These notes were repaid subsequent to year-end in connection with the
Agreement (Note 1) and, therefore, are classified as current in the accompanying
balance sheets. The carrying amount of long-term debt approximates fair value
based on borrowing rates available to the Company.
5. COMMITMENTS AND CONTINGENCIES
As part of the NRTC Member Agreements, the Company is required to pay
certain fees based on a minimum number of subscribers beginning in the fourth
year of operations of the NRTC Member Agreement. The Company had achieved
approximately 75% of the minimum subscriber requirement at December 31, 1996.
Based on the subscriber growth rate of the Company to date, management
anticipates that the Company will meet the minimum subscriber requirement prior
to the fourth year of operations of the NRTC Member Agreement.
6. RELIANCE ON DIRECTV AND THE NRTC AND OTHER MATTERS
The NRTC has contracted with third parties to provide the NRTC members with
certain services, including billing services and centralized remittance
processing services. The NRTC bills the Company for these services on a monthly
basis. These fees are recorded as service fees on the accompanying statements of
operations and changes in accumulated deficit. The NRTC also sells DSS(R)
equipment to its members.
Because the Company is, through the NRTC, a distributor of DIRECTV
Services, the Company would be adversely affected by any material adverse
changes in the assets, financial condition, programming, technological
F-49
<PAGE> 172
KANSAS DBS, L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
capabilities, or services of DirecTv or its parent corporation, Hughes
Communication Galaxy, Inc. ("Hughes"), including DirecTv's failure to retain or
renew its Federal Communication Commission ("FCC") licenses to transmit radio
frequency signals from the orbital slots occupied by its satellites.
The NRTC is a cooperative organization whose members are engaged in the
distribution of telecommunications and other services in predominantly rural
areas of the United States. Pursuant to an agreement between the NRTC and Hughes
(the "Hughes Agreement") and the NRTC Member Agreements, participating NRTC
members acquired the exclusive rights to provide DIRECTV Services to residential
and commercial subscribers in certain rural DirecTv markets. In general, upon
default by the NRTC under the Hughes Agreement, the Company would have the right
to acquire DIRECTV Services directly from DirecTv. The NRTC has contracted with
third parties to provide the NRTC members with certain services, including
billing services and centralized remittance processing services. If the NRTC is
unable to provide these services for whatever reason, the Company would be
required to acquire the services from other sources. There can be no assurance
that the cost to the Company to obtain these services elsewhere would not exceed
the amounts currently payable to the NRTC.
The Company would also be adversely affected by the termination of the NRTC
Member Agreements by the NRTC prior to the expiration of their respective terms.
If the NRTC Member Agreements are terminated by the NRTC, the Company would no
longer have the right to provide DIRECTV Services. There can be no assurance
that the Company would be able to obtain similar DBS services from other
sources.
Both the Hughes Agreement and the NRTC Member Agreements expire when Hughes
removes its current satellites from their assigned orbital locations. Although,
according to Hughes, the three DirecTv satellites have estimated orbital lives
of approximately 15 years from their respective launches in December 1993 and
1994, there can be no assurance as to the longevity of the satellites and thus
no assurance as to how long the Company will be able to continue to acquire DBS
services pursuant to the NRTC Member Agreements.
While the Company believes that it will have access to DIRECTV Services
following the expiration of the current Hughes Agreement by virtue of the NRTC's
right of first refusal in the Hughes Agreement and the Company's existing
contractual and membership relationship with the NRTC, there can be no assurance
that such services will be available to the Company from Hughes or the NRTC,
and, if available, there can be no assurance with regard to the financial and
other terms under which the Company could acquire the services.
The Company's DBS business is a new business with a limited operating
history. There are numerous risks associated with satellite transmission
technology. There can be no assurance as to the longevity of the satellites or
that loss, damage, or changes in the satellites will not occur and have a
material adverse effect on DirecTv and the Company's DBS business.
DirecTv, and therefore the Company, is dependent on third parties to
provide high-quality programming that appeals to mass audiences. DirecTv's
programming agreements have terms which expire on various dates and different
renewal and cancellation provisions. There can be no assurance that any such
agreements will be renewed or will not be canceled prior to expiration of their
original terms.
DBS operators, such as DirecTv, are free to set prices and serve
subscribers according to their business judgment, without rate of return and
other regulation. However, DirecTv is subject to the regulatory jurisdiction of
the FCC.
F-50
<PAGE> 173
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Mitchell Electric
Membership Corporation:
We have audited the accompanying statements of assets and liabilities and
accumulated deficit of the DBS OPERATIONS OF NRTC SYSTEM NO. 0422 (an
unincorporated division of Mitchell Electric Membership Corporation, a Georgia
corporation) as of December 31, 1995 and 1996 and the related statements of
expenses over revenues and changes in accumulated deficit and cash flows for the
years then ended. These financial statements are the responsibility of the
System's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the DBS Operations of NRTC
System No. 0422 as of December 31, 1995 and 1996 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 21, 1997
F-51
<PAGE> 174
DBS OPERATIONS OF NRTC SYSTEM NO. 0422
STATEMENTS OF ASSETS AND LIABILITIES AND ACCUMULATED DEFICIT
DECEMBER 31, 1995, 1996 AND MARCH 31, 1997
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 35,689 $ 253,269 $ 209,005
Trade accounts receivable, net of allowance for
doubtful accounts of $9,368, $24,375 and $42,819 at
December 31, 1995, 1996 and March 31, 1997,
respectively....................................... 178,738 310,436 254,058
Inventory............................................. 246,653 62,815 42,642
Deferred promotional costs, net (Note 2).............. -- 38,433 26,283
---------- ---------- ----------
Total current assets.......................... 461,080 664,953 531,988
---------- ---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Furniture and equipment............................... 5,075 5,075 5,075
Less accumulated depreciation...................... (2,030) (3,045) (3,300)
---------- ---------- ----------
3,045 2,030 1,775
---------- ---------- ----------
LEASED EQUIPMENT, at cost:
Leased equipment...................................... 1,047,081 2,312,534 2,312,534
Less accumulated depreciation...................... (87,257) (367,225) (483,188)
---------- ---------- ----------
959,824 1,945,309 1,829,346
---------- ---------- ----------
CONTRACT RIGHTS AND OTHER ASSETS (Note 2)............... 1,532,245 1,396,530 1,344,288
---------- ---------- ----------
$2,956,194 $4,008,822 $3,707,397
========== ========== ==========
LIABILITIES AND ACCUMULATED DEFICIT
CURRENT LIABILITIES:
Accounts payable...................................... $ 38,153 $ 45,724 $ --
Accrued liabilities................................... 56,236 145,381 155,291
Related-party payable................................. 3,471,320 4,470,539 4,177,369
Unearned revenue...................................... 65,546 233,554 240,745
---------- ---------- ----------
Total current liabilities..................... 3,631,255 4,895,198 4,573,405
---------- ---------- ----------
OTHER LIABILITIES....................................... 31,547 89,102 89,102
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 2, 4 and 5)
ACCUMULATED DEFICIT..................................... (706,608) (975,478) (955,110)
---------- ---------- ----------
$2,956,194 $4,008,822 $3,707,397
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-52
<PAGE> 175
DBS OPERATIONS OF NRTC SYSTEM NO. 0422
STATEMENTS OF EXPENSES OVER REVENUES
AND CHANGES IN ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996 AND
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Programming revenue................................ $ 867,894 $2,375,636 $ 865,850
Equipment and installation revenue................. 958,400 995,674 232,690
---------- ---------- ----------
Total revenue.............................. 1,826,294 3,371,310 1,098,540
---------- ---------- ----------
COST OF REVENUE:
Programming expense................................ 408,654 1,106,938 323,877
Cost of equipment and installation................. 925,496 435,337 124,304
Service fees....................................... 103,817 299,515 128,404
---------- ---------- ----------
Total cost of revenue...................... 1,437,967 1,841,790 576,585
---------- ---------- ----------
GROSS PROFIT......................................... 388,327 1,529,520 521,955
---------- ---------- ----------
OPERATING EXPENSES:
Sales and marketing................................ 204,024 290,275 46,801
General and administrative......................... 314,108 1,033,862 286,326
Depreciation and amortization...................... 281,542 474,253 168,460
---------- ---------- ----------
Total operating expenses................... 799,674 1,798,390 501,587
---------- ---------- ----------
EXPENSES OVER REVENUES............................... (411,347) (268,870) 20,368
ACCUMULATED DEFICIT at beginning of year............. (295,261) (706,608) (975,478)
---------- ---------- ----------
ACCUMULATED DEFICIT at end of year................... $ (706,608) $ (975,478) $ (955,110)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-53
<PAGE> 176
DBS OPERATIONS OF NRTC SYSTEM NO. 0422
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996 AND
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Expenses over revenues............................. $ (411,347) $ (268,870) $ 20,368
----------- ----------- ---------
Adjustments to reconcile expenses over revenues to
net cash provided by operating activities:
Depreciation and amortization................... 281,542 474,253 168,460
Amortization of deferred promotional costs...... -- 10,167 --
Changes in operating assets and liabilities:
Trade accounts receivable, net................ (80,301) (131,698) 56,378
Inventory..................................... 481,081 183,838 20,173
Deferred promotional costs.................... -- (48,600) 12,150
Accounts payable.............................. (45,615) 7,571 (45,724)
Related-party payable......................... 822,511 999,219 (293,170)
Accrued liabilities........................... (52,349) 89,145 9,910
Unearned revenue.............................. 49,217 168,008 7,191
----------- ----------- ---------
Total adjustments.......................... 1,456,086 1,751,903 (64,632)
----------- ----------- ---------
Net cash provided by operating
activities............................... 1,044,739 1,483,033 (44,264)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................ (1,047,081) (1,265,453) --
----------- ----------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS........................................ (2,342) 217,580 (44,264)
CASH AND CASH EQUIVALENTS at beginning of year....... 38,031 35,689 253,269
----------- ----------- ---------
CASH AND CASH EQUIVALENTS at end of year............. $ 35,689 $ 253,269 $ 209,005
=========== =========== =========
SUPPLEMENTAL NONCASH FINANCING ACTIVITY:
NRTC patronage capital declared.................... $ 31,547 $ 57,555 $ --
=========== =========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-54
<PAGE> 177
DBS OPERATIONS OF NRTC SYSTEM NO. 0422
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 (INFORMATION AS OF MARCH 31, 1997 IS UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS
The DBS Operations of NRTC System No. 0422 (the "System") is an
unincorporated division of Mitchell Electric Membership Corporation ("Mitchell
EMC"), a Georgia corporation. The System operates the exclusive rights to
distribute direct broadcast satellite ("DBS") services ("DIRECTV Services")
offered by DirecTv, Inc. ("DirecTv") in certain rural markets in Georgia. The
accompanying financial statements present the financial position and excess of
expenses over revenues of the System.
Mitchell EMC obtained the rights to distribute DIRECTV Services in the
System's territory pursuant to an agreement (the "NRTC Member Agreement") with
the National Rural Telecommunications Cooperative ("NRTC"). Under the provisions
of the NRTC Member Agreement, Mitchell EMC has the exclusive right to provide
DIRECTV Services within certain rural territories in Georgia.
In January 1997, Mitchell EMC entered into an asset purchase agreement (the
"Agreement") with Digital Television Services of Georgia, LLC ("DTS Georgia"), a
subsidiary of DTS Management, LLC ("DTS"), and DTS is a subsidiary of Digital
Television Services, LLC (a Delaware limited liability company). The agreement
provides that DTS Georgia will purchase Mitchell EMC's NRTC Member Agreement and
other assets used in connection with the System's business, as defined in the
Agreement, and will assume certain liabilities of the System, as defined in the
Agreement. The purchase price is subject to an adjustment for working capital at
the date of closing of the Agreement. The closing of the Agreement occurred in
May 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION
The System is not a separate subsidiary of Mitchell EMC nor has it been
operated as a separate division of Mitchell EMC. The financial statements of the
System have been derived from the records of Mitchell EMC and have been prepared
to present its financial position, excess of expenses over revenues, and cash
flows on a stand-alone basis. Accordingly, the accompanying financial statements
include certain costs and expenses which have been allocated to the System from
Mitchell EMC. Such allocated expenses may not be indicative of what such
expenses would have been had the System been operated as a separate entity.
REVENUE RECOGNITION
The System earns programming revenue by providing DIRECTV Services to its
subscribers. Programming revenue includes DIRECTV Services purchased by
subscribers in monthly, quarterly, or annual subscriptions; additional premium
programming available on an a la carte basis; sports programming available under
monthly, annual, or seasonal subscriptions; and movies and events programming
available on a pay-per-view basis. Programming purchased on a monthly,
quarterly, annual, or seasonal basis, including premium programming, is billed
in advance and is recorded as unearned revenue. All programming revenue is
recognized when earned.
Equipment and installation revenue primarily consists of the sale of DSS(R)
equipment and accessories and related installation charges. Equipment revenue is
recognized upon delivery of the equipment to the customer. Installation revenue
is recognized when the equipment is installed.
COST OF REVENUES
Cost of revenues includes the cost associated with providing DIRECTV
Services to the System's subscribers. These costs include the direct wholesale
cost of purchasing related programming from DirecTv (through the NRTC [Note 5]);
monthly subscriber maintenance fees charged by DirecTv, such as security fees,
ground service fees, system authorization fees, and fees for subscriber
billings; costs of equipment sold; and certain subscriber operating costs.
F-55
<PAGE> 178
DBS OPERATIONS OF NRTC SYSTEM NO. 0422
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
The System maintains inventories consisting of DSS(R) equipment and related
accessories. Inventory is valued at the lower of cost or market, generally on a
specific identification basis.
DEFERRED PROMOTIONAL COSTS
Deferred promotional costs consist of costs related to a subscriber rebate
program sponsored by DirecTv. Under the program, new subscribers who agree to
prepay for one year of programming service receive a credit which can be applied
toward equipment or programming. The System defers the cost of this credit and
amortizes it over the one-year contract period. In addition, as a part of this
program, the System receives $1 per month for up to five years from the NRTC for
each subscriber whose account remains active. Such amounts are recorded as a
reduction in sales and marketing expense in the accompanying statements of
expenses over revenues and changes in accumulated deficit.
PROPERTY AND EQUIPMENT AND LEASED EQUIPMENT
Property and equipment and leased equipment are stated at cost. Major
property additions, replacements, and betterments are capitalized, while
maintenance and repairs which do not extend the useful lives of these assets are
expensed currently. The System leases DSS(R) equipment to subscribers under
cancellable operating leases. Depreciation for property and equipment and leased
equipment is provided using the straight-line method over the estimated useful
lives of the respective assets, ranging from five to six years. Depreciation
expense for the year ended December 31, 1995, 1996 and for the three months
ended March 31, 1997 was $88,272, $280,983 and $116,218, respectively. Upon
retirement or disposal of assets, the cost and related accumulated depreciation
are removed from the statements of assets and liabilities and accumulated
deficit and any gain or loss is reflected in earnings.
CONTRACT RIGHTS AND OTHER ASSETS
Contract rights and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ ---------
<S> <C> <C> <C>
Contract rights........................... $1,841,352 $1,841,352 $1,841,352
Organization costs........................ 45,674 45,674 45,674
---------- ---------- ----------
1,887,026 1,887,026 1,887,026
Accumulated amortization.................. (386,328) (579,598) (631,840)
---------- ---------- ----------
1,500,698 1,307,428 1,255,186
NRTC patronage capital.................... 31,547 89,102 89,102
---------- ---------- ----------
$1,532,245 $1,396,530 $1,344,288
========== ========== ==========
</TABLE>
Contract Rights: Contract rights represent the cost of acquiring rights to
distribute DIRECTV Services. Contract rights are being amortized over ten years,
the estimated remaining useful life of the satellites operated by DirecTv which
provide service under the related contracts. Amortization expense, included in
depreciation and amortization in the accompanying statements of expenses over
revenues and changes in accumulated deficit, was $184,135, $184,135 and $52,242
for the year ended December 31, 1995, 1996 and three months ended March 31,
1997, respectively. Accumulated amortization at December 31, 1995, 1996 and
three months ended March 31, 1997 was $368,270, $552,405 and $598,439,
respectively.
Organization Costs: Organization costs are costs associated with the
formation of the System and are being amortized over five years. Amortization
expense, included in depreciation and amortization in the accompanying
statements of expenses over revenues and changes in accumulated deficit, was
$9,135, $9,135 and $1,264 for the year ended December 31, 1995, 1996 and the
three months ended March 31, 1997, respectively. Accumulated amortization at
December 31, 1995, 1996 and for the three months ended March 31, 1997 was
$18,058, $27,193 and $28,335, respectively.
F-56
<PAGE> 179
DBS OPERATIONS OF NRTC SYSTEM NO. 0422
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NRTC Patronage Capital: Mitchell EMC is a voting member of the NRTC with
an ownership interest in the NRTC in proportion to its prior patronage. NRTC
patronage certificates represent the noncash portion of NRTC patronage income.
Under its bylaws, the NRTC declares a patronage dividend of its excess of
revenues over expenses each year. Of the total patronage dividend, 20% is paid
in cash and is recognized as income when received and is netted against
programming expense in the accompanying statements of expenses over revenues and
changes in accumulated deficit. The remaining 80% is distributed in the form of
noncash patronage capital, which will be redeemed in cash only at the discretion
of the NRTC. The System includes noncash patronage capital as other assets, with
an offsetting deferred patronage income amount included in other liabilities in
the accompanying statements of assets and liabilities and accumulated deficit.
The patronage capital will be recognized as income when cash distributions are
declared by the NRTC.
INCOME TAXES
Mitchell EMC, and thus the System, is not considered a taxable entity for
federal and state income tax purposes, as it is a not-for-profit corporation.
Accordingly, no provision for income taxes is included in the accompanying
financial statements.
CASH AND CASH EQUIVALENTS
The System considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The carrying amount
approximates fair value due to the relatively short period to maturity of these
instruments.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk with respect to accounts receivable is limited
due to the large number of subscribers. As a result, at March 31, 1997,
management does not believe any significant concentration of credit risk exists.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. When
events or changes in circumstances occur related to long-lived assets,
management estimates the future cash flows expected to result from the use of
the asset and its eventual disposition. Having found no instances whereby the
sum of expected future cash flows (undiscounted and without interest charges)
was less than the carrying amount of the asset and thus requiring the
recognition of an impairment loss, management believes that the long-lived
assets in the accompanying statements of assets and liabilities and accumulated
deficit are appropriately valued.
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 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.
3. RELATED-PARTY TRANSACTIONS
Certain administrative services are performed by Mitchell EMC on behalf of
the System. Costs attributable to these support functions are included in
general and administrative expenses in the accompanying statements of
F-57
<PAGE> 180
DBS OPERATIONS OF NRTC SYSTEM NO. 0422
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
expenses over revenues and changes in accumulated deficit. The costs allocated
to the System were approximately $279,000, $810,000 and $211,000 for the year
ended December 31, 1995, 1996 and for the three months ended March 31, 1997,
respectively. Such allocations do not necessarily represent actual and/or
ongoing expenses of the System.
Mitchell EMC either advances funds to or borrows funds from the System.
Included in the accompanying statements of assets and liabilities and
accumulated deficit is a net payable to Mitchell EMC representing amounts due
for the initial purchase of contract rights and net operating activities as
funded by Mitchell EMC.
4. COMMITMENTS AND CONTINGENCIES
As part of the NRTC Member Agreements, the System is required to pay
certain fees based on a minimum number of subscribers beginning in the fourth
year of operations of the NRTC Member Agreement. The System had achieved the
minimum subscriber requirement at March 31, 1997.
5. RELIANCE ON DIRECTV AND THE NRTC AND OTHER MATTERS
The NRTC has contracted with third parties to provide the NRTC members with
certain services, including billing services and centralized remittance
processing services. The NRTC bills the System for these services on a monthly
basis. These fees are recorded as service fees on the accompanying statements of
expenses over revenues and changes in accumulated deficit. The NRTC also sells
DSS(R) equipment to its members.
Because the System is, through the NRTC, a distributor of DIRECTV Services,
the System would be adversely affected by any material adverse changes in the
assets, financial condition, programming, technological capabilities or services
of DirecTv or its parent corporation, Hughes Communication Galaxy, Inc.
("Hughes"), including DirecTv's failure to retain or renew its Federal
Communication Commission ("FCC") licenses to transmit radio frequency signals
from the orbital slots occupied by its satellites.
The NRTC is a cooperative organization whose members are engaged in the
distribution of telecommunications and other services in predominantly rural
areas of the United States. Pursuant to an agreement between the NRTC and Hughes
(the "Hughes Agreement") and the NRTC Member Agreements, participating NRTC
members acquired the exclusive rights to provide DIRECTV Services to residential
and commercial subscribers in certain rural DirecTv markets. In general, upon
default by the NRTC under the Hughes Agreement, the System would have the right
to acquire DIRECTV Services directly from DirecTv. The NRTC has contracted with
third parties to provide the NRTC members with certain services, including
billing services and centralized remittance processing services. If the NRTC is
unable to provide these services for whatever reason, the System would be
required to acquire the services from other sources. There can be no assurance
that the cost to the System to obtain these services elsewhere would not exceed
the amounts currently payable to the NRTC.
The System would also be adversely affected by the termination of the NRTC
Member Agreements by the NRTC prior to the expiration of their respective terms.
If the NRTC Member Agreements are terminated by the NRTC, the System would no
longer have the right to provide DIRECTV Services. There can be no assurance
that the System would be able to obtain similar DBS services from other sources.
Both the Hughes Agreement and the NRTC Member Agreements expire when Hughes
removes its current satellites from their assigned orbital locations. Although,
according to Hughes, the three DirecTv satellites have estimated orbital lives
of approximately 15 years from their respective launches in December 1993 and
1994, there can be no assurance as to the longevity of the satellites and thus
no assurance as to how long the System will be able to continue to acquire DBS
services pursuant to the NRTC Member Agreements.
While management believes that it will have access to DIRECTV Services
following the expiration of the current Hughes Agreement by virtue of the NRTC's
right of first refusal in the Hughes Agreement and the System's existing
contractual and membership relationship with the NRTC, there can be no assurance
that such
F-58
<PAGE> 181
DBS OPERATIONS OF NRTC SYSTEM NO. 0422
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
services will be available to the System from Hughes or the NRTC, and, if
available, there can be no assurance with regard to the financial and other
terms under which the System could acquire the services.
The System's DBS business is a new business with a limited operating
history. There are numerous risks associated with satellite transmission
technology. There can be no assurance as to the longevity of the satellites or
that loss, damage, or changes in the satellites will not occur and have a
material adverse effect on DirecTv and the System's DBS business.
DirecTv, and therefore the System, is dependent on third parties to provide
high-quality programming that appeals to mass audiences. DirecTv's programming
agreements have terms which expire on various dates and different renewal and
cancellation provisions. There can be no assurance that any such agreements will
be renewed or will not be canceled prior to expiration of their original terms.
DBS operators, such as DirecTv, are free to set prices and serve
subscribers according to their business judgment, without rate of return and
other regulation. However, DirecTv is subject to the regulatory jurisdiction of
the FCC.
F-59
<PAGE> 182
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Washington Electric
Membership Corporation:
We have audited the accompanying statement of assets and liabilities and
accumulated earnings of the DBS OPERATIONS OF NRTC SYSTEM NO. 0073 (an
unincorporated division of Washington Electric Membership Corporation) as of
December 31, 1996 and the related statements of revenues over expenses and
changes in accumulated earnings and cash flows for the year then ended. These
financial statements are the responsibility of the System'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. 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 the DBS Operations of NRTC
System No. 0073 as of December 31, 1996 and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 21, 1997
F-60
<PAGE> 183
DBS OPERATIONS OF NRTC SYSTEM NO. 0073
STATEMENTS OF ASSETS AND LIABILITIES AND ACCUMULATED EARNINGS
DECEMBER 31, 1996 AND MARCH 31, 1997
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 18,811 $ 29,742
Trade accounts receivable, net of allowance for doubtful
accounts of $14,820 and $0 at December 31, 1996 and
March 31, 1997, respectively........................... 183,444 166,493
Inventory................................................. 44,282 55,025
Deferred promotional costs, net (Note 2).................. 57,533 50,250
---------- ----------
Total current assets.............................. 304,070 301,510
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Furniture and equipment................................... 16,197 16,197
Less accumulated depreciation.......................... (10,798) (12,148)
---------- ----------
5,399 4,049
---------- ----------
LEASED EQUIPMENT, at cost:
Leased equipment.......................................... 206,066 209,212
Less accumulated depreciation.......................... (35,060) (44,136)
---------- ----------
171,006 165,076
---------- ----------
CONTRACT RIGHTS AND OTHER ASSETS (Note 2)................... 842,951 816,341
---------- ----------
$1,323,426 $1,286,976
========== ==========
LIABILITIES AND ACCUMULATED EARNINGS
CURRENT LIABILITIES:
Accounts payable.......................................... $ 98,644 $ 1,448
Accrued liabilities....................................... 119,036 70,919
Related-party payable..................................... 656,004 704,956
Unearned revenue.......................................... 209,288 202,837
---------- ----------
Total current liabilities......................... 1,082,972 980,160
---------- ----------
OTHER LIABILITIES........................................... 44,637 44,637
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 2, 4, and 5)
ACCUMULATED EARNINGS........................................ 195,817 262,179
---------- ----------
$1,323,426 $1,286,976
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-61
<PAGE> 184
DBS OPERATIONS OF NRTC SYSTEM NO. 0073
STATEMENTS OF REVENUES OVER EXPENSES AND CHANGE
IN ACCUMULATED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND FOR THE THREE MONTHS ENDED MARCH 31,
1997
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
REVENUE:
Programming revenue....................................... $1,605,660 $479,917
Equipment and installation revenue........................ 370,888 74,545
---------- --------
Total revenue..................................... 1,976,548 554,462
---------- --------
COST OF REVENUE:
Programming expense....................................... 826,714 271,395
Cost of equipment and installation........................ 200,066 51,897
Service fees.............................................. 157,469 51,693
---------- --------
Total cost of revenue............................. 1,184,249 374,985
---------- --------
GROSS PROFIT................................................ 792,299 179,477
---------- --------
OPERATING EXPENSES:
Sales and marketing....................................... 57,752 3,500
General and administrative................................ 310,931 72,579
Depreciation and amortization............................. 143,675 37,036
---------- --------
Total operating expenses.......................... 512,358 113,115
---------- --------
REVENUES OVER EXPENSES...................................... 279,941 66,362
ACCUMULATED DEFICIT at beginning of year.................... (84,124) 195,817
---------- --------
ACCUMULATED EARNINGS at end of year......................... $ 195,817 $262,179
========== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-62
<PAGE> 185
DBS OPERATIONS OF NRTC SYSTEM NO. 0073
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND FOR THE THREE MONTHS ENDED MARCH 31,
1997
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Revenues over expenses.................................... $ 279,941 $ 66,362
--------- --------
Adjustments to reconcile revenues over expenses to net
cash provided by operating activities:
Depreciation and amortization.......................... 143,675 10,436
Amortization of deferred promotional costs............. 9,467 26,610
Changes in operating assets and liabilities:
Trade accounts receivable, net....................... (82,517) 16,951
Related-party payable................................ (439,143) 48,952
Inventory............................................ 70,343 (10,743)
Deferred promotional costs........................... (67,000) 7,283
Accounts payable..................................... 34,392 (97,196)
Accrued liabilities.................................. 74,401 (48,117)
Unearned revenue..................................... 123,134 (6,451)
--------- --------
Total adjustments................................. (133,248) (52,275)
--------- --------
Net cash provided by operating activities......... 146,693 14,087
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (141,022) (3,156)
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 5,671 10,931
CASH AND CASH EQUIVALENTS at beginning of year.............. 13,140 18,811
--------- --------
CASH AND CASH EQUIVALENTS at end of year.................... $ 18,811 $ 29,742
========= ========
SUPPLEMENTAL NONCASH FINANCING ACTIVITY:
NRTC patronage capital declared........................... $ 31,110 $ --
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-63
<PAGE> 186
DBS OPERATIONS OF NRTC SYSTEM NO. 0073
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (INFORMATION AS OF MARCH 31, 1997 IS UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS
The DBS Operations of NRTC System No. 0073 (the "System") is an
unincorporated division of Washington Electric Membership Corporation
("Washington EMC"), a Georgia corporation. The System operates the exclusive
rights to distribute direct broadcast satellite ("DBS") services ("DIRECTV
Services") offered by DirecTv, Inc. ("DirecTv") in certain rural markets in
Georgia. The accompanying financial statements present the financial position
and excess of revenues over expenses of the System.
Washington EMC obtained the rights to distribute DIRECTV Services in the
System's territory pursuant to an agreement (the "NRTC Member Agreement") with
the National Rural Telecommunications Cooperative ("NRTC"). Under the provisions
of the NRTC Member Agreement, Washington EMC has the exclusive right to provide
DIRECTV Services within certain rural territories in Georgia.
In March 1997, Washington EMC entered into an asset purchase agreement (the
"Agreement") with Digital Television Services of Georgia, LLC ("DTS Georgia"), a
subsidiary of DTS Management, LLC ("DTS"). DTS is a subsidiary of Digital
Television Services, LLC. The agreement provides that DTS Georgia will purchase
Washington EMC's NRTC Member Agreement and other assets used in connection with
the System's business, as defined in the Agreement, and will assume certain
liabilities of the System, as defined in the Agreement. The purchase price is
subject to an adjustment for working capital at the date of closing of the
Agreement. The closing of the Agreement occurred in May 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION
The System is not a separate subsidiary of Washington EMC nor has it been
operated as a separate division of Washington EMC. The financial statements of
the System have been derived from the records of Washington EMC and have been
prepared to present its financial position, results of operations, and cash
flows on a stand-alone basis. Accordingly, the accompanying financial statements
include certain costs and expenses which have been allocated to the System from
Washington EMC. Such allocated expenses may not be indicative of what such
expenses would have been had the System been operated as a separate entity.
REVENUE RECOGNITION
The System earns programming revenue by providing DIRECTV Services to its
subscribers. Programming revenue includes DIRECTV Services purchased by
subscribers in monthly, quarterly, or annual subscriptions; additional premium
programming available on an a la carte basis; sports programming available under
monthly, annual, or seasonal subscriptions; and movies and events programming
available on a pay-per-view basis. Programming purchased on a monthly,
quarterly, annual, or seasonal basis, including premium programming, is billed
in advance and is recorded as unearned revenue. All programming revenue is
recognized when earned.
Equipment and installation revenue primarily consists of the sale of DSS(R)
equipment and accessories and related installation charges. Equipment revenue is
recognized upon delivery of the equipment to the customer. Installation revenue
is recognized when the equipment is installed.
COST OF REVENUES
Cost of revenues includes the cost associated with providing DIRECTV
Services to the System's subscribers. These costs include the direct wholesale
cost of purchasing related programming from DirecTv (through the NRTC [Note 5]);
monthly subscriber maintenance fees charged by DirecTv, such as security fees,
ground service fees, system authorization fees, and fees for subscriber
billings; costs of equipment sold; and certain subscriber operating costs.
F-64
<PAGE> 187
DBS OPERATIONS OF NRTC SYSTEM NO. 0073
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
The System maintains inventories consisting of DSS(R) equipment and related
accessories. Inventory is valued at the lower of cost or market, generally on a
specific identification basis.
DEFERRED PROMOTIONAL COSTS
Deferred promotional costs consist of costs related to a subscriber rebate
program sponsored by DirecTv. Under the program, new subscribers who agree to
prepay for one year of programming service receive a credit which can be applied
toward equipment or programming. The System defers the cost of this credit and
amortizes it over the one-year contract period. In addition, as a part of this
program, the System receives $1 per month for up to five years from the NRTC for
each subscriber whose account remains active. Such amounts are recorded as a
reduction in sales and marketing expense in the accompanying statement of
revenues over expenses and change in accumulated earnings.
PROPERTY AND EQUIPMENT AND LEASED EQUIPMENT
Property and equipment and leased equipment are stated at cost. Major
property additions, replacements, and betterments are capitalized, while
maintenance and repairs which do not extend the useful lives of these assets are
expensed currently. The System leases DSS(R) equipment to subscribers under
cancellable operating leases. Depreciation for property and equipment and leased
equipment is provided using the straight-line method over the estimated useful
lives of the respective assets, ranging from three to six years. Depreciation
expense for the year ended December 31, 1996 and for the three months ended
March 31, 1997 was $37,235 and $10,426, respectively. Upon retirement or
disposal of assets, the cost and related accumulated depreciation are removed
from the statement of assets and liabilities and accumulated earnings and any
gain or loss is reflected in earnings.
CONTRACT RIGHTS AND OTHER ASSETS
Contract rights and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ----------
<S> <C> <C>
Contract rights....................................... $1,064,414 $1,064,414
Accumulated amortization.............................. (266,100) (292,710)
---------- ----------
798,314 771,704
NRTC patronage capital................................ 44,637 44,637
---------- ----------
$ 842,951 $ 816,341
========== ==========
</TABLE>
Contract Rights: Contract rights represent the cost of acquiring rights to
distribute DIRECTV Services. Contract rights are being amortized over ten years,
the estimated remaining useful life of the satellites operated by DirecTv which
provide service under the related contracts. Amortization expense, included in
depreciation and amortization in the accompanying statement of revenues over
expenses and change in accumulated earnings, for the year ended December 31,
1996 and for the three months ended March 31, 1997 is $106,440 and $26,610,
respectively.
NRTC Patronage Capital: Washington EMC is a voting member of the NRTC with
an ownership interest in the NRTC in proportion to its prior patronage. NRTC
patronage certificates represent the noncash portion of NRTC patronage income.
Under its bylaws, the NRTC declares a patronage dividend of its excess of
revenues over expenses each year. Of the total patronage dividend, 20% is paid
in cash and is netted against programming expense in the accompanying statement
of revenues over expenses and change in accumulated earnings when received. The
remaining 80% is distributed in the form of noncash patronage capital, which
will be redeemed in cash only at the discretion of the NRTC. The System includes
noncash patronage capital as other assets, with an offsetting deferred patronage
income amount included in other liabilities in the accompanying statement of
assets
F-65
<PAGE> 188
DBS OPERATIONS OF NRTC SYSTEM NO. 0073
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and liabilities and accumulated earnings. The patronage capital will be
recognized as income when cash distributions are declared by the NRTC.
INCOME TAXES
The System is not considered a taxable entity for federal and state income
tax purposes, as it is a not-for profit-corporation. Accordingly, no provision
for income taxes is included in the accompanying financial statements.
CASH AND CASH EQUIVALENTS
The System considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The carrying amount
approximates fair value due to the relatively short period to maturity of these
instruments.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk with respect to accounts receivable is limited
due to the large number of subscribers. As a result, at December 31, 1996,
management does not believe any significant concentration of credit risk exists.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. When
events or changes in circumstances occur related to long-lived assets,
management estimates the future cash flows expected to result from the use of
the asset and its eventual disposition. Having found no instances whereby the
sum of expected future cash flows (undiscounted and without interest charges)
was less than the carrying amount of the asset and thus requiring the
recognition of an impairment loss, management believes that the long-lived
assets in the accompanying statement of assets and liabilities and accumulated
earnings are appropriately valued.
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 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.
3. RELATED-PARTY TRANSACTIONS
Certain administrative services are performed by Washington EMC on behalf
of the System. Costs attributable to these support functions are included in
general and administrative expenses in the accompanying statement of revenues
over expenses and change in accumulated earnings. The costs allocated to the
System were approximately $235,000 and $55,000 for the year ended December 31,
1996 and for the three months ended March 31, 1997, respectively. Such
allocations do not necessarily represent actual and/or ongoing expenses of the
System.
Washington EMC either advances funds to or borrows funds from the System.
Included in the accompanying statement of assets and liabilities and accumulated
earnings is a net payable to Washington EMC representing amounts due for the
initial purchase of contract rights and net operating activities as funded by
Washington EMC.
F-66
<PAGE> 189
DBS OPERATIONS OF NRTC SYSTEM NO. 0073
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES
As part of the NRTC Member Agreements, the System is required to pay
certain fees based on a minimum number of subscribers beginning in the fourth
year of operations of the NRTC Member Agreement. The System had achieved the
minimum subscriber requirement at December 31, 1996.
5. RELIANCE ON DIRECTV AND THE NRTC AND OTHER MATTERS
The NRTC has contracted with third parties to provide the NRTC members with
certain services, including billing services and centralized remittance
processing services. The NRTC bills the System for these services on a monthly
basis. These fees are recorded as service fees on the accompanying statements of
revenues over expenses and change in accumulated earnings. The NRTC also sells
DSS(R) equipment to its members.
Because the System is, through the NRTC, a distributor of DIRECTV Services,
the System would be adversely affected by any material adverse changes in the
assets, financial condition, programming, technological capabilities, or
services of DirecTv or its parent corporation, Hughes Communication Galaxy, Inc.
("Hughes"), including DirecTv's failure to retain or renew its Federal
Communication Commission ("FCC") licenses to transmit radio frequency signals
from the orbital slots occupied by its satellites.
The NRTC is a cooperative organization whose members are engaged in the
distribution of telecommunications and other services in predominantly rural
areas of the United States. Pursuant to an agreement between the NRTC and Hughes
(the "Hughes Agreement") and the NRTC Member Agreements, participating NRTC
members acquired the exclusive rights to provide DIRECTV Services to residential
and commercial subscribers in certain rural DirecTv markets. In general, upon
default by the NRTC under the Hughes Agreement, the System would have the right
to acquire DIRECTV Services directly from DirecTv. The NRTC has contracted with
third parties to provide the NRTC members with certain services, including
billing services and centralized remittance processing services. If the NRTC is
unable to provide these services for whatever reason, the System would be
required to acquire the services from other sources. There can be no assurance
that the cost to the System to obtain these services elsewhere would not exceed
the amounts currently payable to the NRTC.
The System would also be adversely affected by the termination of the NRTC
Member Agreements by the NRTC prior to the expiration of their respective terms.
If the NRTC Member Agreements are terminated by the NRTC, the System would no
longer have the right to provide DIRECTV Services. There can be no assurance
that the System would be able to obtain similar DBS services from other sources.
Both the Hughes Agreement and the NRTC Member Agreements expire when Hughes
removes its current satellites from their assigned orbital locations. Although,
according to Hughes, the three DirecTv satellites have estimated orbital lives
of approximately 15 years from their respective launches in December 1993 and
1994, there can be no assurance as to the longevity of the satellites and thus
no assurance as to how long the System will be able to continue to acquire DBS
services pursuant to the NRTC Member Agreements.
While management believes that it will have access to DIRECTV Services
following the expiration of the current Hughes Agreement by virtue of the NRTC's
right of first refusal in the Hughes Agreement and the System's existing
contractual and membership relationship with the NRTC, there can be no assurance
that such services will be available to the System from Hughes or the NRTC, and,
if available, there can be no assurance with regard to the financial and other
terms under which the System could acquire the services.
The System's DBS business is a new business with a limited operating
history. There are numerous risks associated with satellite transmission
technology. There can be no assurance as to the longevity of the satellites or
F-67
<PAGE> 190
DBS OPERATIONS OF NRTC SYSTEM NO. 0073
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
that loss, damage, or changes in the satellites will not occur and have a
material adverse effect on DirecTv and the System's DBS business.
DirecTv, and therefore the System, is dependent on third parties to provide
high-quality programming that appeals to mass audiences. DirecTv's programming
agreements have terms which expire on various dates and different renewal and
cancellation provisions. There can be no assurance that any such agreements will
be renewed or will not be canceled prior to expiration of their original terms.
DBS operators, such as DirecTv, are free to set prices and serve
subscribers according to their business judgment, without rate of return and
other regulation. However, DirecTv is subject to the regulatory jurisdiction of
the FCC.
F-68
<PAGE> 191
INDEPENDENT AUDITOR'S REPORT
Partners
Northeast DBS Enterprises, L.P.
T/A Digital One Television
Williston, Vermont
We have audited the accompanying balance sheets of NORTHEAST DBS
ENTERPRISES, L.P., T/A Digital One Television as of December 31, 1995 and 1994,
and the related statements of operations and partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Northeast DBS Enterprises,
L.P., T/A Digital One Television as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
FISHBEIN & COMPANY, P.C.
Elkins Park, Pennsylvania
February 23, 1996
F-69
<PAGE> 192
NORTHEAST DBS ENTERPRISES, L.P.
T/A DIGITAL ONE TELEVISION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... $ 245,639 $ 1,286,240
Accounts receivable -- Net of allowance for doubtful
accounts of $12,157 -- 1995 and
$3,000 -- 1994.......................................... 361,890 138,116
Inventory................................................. 371,795 451,434
Due from partners......................................... 28,315
Prepaid expenses and other current assets................. 43,866 2,963
----------- -----------
Total current assets............................... 1,023,190 1,907,068
----------- -----------
EQUIPMENT HELD FOR RENTAL................................... 487,866 --
Less accumulated depreciation............................. 97,573 --
----------- -----------
390,293 --
----------- -----------
OTHER PROPERTY AND EQUIPMENT................................ 395,301 256,441
Less accumulated depreciation and amortization............ 164,395 57,387
----------- -----------
230,906 199,054
----------- -----------
FRANCHISE COSTS............................................. 3,624,514 3,624,514
Less accumulated depreciation............................. 543,676 181,225
----------- -----------
3,080,838 3,443,289
----------- -----------
OTHER ASSETS
NRTC patronage capital.................................... 30,649
Note receivable -- Partner................................ 35,035 31,850
Deposits.................................................. 4,040 3,590
Unamortized organization costs............................ 29,672 19,600
----------- -----------
99,396 55,040
----------- -----------
$ 4,824,623 $ 5,604,451
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term notes payable................ $ 10,390 $ 5,316
Accounts payable.......................................... 774,650 417,912
Accrued expenses and other current liabilities............ 474,257 72,661
Unearned income and customer deposits..................... 248,104 62,968
----------- -----------
Total current liabilities.......................... 1,507,401 558,857
----------- -----------
OTHER LIABILITIES........................................... 30,649 --
----------- -----------
LONG-TERM NOTES PAYABLE -- Net of current portion........... 16,356 8,980
----------- -----------
COMMITMENTS (Notes 7 and 8)
PARTNERS' EQUITY -- 565.72834 Units -- 1995 and 546.89676
Units -- 1994
Capital contributions..................................... 6,968,080 6,710,087
Private placement costs................................... (263,704) (244,346)
Accumulated deficit....................................... (3,434,159) (1,429,127)
----------- -----------
3,270,217 5,036,614
----------- -----------
$ 4,824,623 $ 5,604,451
=========== ===========
</TABLE>
See notes to financial statements.
F-70
<PAGE> 193
NORTHEAST DBS ENTERPRISES, L.P.
T/A DIGITAL ONE TELEVISION
STATEMENTS OF OPERATIONS AND PARTNERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994
----------- ----------
<S> <C> <C>
OPERATING INCOME
Programming............................................... $ 2,670,015 $ 110,422
Equipment sales and installation.......................... 2,025,501 671,122
Rental.................................................... 106,663 144,343
----------- ----------
4,802,179 925,887
----------- ----------
DIRECT COSTS
Programming............................................... 1,611,657 66,405
Equipment sales and installation.......................... 1,720,634 566,610
Rental.................................................... 97,573 118,627
----------- ----------
3,429,864 751,642
----------- ----------
GROSS PROFIT
Programming............................................... 1,058,358 44,017
Equipment sales and installation.......................... 304,867 104,512
Rental.................................................... 9,090 25,716
----------- ----------
1,372,315 174,245
----------- ----------
OPERATING EXPENSES
Marketing and selling..................................... 1,697,782 232,565
Administrative............................................ 1,223,003 641,015
Amortization of franchise costs........................... 362,451 181,225
Depreciation and amortization............................. 118,151 102,395
----------- ----------
3,401,387 1,157,200
----------- ----------
LOSS FROM OPERATIONS........................................ (2,029,072) (982,955)
----------- ----------
OTHER INCOME (EXPENSES)
Interest income........................................... 41,018 97,212
Interest expense.......................................... (9,478) (97,545)
Loan commitment fees...................................... (7,500) --
----------- ----------
24,040 (333)
----------- ----------
NET LOSS.................................................... (2,005,032) (983,288)
PARTNERS' EQUITY -- BEGINNING............................... 5,036,614 1,108,561
PARTNERS' CAPITAL CONTRIBUTIONS............................. 257,993 5,155,687
PRIVATE PLACEMENT COSTS INCURRED............................ (19,358) (244,346)
----------- ----------
PARTNERS' EQUITY -- ENDING.................................. $ 3,270,217 $5,036,614
=========== ==========
</TABLE>
See notes to financial statements.
F-71
<PAGE> 194
NORTHEAST DBS ENTERPRISES, L.P.
T/A DIGITAL ONE TELEVISION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(2,005,032) $ (983,288)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization of property and
equipment............................................. 204,581 54,028
Amortization of other assets........................... 373,594 229,592
Amortized discount on notes payable.................... -- 15,069
Accrued interest on note receivable -- Partner......... (3,185) --
Increase in accounts receivable........................ (223,774) (138,116)
(Increase) decrease in inventory....................... 79,639 (451,434)
(Increase) decrease in prepaid expenses and other
current assets........................................ (41,528) 7,258
Increase in deposits................................... (450) (3,590)
Organization costs incurred............................ (20,590) (2,000)
Increase in accounts payable, accrued expenses and
other current liabilities............................. 758,334 319,183
Increase in unearned income and customer deposits...... 185,136 --
----------- ----------
Net cash used in operating activities............. (693,275) (953,298)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in due from partners.................. 28,315 (8,528)
Purchase of equipment held for rental..................... (487,866)
Purchase of other property and equipment.................. (118,658) (219,537)
Proceeds from disposition of equipment.................... -- 2,484
Franchise costs incurred.................................. -- (518,016)
Decrease in franchise costs payable....................... -- (1,082,523)
----------- ----------
Net cash used in investing activities............. (578,209) (1,826,120)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term notes payable............. (7,752) (2,476)
Principal payments on notes payable -- Other.............. -- (513,705)
Partners' capital contributions........................... 257,993 4,454,622
Private placement costs incurred.......................... (19,358) (178,869)
----------- ----------
Net cash provided by financing activities......... 230,883 3,759,572
----------- ----------
NET INCREASE (DECREASE) IN CASH............................. (1,040,601) 980,154
CASH -- BEGINNING........................................... 1,286,240 306,086
----------- ----------
CASH -- ENDING.............................................. $ 245,639 $1,286,240
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest.................... $ 1,983 $ 147,220
=========== ==========
</TABLE>
See notes to financial statements.
F-72
<PAGE> 195
NORTHEAST DBS ENTERPRISES, L.P.
T/A DIGITAL ONE TELEVISION
STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Long-term notes payable of $20,202 and $16,772 were incurred for the
purchase of property and equipment during the years ended December 31, 1995 and
1994, respectively.
During the year ended December 31, 1995, NRTC patronage capital of $30,649
was recorded, representing deferred patronage dividends.
During the year ended December 31, 1994, the amount due from partners was
increased by $20,000 and a note receivable -- partner of $31,850 was issued in
connection with the issuance of Partnership Units (recorded as partners' capital
contributions).
During the year ended December 31, 1994, franchise costs of $350,614 were
incurred, recorded as a reduction of the note receivable of $140,496 and
partners' capital contributions of $210,118.
During the year ended December 31, 1994, notes payable of $422,063 were
converted to Partnership Units (recorded as partners' capital contributions).
During the year ended December 31, 1994, private placement costs of $17,034
were incurred in connection with the issuance of Partnership Units (recorded as
partners' capital contributions).
See notes to financial statements.
F-73
<PAGE> 196
NORTHEAST DBS ENTERPRISES, L.P.
T/A DIGITAL ONE TELEVISION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION AND NATURE OF BUSINESS
Northeast DBS Enterprises, L.P. is a limited partnership under the laws of
the State of Vermont. The Partnership provides direct broadcast satellite
("DBS") television distribution services and sells related equipment in rural
territories franchised in conjunction with the National Rural Telecommunications
Cooperative ("NRTC") and DIRECTV, a subsidiary of G.M. Hughes Electronics, Inc.
In the normal course of business, the Partnership grants credit to its
customers, in the form of accounts receivable, who are located in Vermont and
New Hampshire.
Unearned income on programming contracts is recognized as earned over the
term of the contracts.
The Company also leases certain equipment to customers under four-year
cancelable operating leases with rental income reported as earned over the lease
term.
The financial statements include only those assets, liabilities and results
of operations which relate to the business of the Partnership. The statements do
not include any assets, liabilities, income or expenses attributable to the
partners' individual activities.
B. USE OF ESTIMATES
The presentation 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.
C. CASH
The Partnership maintains cash balances at several financial institutions.
Accounts at certain institutions are insured by the Federal Deposit Insurance
Corporation up to $100,000. Temporary cash balances are invested on a daily
basis in a money market fund backed by U.S. Government obligations.
D. INVENTORY
Inventory, consisting of DBS systems and related parts and supplies, is
stated at the lower of cost (first-in, first-out method) or market.
E. PROPERTY AND EQUIPMENT AND DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Expenditures for additions,
renewals and betterments are capitalized; expenditures for maintenance and
repairs are charged to expense as incurred. Upon retirement or disposal of
assets, the cost and accumulated depreciation or amortization are eliminated
from the accounts and the resulting gain or loss is credited or charged to
operations. Depreciation and amortization are provided using the straight-line
and declining balance methods over the estimated useful lives of the assets.
F. NRTC PATRONAGE CAPITAL
The Partnership is an affiliate of the NRTC. While affiliates have no vote,
they do have an interest in the NRTC in proportion to their prior patronage.
NRTC patronage capital represents the noncash portion of NRTC patronage
dividends. Under its bylaws, the NRTC declares a patronage dividend equal to the
excess of its revenues over its expenses each year. Of the total patronage
dividend, 20% is paid in cash and recognized as
F-74
<PAGE> 197
NORTHEAST DBS ENTERPRISES, L.P.
T/A DIGITAL ONE TELEVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
income when received and is netted against programming expense in the
accompanying statement of operations. The remaining 80% is distributed on the
form of noncash patronage capital which will be redeemed in cash only at the
discretion of the NRTC, and is recorded as deferred patronage dividends which
will be recognized as income only when cash distributions are declared by the
NRTC.
G. FRANCHISE COSTS AND AMORTIZATION
The Partnership purchased the rights to distribute DBS services in twelve
counties in Vermont and two counties in New Hampshire. These rights have been
granted by the NRTC under its agreement with DIRECTV. The DBS services which the
Partnership distributes are video and audio entertainment and information
programming transmitted by a satellite operated by DIRECTV. The franchise costs
paid to NRTC are being amortized over the minimum term of the contract with NRTC
of ten years.
H. PRIVATE PLACEMENT COSTS
Costs incurred in connection with the private placement offering are
reflected as a reduction of partners' equity.
I. ADVERTISING
Advertising costs are charged to operations when the advertising first
takes place.
J. INCOME TAXES
Income taxes are not payable by, or provided for, the Partnership. All tax
effects of the Partnership's income or losses are passed through to the
partners.
K. ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES
Partnership profits and losses are allocated as follows:
All losses are allocated 99% to the Limited Partners and 1% to the General
Partner.
All profits are allocated as follows:
First, 100% to Partners who have previously been allocated losses in
proportion to previously allocated losses until each Partner has been
allocated profits equal to previously allocated losses.
Second, 100% to all Partners, pro rata based on the number of
Partnership Units ("Units") owned, until each Partner has been allocated
$1,000 per year per Unit, cumulatively (the "Preferred Return").
Third, 80% to all Partners, pro rata based on the number of Units
owned, and 20% to the General Partner until each of the Partners has been
allocated aggregate profits equal to a 35% per year compounded return on
their initial capital contribution (the "Fixed Return").
After the aggregate allocated profits to each of the Partners exceeds
the Fixed Return, net profits will be allocated 65% to all Partners, pro
rata based on the number of Units owned, and 35% to the General Partner.
F-75
<PAGE> 198
NORTHEAST DBS ENTERPRISES, L.P.
T/A DIGITAL ONE TELEVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. OTHER PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Demonstration equipment..................................... $ 23,290 $ 8,966
Office furniture and equipment.............................. 339,151 220,386
Leasehold improvements...................................... 32,860 27,089
-------- --------
395,301 256,441
Less accumulated depreciation and amortization.............. 164,395 57,387
-------- --------
$230,906 $199,054
======== ========
</TABLE>
3. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Sales taxes payable......................................... $ 24,062 $ 34,847
Accrued programming fees.................................... 144,189 17,000
Accrued payroll and related expenses........................ 115,552 --
Accrued commissions......................................... 131,105 8,500
Other....................................................... 59,349 12,314
-------- --------
$474,257 $ 72,661
======== ========
</TABLE>
4. LONG-TERM NOTES PAYABLE
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Payable in monthly installments of $537 including interest
at 9.5%; final payment due in June, 1997; collateralized
by related equipment...................................... $ 8,980 $14,296
Payable in monthly installments of $520 including interest
at 10.75%; final payment due in May, 1999; collateralized
by related equipment...................................... 17,766 --
------- -------
26,746 14,296
Less current portion........................................ 10,390 5,316
------- -------
$16,356 $ 8,980
======= =======
</TABLE>
Principal payments on long-term notes payable are due as follows: Year
ending December 31, 1996 -- $10,390, 1997 -- $8,195, 1998 -- $5,631 and
1999 -- $2,530.
5. PARTNERS' EQUITY
At December 31, 1995 and 1994, warrants are outstanding to purchase 33.81
Units and 31.31 Units, respectively, of the Partnership at prices ranging from
$10,000 to $25,000 per Unit. The warrants are exercisable (except as described
in Note 7), and expire at various dates from November, 1998, through October,
2000.
6. MAJOR SUPPLIER
The Partnership purchases substantially all of its programming, inventory
and equipment held for rental from NRTC (see Note 1-a).
F-76
<PAGE> 199
NORTHEAST DBS ENTERPRISES, L.P.
T/A DIGITAL ONE TELEVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. RELATED PARTY TRANSACTIONS
The note receivable -- partner bears interest at 10%; the principal balance
and accrued interest are due on or before July 1, 1997, based on the occurrence
of certain events per the agreement.
At December 31, 1995, the Partnership has a $500,000 line of credit with a
company affiliated by common ownership and management; the agreement expires
October 1, 1996, and contains an option to extend the agreement for an
additional year. Loans outstanding, if any, bear interest at 15%. Interest
expense, commitment fees, and financing costs incurred under this agreement were
$343, $7,500 and $2,500, respectively, for the year ended December 31, 1995. As
part of the agreement, the Partnership issued to the affiliate a warrant to
purchase one Unit at a price of $25,000 which is exercisable immediately, and a
warrant to purchase 1.5 Units at a price of $25,000 per Unit exercisable as
defined in the agreement based on amounts borrowed. If the agreement is extended
to October 1, 1997, the Partnership will issue a warrant to purchase two
additional Units at a price of $25,000 per Unit exercisable as defined in the
agreement.
Companies affiliated by common ownership and management charge the
Partnership for expenses incurred by the Affiliates on behalf of the
Partnership. Total expenses of $38,008 and $63,375 were charged to the
Partnership for the years ended December 31, 1995 and 1994, respectively.
8. LEASE COMMITMENT
The Partnership leases its office facilities under a noncancelable
operating lease expiring in January, 1997; the lease contains a two-year renewal
option. Future minimum annual rentals under this lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
<S> <C>
1996...................................................... $34,661
1997...................................................... 2,896
-------
$37,557
=======
</TABLE>
Rent expense under all operating leases was $39,111 and $44,415 for the
years ended December 31, 1995 and 1994, respectively.
F-77
<PAGE> 200
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Northeast DBS Enterprises, L.P.:
We have audited the accompanying balance sheet of NORTHEAST DBS
ENTERPRISES, L.P. (a Vermont limited partnership) as of December 31, 1996 and
the related statements of operations, changes in partners' capital, and cash
flows for the year then ended. These financial statements are the responsibility
of the Partnership'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. 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 Northeast DBS Enterprises,
L.P. as of December 31, 1996 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 21, 1997
F-78
<PAGE> 201
NORTHEAST DBS ENTERPRISES, L.P.
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 128,589
Trade accounts receivable, net of allowance for doubtful
accounts of $25,061.................................... 887,547
Due from partners......................................... 35,035
Inventory................................................. 268,179
Other, net (Note 2)....................................... 341,890
----------
Total current assets.............................. 1,661,240
----------
PROPERTY AND EQUIPMENT, at cost:
Furniture and equipment................................... 483,793
Less accumulated depreciation.......................... (241,426)
----------
242,367
----------
LEASED EQUIPMENT, at cost:
Leased equipment.......................................... 934,822
Less accumulated depreciation.......................... (220,932)
----------
713,890
----------
CONTRACT RIGHTS AND OTHER ASSETS (Note 2)................... 2,967,427
----------
$5,584,924
==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable.......................................... $ 932,120
Accrued liabilities....................................... 969,781
Notes payable............................................. 1,209,917
Unearned revenue.......................................... 1,052,611
----------
Total current liabilities......................... 4,164,429
----------
OTHER LIABILITIES........................................... 140,529
----------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, and 5)
PARTNERS' CAPITAL:
Class A units, 565.72834 units issued and outstanding..... 1,279,966
Class B units, 9.5 units issued and outstanding........... --
----------
Total partners' capital........................... 1,279,966
----------
$5,584,924
==========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-79
<PAGE> 202
NORTHEAST DBS ENTERPRISES, L.P.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUE:
Programming revenue....................................... $ 6,545,998
Equipment and installation revenue........................ 3,139,093
-----------
Total revenue..................................... 9,685,091
-----------
COST OF REVENUE:
Programming expense....................................... 3,453,667
Cost of equipment and installation........................ 2,399,483
Service fees.............................................. 697,128
-----------
Total cost of revenue............................. 6,550,278
-----------
GROSS PROFIT................................................ 3,134,813
-----------
OPERATING EXPENSES:
Sales and marketing....................................... 2,804,769
General and administrative................................ 1,570,979
Depreciation and amortization............................. 592,732
-----------
Total operating expenses.......................... 4,968,480
-----------
OPERATING LOSS.............................................. (1,833,667)
-----------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (177,617)
Other income.............................................. 21,033
-----------
(156,584)
-----------
NET LOSS.................................................... $(1,990,251)
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-80
<PAGE> 203
NORTHEAST DBS ENTERPRISES, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
LIMITED PARTNERS
GENERAL ----------------------
PARTNER CLASS A CLASS B TOTAL
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995.................... $ 11,195 $ 3,259,022 $-- $ 3,270,217
Net loss.................................... (19,903) (1,970,348) -- (1,990,251)
-------- ----------- -- -----------
BALANCE, December 31, 1996.................... $ (8,708) $ 1,288,674 $-- $ 1,279,966
======== =========== == ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-81
<PAGE> 204
NORTHEAST DBS ENTERPRISES, L.P.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(1,990,251)
-----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 592,732
Amortization of capitalized debt costs and debt
discount.............................................. 12,120
Changes in operating assets and liabilities:
Accounts receivable, net............................. (525,657)
Inventory............................................ 103,616
Other, net........................................... (302,464)
Accounts payable..................................... 157,470
Accrued liabilities.................................. 495,524
Unearned revenue..................................... 804,507
-----------
Total adjustments................................. 1,337,848
-----------
Net cash used in operating activities............. (652,403)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and lease equipment,
net.................................................... (439,231)
Increase in amounts due from partners..................... --
-----------
Net cash used in investing activities............. (439,231)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable................... 1,285,000
Repayment of notes payable................................ (205,299)
Other assets.............................................. (105,117)
-----------
Net cash provided by financing activities......... 974,584
-----------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (117,050)
CASH AND CASH EQUIVALENTS at beginning of year.............. 245,639
-----------
CASH AND CASH EQUIVALENTS at end of year.................... $ 128,589
===========
SUPPLEMENTAL NONCASH FINANCING ACTIVITY:
NRTC patronage capital declared........................... $ 103,470
===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 127,531
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-82
<PAGE> 205
NORTHEAST DBS ENTERPRISES, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND NATURE OF BUSINESS
Northeast DBS Enterprises, L.P. (the "Partnership") (d.b.a. Digital One
Television) is a limited partnership organized in Vermont. The Partnership was
formed on January 1, 1993 to acquire and operate rights to distribute direct
broadcast satellite ("DBS") services ("DIRECTV Services") offered by DirecTv,
Inc. ("DirecTv"). The Partnership is a continuation of a general partnership
which was known as Northeast DBS Enterprises.
The Partnership shall continue until terminated in accordance with
provisions defined in the partnership agreement. The Partnership has a general
partner in addition to its limited partners. The limited partners may not take
part in the management of the Partnership and are not liable for any debts,
obligations or losses of the Partnership in excess of their capital
contributions and their shares of the undistributed profits.
The partnership agreement provides that net losses are allocated 99% to the
limited partners and 1% to the general partner; however, no net losses will be
allocated to a limited partner in excess of the balance of the limited partner's
capital account. Profits are allocated (1) first to those partners (the general
and limited partners collectively) who have previously been allocated losses in
proportion to the excess of the amount of such losses previously allocated to
each partner over the profits previously allocated to each partner until the
aggregate amount of profits allocated equal the aggregate amount of allocated
losses; (2) next, 100% to the partners pro rata in accordance with the number of
units owned until aggregate profits have been allocated equal $1,000 per unit
per year; (3) next, 80% to the partners, pro rata in accordance with the number
of units owned by the partners and 20% to the general partner until each of the
partners has been allocated for the current year and all prior years aggregate
profits equal to 35% per year compounded return on their initial capital
contribution (the "Fixed Return"); and (4) finally, after the aggregate of all
profits allocated to the partners exceeds the Fixed Return, 65% to the Partners
on a pro rata basis in accordance with the number of units owned by the partners
and 35% to the general partner.
The Partnership obtained the rights to distribute DIRECTV Services in
certain rural markets in Vermont and New Hampshire pursuant to agreements (the
"NRTC Member Agreements") with the National Rural Telecommunications Cooperative
("NRTC") in exchange for approximately $3.6 million.
In November 1996, the Partnership entered into an asset purchase agreement
(the "Agreement") with DTS Management, LLC ("DTS"), which was subsequently
amended by an amendment dated February 11, 1997 by and among the Partnership,
DTS and Digital Television Services of Vermont, LLC ("DTS Vermont"), a
subsidiary of DTS. DTS is a subsidiary of Digital Television Services, LLC. The
Agreement provides that DTS Vermont will purchase the Partnership's NRTC Member
Agreement and other assets used in connection with the Partnership's business,
as defined in the Agreement, and will assume certain liabilities of the
Partnership, as defined in the Agreement. The purchase price is subject to an
adjustment based on the number of subscribers and working capital at the date of
closing of the Agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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.
REVENUE RECOGNITION
The Partnership earns programming revenue by providing DIRECTV Services to
its subscribers. Programming revenue includes DIRECTV Services purchased by
subscribers in monthly, quarterly, or annual subscrip-
F-83
<PAGE> 206
NORTHEAST DBS ENTERPRISES, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
tions; additional premium programming available on an a la carte basis; sports
programming available under monthly, annual, or seasonal subscriptions; and
movies and events programming, including premium programming, available on a
pay-per-view basis. Programming purchased on a monthly, quarterly, annual, or
seasonal basis is billed in advance and is recorded as unearned revenue. All
programming revenue is recognized when earned.
Equipment and installation revenue primarily consists of the sale of DSS(R)
equipment and accessories and related installation charges. Equipment sales
revenue is recognized upon delivery of the equipment to the customer.
Installation revenue is recognized when the equipment is installed.
COST OF REVENUES
Cost of revenues includes the cost associated with providing DIRECTV
Services to the Partnership's subscribers. These costs include the direct
wholesale cost of purchasing related programming from DirecTv (through the NRTC
[Note 5]); monthly subscriber maintenance fees charged by DirecTV, such as
security fees, ground service fees, system authorization fees, and fees for
subscriber billings; costs of equipment sold; and certain subscriber operating
costs.
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The carrying amount
approximates fair value due to the relatively short period to maturity of these
instruments.
INVENTORIES
The Partnership maintains inventories consisting of DSS(R) equipment and
related accessories. Inventory is valued at the lower of cost or market,
generally on a specific identification basis.
OTHER CURRENT ASSETS
Other current assets consist of the following at December 31, 1996:
<TABLE>
<S> <C>
Deferred promotional costs, net............................. $310,667
Other....................................................... 31,223
--------
$341,890
========
</TABLE>
Deferred promotional costs consist of costs related to a subscriber rebate
program sponsored by DirecTv. Under the program, new subscribers who agree to
prepay for one year of programming service receive a credit which can be applied
toward equipment or programming. The Partnership defers the cost of credit and
amortizes it over the one-year contract period. In addition, as a part of this
program, the Partnership receives $1 per month up to five years from the NRTC
for each subscriber whose account remains active. Such amounts are recorded as
received as a reduction in selling expenses in the accompanying statement of
operations.
PROPERTY AND EQUIPMENT AND LEASED EQUIPMENT
Property and equipment and leased equipment are stated at cost. Major
property additions, replacements, and betterments are capitalized, while
maintenance and repairs which do not extend the useful lives of these assets are
expensed currently. Depreciation for property and equipment and leased equipment
is provided using the straight-line method over the estimated useful lives of
the respective assets, ranging from three to seven years. Depreciation expense
for the year ended December 31, 1996 was $219,763. Upon retirement or disposal
of
F-84
<PAGE> 207
NORTHEAST DBS ENTERPRISES, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
assets, the cost and related accumulated depreciation are removed from the
balance sheet and any gain or loss is reflected in earnings.
At December 31, 1996, future minimum rental revenues to be received from
operating leases of DSS(R) equipment are due as follows:
<TABLE>
<S> <C>
1997........................................................ $ 411,742
1998........................................................ 403,821
1999........................................................ 327,002
2000........................................................ 67,754
----------
$1,210,319
==========
</TABLE>
CONTRACT RIGHTS AND OTHER ASSETS
Contract rights and other assets consist of the following at December 31,
1996:
<TABLE>
<S> <C>
Contract rights............................................. $3,624,514
Organization costs.......................................... 34,292
----------
3,658,806
Accumulated amortization.................................... (939,563)
----------
2,719,243
NRTC patronage capital...................................... 140,529
Debt issuance costs, net.................................... 103,215
Other....................................................... 4,440
----------
$2,967,427
==========
</TABLE>
Contract Rights: Contract rights represent the cost of acquiring rights to
distribute DIRECTV Services. Contract rights are being amortized over ten years,
the estimated remaining useful life of the satellites operated by DirecTv which
provide service under the related contracts. Amortization expense, included in
depreciation and amortization in the accompanying statement of operations, for
the year ended December 31, 1996 was $362,451. Accumulated amortization at
December 31, 1996 was $906,127.
Organization Costs: Organization costs are costs associated with the
formation of the Partnership and are being amortized over five years.
Amortization expense, included in depreciation and amortization in the
accompanying statement of operations, for the year ended December 31, 1996 was
$10,518. Accumulated amortization at December 31, 1996 was $33,436.
Debt Issuance Costs: Debt issuance costs are amortized over the term of
the related long-term debt facility. Amortization expense, included in interest
expense in the accompanying statement of operations, for the year ended December
31, 1996 was $12,120 and accumulated amortization at December 31, 1996 was
$12,120.
NRTC Patronage Capital: The Partnership is an affiliate of the NRTC. While
affiliates have no vote, they do have an interest in the NRTC in proportion to
their prior patronage. NRTC patronage capital represents the noncash portion of
NRTC patronage income. Under its bylaws, the NRTC declares a patronage dividend
of its excess of revenues over expenses each year. Of the total patronage
dividend, 20% is paid in cash and is recognized as income when received and is
netted against programming expense in the accompanying statement of operations.
The remaining 80% is distributed in the form of noncash patronage capital, which
will be redeemed in cash only at the discretion of the NRTC. The Partnership
includes noncash patronage capital as other assets, with an offsetting deferred
patronage income amount included in other liabilities in the accompanying
balance sheet. The patronage capital will be recognized as income when cash
distributions are declared by the NRTC.
F-85
<PAGE> 208
NORTHEAST DBS ENTERPRISES, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1996:
<TABLE>
<S> <C>
Accrued programming expense................................. $325,462
Accrued salaries and wages.................................. 251,128
Accrued commissions......................................... 132,717
Other....................................................... 260,474
--------
$969,781
========
</TABLE>
INCOME TAXES
The Partnership is not considered a taxable entity for federal and state
income tax purposes. All taxable income or loss is allocated to the partners in
accordance with the terms of the partnership agreement. Accordingly, no
provision for income taxes is included in the accompanying financial statements.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk with respect to accounts receivable is limited
due to the large number of subscribers. As a result, at December 31, 1996,
management does not believe any significant concentration of credit risk exists.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. When
events or changes in circumstances occur related to long-lived assets,
management estimates the future cash flows expected to result from the use of
the asset and its eventual disposition. Having found no instances whereby the
sum of expected future cash flows (undiscounted and without interest charges)
was less than the carrying amount of the asset and thus requiring the
recognition of an impairment loss, management believes that the long-lived
assets in the accompanying balance sheet are appropriately valued.
3. COMMITMENTS AND CONTINGENCIES
LEASES
The Partnership leases office and warehouse space and certain equipment
under noncancelable operating leases which expire through 1999. Future minimum
lease payments for noncancelable operating leases in effect at December 31, 1996
are as follows:
<TABLE>
<S> <C>
1997........................................................ $46,430
1998........................................................ 38,211
1999........................................................ 2,958
-------
Total future minimum lease payments............... $87,599
=======
</TABLE>
Rental expense charged to general and administrative expenses in the
accompanying statement of operations for the year ended December 31, 1996
totaled $34,760.
F-86
<PAGE> 209
NORTHEAST DBS ENTERPRISES, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
WARRANTS
The Partnership has issued warrants to purchase 34.31 partnership units at
prices ranging from $10,000 to $25,000 per unit at December 31, 1996, no
warrants had been exercised.
NRTC
As part of the NRTC Member Agreements, the Partnership is required to pay
certain fees based on a minimum number of subscribers beginning in the fourth
year of operations of the NRTC Member Agreement. The Partnership has achieved
the minimum subscriber requirement at December 31, 1996.
LITIGATION
The Partnership is involved in certain litigation arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
these matters will not have a material adverse effect on the Partnership's
financial position or results of operations.
4. NOTES PAYABLE
In October 1995, the Partnership entered into a credit agreement with one
of its limited partners providing for borrowings up to $500,000 through October
1, 1996 with interest at 15%. No borrowings were made under this agreement;
however, the limited partner was given warrants related to this agreement. No
warrants were exercised under this agreement. The Partnership paid commitment
fees of $22,500 to the limited partner under this agreement during 1996.
In August 1996, the Partnership entered into a loan agreement with a bank
in the form of a $500,000 line of credit ("LOC") and a $500,000 overline credit
facility ("OL Facility"). No borrowings were outstanding under the OL Facility
at year-end. Borrowings outstanding under the LOC at December 31, 1996 were
$434,900 and bear interest at 10.25%. Borrowings under the LOC became current at
year-end due to the pending change in ownership under the Agreement (Note 1). As
part of the LOC and OL Facility, the Company issued warrants to the bank which
can be exercised for 2 partnership units at a price of $25,000 per unit. No
warrants had been exercised at December 31, 1997 (Note 3).
The Partnership obtained a $750,000 loan from a financing company at an
interest rate of 18%. Outstanding borrowings under this agreement were $655,180
at December 31, 1996. As part of this agreement, the Partnership also discounted
certain subscriber equipment leases with the financing company. Subsequent to
year-end, the Partnership repaid $758,650 to the financing company, representing
the outstanding loan balance as well as the settlement of the outstanding
leases. The lease liability of $103,470 is also included in notes payable at
December 31, 1996.
At December 31, 1996, the Partnership also had $16,367 in outstanding notes
payable with interest rates ranging from 9.5% to 10.75% and payable in monthly
installments.
All outstanding notes payable and lease obligations are included as current
liabilities in the accompanying balance sheet. The carrying amount of notes
payable approximates fair value due to the relatively short period to maturity
of these instruments.
5. RELIANCE ON DIRECTV AND THE NRTC AND OTHER MATTERS
The NRTC has contracted with third parties to provide the NRTC members with
certain services, including billing services and centralized remittance
processing services. The NRTC bills the Partnership for these services on a
monthly basis. These fees are recorded as service fees in the accompanying
statement of operations. The NRTC also sells DSS(R) equipment to its members.
Because the Partnership is, through the NRTC, a distributor of DIRECTV
Services, the Partnership would be adversely affected by any material adverse
changes in the assets, financial condition, programming, technological
capabilities, or services of DirecTv or its parent corporation, Hughes
Communication Galaxy, Inc. ("Hughes"),
F-87
<PAGE> 210
NORTHEAST DBS ENTERPRISES, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
including DirecTv's failure to retain or renew its Federal Communication
Commission ("FCC") licenses to transmit radio frequency signals from the orbital
slots occupied by its satellites.
The NRTC is a cooperative organization whose members are engaged in the
distribution of telecommunications and other services in predominantly rural
areas of the United States. Pursuant to an agreement between the NRTC and Hughes
(the "Hughes Agreement") and the NRTC Member Agreements, participating NRTC
members acquired the exclusive rights to provide DIRECTV Services to residential
and commercial subscribers in certain rural DirecTv markets. In general, upon
default by the NRTC under the Hughes Agreement, the Partnership would have the
right to acquire DIRECTV Services directly from DirecTv. The NRTC has contracted
with third parties to provide the NRTC members with certain services, including
billing services and centralized remittance processing services. If the NRTC is
unable to provide these services for whatever reason, the Partnership would be
required to acquire the services from other sources. There can be no assurance
that the cost to the Partnership to obtain these services elsewhere would not
exceed the amounts currently payable to the NRTC.
The Partnership would also be adversely affected by the termination of the
NRTC Member Agreements by the NRTC prior to the expiration of their respective
terms. If the NRTC Member Agreements are terminated by the NRTC, the Partnership
would no longer have the right to provide DIRECTV Services. There can be no
assurance that the Partnership would be able to obtain similar DBS services from
other sources.
Both the Hughes Agreement and the NRTC Member Agreements expire when Hughes
removes its current satellites from their assigned orbital locations. Although,
according to Hughes, the three DirecTv satellites have estimated orbital lives
of approximately 15 years from their respective launches in December 1993 and
1994, there can be no assurance as to the longevity of the satellites and thus
no assurance as to how long the Partnership will be able to continue to acquire
DBS services pursuant to the NRTC Member Agreements.
While the Partnership believes that it will have access to DIRECTV Services
following the expiration of the current Hughes Agreement by virtue of the NRTC's
right of first refusal in the Hughes Agreement and the Partnership's existing
contractual and membership relationship with the NRTC, there can be no assurance
that such services will be available to the Partnership from Hughes or the NRTC;
and, if available, there can be no assurance with regard to the financial and
other terms under which the Partnership could acquire the services.
The Partnership's DBS business is a new business with a limited operating
history. There are numerous risks associated with satellite transmission
technology. There can be no assurance as to the longevity of the satellites or
that loss, damage, or changes in the satellites will not occur and have a
material adverse effect on DirecTv and the Partnership's DBS business.
DirecTv, and therefore the Partnership, is dependent on third parties to
provide high-quality programming that appeals to mass audiences. DirecTv's
programming agreements have terms which expire on various dates and different
renewal and cancellation provisions. There can be no assurance that any such
agreements will be renewed or will not be canceled prior to expiration of their
original terms.
DBS operators, such as DirecTv, are free to set prices and serve
subscribers according to their business judgment, without rate of return and
other regulation. However, DirecTv is subject to the regulatory jurisdiction of
the FCC.
F-88
<PAGE> 211
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Pee Dee
Electricom, Inc.:
We have audited the accompanying statements of assets and liabilities and
accumulated deficit of the DBS OPERATIONS OF NRTC SYSTEM NO. 0001 (an
unincorporated division of Pee Dee Electricom, Inc., a South Carolina
corporation) as of December 31, 1995 and November 26, 1996 and the related
statements of expenses over revenues and changes in accumulated deficit and cash
flows for the year ended December 31, 1995 and for the period from January 1,
1996 through November 26, 1996. These financial statements are the
responsibility of the System's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the DBS Operations of NRTC
System No. 0001 as of December 31, 1995 and November 26, 1996 and the results of
its operations and its cash flows for the year ended December 31, 1995 and for
the period from January 1, 1996 through November 26, 1996 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 4, 1997
F-89
<PAGE> 212
DBS OPERATIONS OF NRTC SYSTEM NO. 0001
STATEMENTS OF ASSETS AND LIABILITIES AND ACCUMULATED DEFICIT
DECEMBER 31, 1995 AND NOVEMBER 26, 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 114,485 $ 166,325
Trade accounts receivable net of allowance for doubtful
accounts of $5,200 and $17,396 at December 31, 1995 and
November 26, 1996, respectively........................ 147,506 306,305
Inventory................................................. 155,425 51,758
Deferred promotional costs, net (Note 2).................. -- 39,000
---------- ----------
Total current assets.............................. 417,416 563,388
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Furniture and equipment................................... 6,636 19,441
Less accumulated depreciation.......................... (2,262) (6,394)
---------- ----------
4,374 13,047
---------- ----------
CONTRACT RIGHTS AND OTHER ASSETS (Note 2)................... 1,515,920 1,371,940
---------- ----------
$1,937,710 $1,948,375
========== ==========
LIABILITIES AND ACCUMULATED DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 247,227 $ 186,027
Accrued liabilities....................................... 17,449 13,685
Related-party payable..................................... 1,757,438 1,757,438
Unearned revenue.......................................... 76,755 171,899
---------- ----------
Total current liabilities......................... 2,098,869 2,129,049
---------- ----------
OTHER LIABILITIES........................................... 7,450 24,572
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 2, 4, and 5)
ACCUMULATED DEFICIT......................................... (168,609) (205,246)
---------- ----------
$1,937,710 $1,948,375
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
F-90
<PAGE> 213
DBS OPERATIONS OF NRTC SYSTEM NO. 0001
STATEMENTS OF EXPENSES OVER REVENUES
AND CHANGES IN ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD FROM JANUARY 1, 1996 THROUGH
NOVEMBER 26, 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
REVENUE:
Programming revenue....................................... $ 626,029 $1,442,380
Equipment and installation revenue........................ 386,519 161,474
---------- ----------
Total revenue..................................... 1,012,548 1,603,854
---------- ----------
COST OF REVENUE:
Programming expense....................................... 293,071 727,843
Cost of equipment and installation........................ 317,205 164,689
Service fees.............................................. 56,039 113,253
---------- ----------
Total cost of revenue............................. 666,315 1,005,785
---------- ----------
GROSS PROFIT................................................ 346,233 598,069
---------- ----------
OPERATING EXPENSES:
Sales and marketing....................................... 64,084 110,926
General and administrative................................ 181,950 358,546
Depreciation and amortization............................. 177,275 165,234
---------- ----------
Total operating expenses.......................... 423,309 634,706
---------- ----------
EXPENSES OVER REVENUES...................................... (77,076) (36,637)
ACCUMULATED DEFICIT at beginning of period.................. (91,533) (168,609)
---------- ----------
ACCUMULATED DEFICIT at end of period........................ $ (168,609) $ (205,246)
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-91
<PAGE> 214
DBS OPERATIONS OF NRTC SYSTEM NO. 0001
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD FROM JANUARY 1, 1996 THROUGH
NOVEMBER 26, 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Expenses over revenues.................................... $(77,076) $(36,637)
-------- --------
Adjustments to reconcile expenses over revenues to net
cash provided
by operating activities:
Depreciation and amortization........................ 177,275 165,234
Amortization of deferred promotional costs........... -- 7,800
Changes in operating assets and liabilities:
Trade accounts receivable, net.................... (115,007) (158,799)
Inventory......................................... 145,296 103,667
Deferred promotional costs........................ -- (46,800)
Accounts payable.................................. (102,138) (61,200)
Accrued liabilities............................... 12,405 (3,764)
Unearned revenue.................................. 69,948 95,144
-------- --------
Total adjustments............................ 187,779 101,282
-------- --------
Net cash provided by operating activities.... 110,703 64,645
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (198) (12,805)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 110,505 51,840
CASH AND CASH EQUIVALENTS at beginning of period............ 3,980 114,485
-------- --------
CASH AND CASH EQUIVALENTS at end of period.................. $114,485 $166,325
======== ========
SUPPLEMENTAL NONCASH FINANCING ACTIVITY:
NRTC patronage capital declared........................... $ 7,450 $ 17,122
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-92
<PAGE> 215
DBS OPERATIONS OF NRTC SYSTEM NO. 0001
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND NOVEMBER 26, 1996
1. ORGANIZATION AND NATURE OF BUSINESS
The DBS Operations of NRTC System No. 0001 (the "System") is an
unincorporated division of Pee Dee Electricom, Inc. ("Pee Dee"), a South
Carolina corporation. Pee Dee is a wholly-owned subsidiary of Pee Dee Electric
Cooperative, Inc. ("Pee Dee EC"), a South Carolina cooperative association (Pee
Dee and Pee Dee EC collectively referred to as the "Sellers"). The System
operates the exclusive rights to distribute direct broadcast satellite ("DBS")
services ("DIRECTV Services") offered by DirecTv, Inc. ("DirecTv") in certain
rural markets in South Carolina. The accompanying financial statements present
the financial position and excess of expenses over revenues of the System.
The Sellers obtained the rights to distribute DIRECTV Services in the
System's territory pursuant to an agreement (the "NRTC Member Agreement") with
the National Rural Telecommunications Cooperative ("NRTC"). Under the provisions
of the NRTC Member Agreement, Pee Dee has the exclusive right to provide DIRECTV
Services within certain rural territories in South Carolina.
In October 1996, the Sellers entered into an asset purchase agreement (the
"Agreement") with Digital Television Services of South Carolina I, LLC ("DTS
SCI"), a subsidiary of DTS Management, LLC ("DTS"). DTS is a subsidiary of
Digital Television Services, LLC. The agreement provides that DTS SCI will
purchase Pee Dee's NRTC Member Agreement and other assets used in connection
with the System's business, as defined in the Agreement, and will assume certain
liabilities of the System, as defined in the Agreement. The purchase price was
subject to an adjustment for working capital at the date of closing of the
Agreement and new subscribers acquired by the Sellers between November 1, 1996
through the date of the closing of the Agreement. The closing date of the
Agreement was November 26, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION
The System is not a separate subsidiary of Pee Dee nor has it been operated
as a separate division of Pee Dee. The financial statements of the System have
been derived from the records of Pee Dee and have been prepared to present its
financial position, excess of expenses over revenues, and cash flows on a
stand-alone basis. Accordingly, the accompanying financial statements include
certain costs and expenses which have been allocated to the System from Pee Dee
EC. Such allocated expenses may not be indicative of what such expenses would
have been had the System been operated as a separate entity.
REVENUE RECOGNITION
The System earns programming revenue by providing DIRECTV Services to its
subscribers. Programming revenue includes DIRECTV Services purchased by
subscribers in monthly, quarterly, or annual subscriptions; additional premium
programming available on an a la carte basis; sports programming available under
monthly, annual, or seasonal subscriptions; and movies and events programming
available on a pay-per-view basis. Programming purchased on a monthly,
quarterly, annual, or seasonal basis, including premium programming, is billed
in advance and is recorded as unearned revenue. All programming revenue is
recognized when earned.
Equipment and installation revenue primarily consists of the sale of DSS(R)
equipment and accessories and related installation charges. Equipment revenue is
recognized upon delivery of the equipment to the customer. Installation revenue
is recognized when the equipment is installed.
F-93
<PAGE> 216
DBS OPERATIONS OF NRTC SYSTEM NO. 0001
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COST OF REVENUES
Cost of revenues includes the cost associated with providing DIRECTV
Services to the System's subscribers. These costs include the direct wholesale
cost of purchasing related programming from DirecTv (through the NRTC [Note 5]);
monthly subscriber maintenance fees charged by DirecTv, such as security fees,
ground service fees, system authorization fees, and fees for subscriber
billings; costs of equipment sold; and certain subscriber operating costs.
INVENTORIES
The System maintains inventories consisting of DSS(R) equipment and related
accessories. Inventory is valued at the lower of cost or market, generally on a
specific identification basis.
DEFERRED PROMOTIONAL COSTS
Deferred promotional costs consist of costs deferred under a subscriber
rebate program sponsored by DirecTv. Under the program, new subscribers who
agree to prepay for one year of programming service receive a credit which can
be applied toward equipment or programming. The System defers the cost of this
credit and amortizes it over the one-year contract period. In addition, as a
part of this program, the System receives $1 per month from DirecTv for each
customer for each month the subscriber remains an active subscriber up to five
years. Such amounts are recorded as a reduction in sales and marketing expense
in the accompanying statements of expenses over revenues and changes in
accumulated deficit.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major property additions,
replacements, and betterments are capitalized, while maintenance and repairs
which do not extend the useful lives of these assets are expensed currently.
Depreciation for property and equipment is provided using the straight-line
method over the estimated useful lives of the respective assets, ranging from
three to five years. Depreciation expense for the year ended December 31, 1995
and for the period from January 1, 1996 through November 26, 1996 was $1,531 and
$4,132, respectively. Upon retirement or disposal of assets, the cost and
related accumulated depreciation are removed from the statements of assets and
liabilities and accumulated deficit and any gain or loss is reflected in
earnings.
CONTRACT RIGHTS AND OTHER ASSETS
Contract rights and other assets consist of the following at December 31,
1995 and November 26, 1996:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Contract rights..................................... $1,757,438 $1,757,438
Accumulated amortization............................ (248,968) (410,070)
---------- ----------
1,508,470 1,347,368
NRTC patronage capital.............................. 7,450 24,572
---------- ----------
$1,515,920 $1,371,940
========== ==========
</TABLE>
Contract Rights: Contract rights represent the cost of acquiring rights to
distribute DIRECTV Services. Contract rights are being amortized over ten years,
the estimated remaining useful life of the satellites operated by DirecTv which
provide service under the related contracts. Amortization expense, included in
depreciation and amortization in the accompanying statements of expenses over
revenues and changes in accumulated deficit, for the year ended December 31,
1995 and for the period from January 1, 1996 through November 26, 1996 was
$175,744 and $161,102, respectively.
F-94
<PAGE> 217
DBS OPERATIONS OF NRTC SYSTEM NO. 0001
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NRTC Patronage Capital: Pee Dee EC is a voting member of the NRTC with an
ownership interest in the NRTC in proportion to its prior patronage. NRTC
patronage certificates represent the noncash portion of NRTC patronage income.
Under its bylaws, the NRTC declares a patronage dividend of its excess of
revenues over expenses each year. Of the total patronage dividend, 20% is paid
in cash and is recognized as income when received and is netted against
programming expense in the accompanying statement of expenses over revenues and
changes in accumulated deficit. The remaining 80% is distributed in the form of
noncash patronage capital, which will be redeemed in cash only at the discretion
of the NRTC. The System includes noncash patronage capital as other assets, with
an offsetting deferred patronage income amount included in other liabilities in
the accompanying statements of assets and liabilities and accumulated deficit.
The patronage capital will be recognized as income when cash distributions are
declared by the NRTC.
INCOME TAXES
Pee Dee, and thus the System, is not considered a taxable entity for
federal and state income tax purposes as it is a not-for-profit corporation.
Accordingly, no provision for income taxes is included in the accompanying
financial statements.
CASH AND CASH EQUIVALENTS
The System considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The carrying amount
approximates fair value due to the relatively short period to maturity of these
instruments.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk with respect to accounts receivable is limited
due to the large number of subscribers. As a result, at November 26, 1996,
management does not believe any significant concentration of credit risk exists.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. When
events or changes in circumstances occur related to long-lived assets,
management estimates the future cash flows expected to result from the use of
the asset and its eventual disposition. Having found no instances whereby the
sum of expected future cash flows (undiscounted and without interest charges)
was less than the carrying amount of the asset and thus requiring the
recognition of an impairment loss, management believes that the long-lived
assets in the accompanying statements of assets and liabilities and accumulated
deficit are appropriately valued.
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 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.
3. RELATED-PARTY TRANSACTIONS
Certain administrative services are performed by Pee Dee EC on behalf of
the System. Costs attributable to these support functions are included in
general and administrative expenses in the accompanying statements of
F-95
<PAGE> 218
DBS OPERATIONS OF NRTC SYSTEM NO. 0001
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
expenses over revenues and changes in accumulated deficit. The costs allocated
to the System were approximately $64,000 and $124,000 for the year ended
December 31, 1995 and the period from January 1, 1996 through November 26, 1996,
respectively. Such allocations do not necessarily represent actual and/or
ongoing expenses of the System.
Pee Dee EC either advances funds to or borrows funds from the System.
Included in the accompanying statements of assets and liabilities and
accumulated deficit is a net payable to Pee Dee EC representing amounts due for
the initial purchase of contract rights and net operating activities as funds by
Pee Dee EC.
4. COMMITMENTS AND CONTINGENCIES
As part of the NRTC Member Agreements, the System is required to pay
certain fees based on a minimum number of subscribers beginning in the fourth
year of operations of the NRTC Member Agreement. The System had achieved
approximately 75% of the minimum subscriber requirement at December 31, 1996.
Based on the subscriber growth rate of the System to date, management
anticipates that the System will meet the minimum subscriber requirement prior
to the fourth year of operations of the NRTC Member Agreements.
5. RELIANCE ON DIRECTV AND NRTC AND OTHER MATTERS
The NRTC has contracted with third parties to provide the NRTC members with
certain services, including billing services and centralized remittance
processing services. The NRTC bills the System for these services on a monthly
basis. These fees are recorded as service fees in the accompanying statements of
expenses over revenues and changes in accumulated deficit. The NRTC also sells
DSS(R) Equipment to its members.
Because the System is, through the NRTC, a distributor of DIRECTV Services,
the System would be adversely affected by any material adverse changes in the
assets, financial condition, programming, technological capabilities, or
services of DirecTv or its parent corporation, Hughes Communication Galaxy, Inc.
("Hughes"), including DirecTv's failure to retain or renew its Federal
Communication Commission ("FCC") licenses to transmit radio frequency signals
from the orbital slots occupied by its satellites.
The NRTC is a cooperative organization whose members are engaged in the
distribution of telecommunications and other services in predominantly rural
areas of the United States. Pursuant to an agreement between the NRTC and Hughes
(the "Hughes Agreement") and the NRTC Member Agreements, participating NRTC
members acquired the exclusive rights to provide DIRECTV Services to residential
and commercial subscribers in certain rural DirecTv markets. In general, upon
default by the NRTC under the Hughes Agreement, the System would have the right
to acquire DIRECTV Services directly from DirecTv. The NRTC has contracted with
third parties to provide the NRTC members with certain services, including
billing services and centralized remittance processing services. If the NRTC is
unable to provide these services for whatever reason, the System would be
required to acquire the services from other sources. There can be no assurance
that the cost to the System to obtain these services elsewhere would not exceed
the amounts currently payable to the NRTC.
The System would also be adversely affected by the termination of the NRTC
Member Agreements by the NRTC prior to the expiration of their respective terms.
If the NRTC Member Agreements are terminated by the NRTC, the System would no
longer have the right to provide DIRECTV Services. There can be no assurance
that the System would be able to obtain similar DBS services from other sources.
Both the Hughes Agreement and the NRTC Member Agreements expire when Hughes
removes its current satellites from their assigned orbital locations. Although,
according to Hughes, the three DirecTv satellites have estimated orbital lives
of approximately 15 years from their respective launches in December 1993 and
1994, there can be no assurance as to the longevity of the satellites and thus
no assurance as to how long the System will be able to continue to acquire DBS
services pursuant to the NRTC Member Agreements.
F-96
<PAGE> 219
DBS OPERATIONS OF NRTC SYSTEM NO. 0001
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
While management believes that it will have access to DIRECTV Services
following the expiration of the current Hughes Agreement by virtue of the NRTC's
right of first refusal in the Hughes Agreement and the System's existing
contractual and membership relationship with the NRTC, there can be no assurance
that such services will be available to the System from Hughes or the NRTC, and,
if available, there can be no assurance with regard to the financial and other
terms under which the System could acquire the services.
The System's DBS business is a new business with a limited operating
history. There are numerous risks associated with satellite transmission
technology. There can be no assurance as to the longevity of the satellites or
that loss, damage, or changes in the satellites will not occur and have a
material adverse effect on DirecTv and the System's DBS business.
DirecTv, and therefore the System, is dependent on third parties to provide
high-quality programming that appeals to mass audiences. DirecTv's programming
agreements have terms which expire on various dates and different renewal and
cancellation provisions. There can be no assurance that any such agreements will
be renewed or will not be canceled prior to expiration of their original terms.
DBS operators, such as DirecTv, are free to set prices and serve
subscribers according to their business judgment, without rate of return and
other regulation. However, DirecTv is subject to the regulatory jurisdiction of
the FCC.
F-97
<PAGE> 220
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Teg DBS
Services, Inc.:
We have audited the accompanying statements of assets and liabilities and
accumulated deficit of the DBS OPERATIONS OF NRTC SYSTEM NO. 1025 (an
unincorporated division of Teg DBS Services, Inc., a Nevada corporation) as of
December 31, 1995 and August 28, 1996 and the related statements of expenses
over revenues and changes in accumulated deficit and cash flows for the period
from March 10, 1995 (inception) through December 31, 1995 and the period from
January 1, 1996 through August 28, 1996. These financial statements are the
responsibility of the System's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the DBS Operations of NRTC
System No. 1025 as of December 31, 1995 and August 28, 1996 and the results of
its operations and its cash flows for the period from March 10, 1995 (inception)
through December 31, 1995 and the period from January 1, 1996 through August 28,
1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 4, 1997
F-98
<PAGE> 221
DBS OPERATIONS OF NRTC SYSTEM NO. 1025
STATEMENTS OF ASSETS AND LIABILITIES AND ACCUMULATED DEFICIT
DECEMBER 31, 1995 AND AUGUST 28, 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 100,158 $ 59,247
Accounts receivable:
Trade.................................................. 99,759 112,598
Other, net............................................. 48,226 37,111
---------- ----------
Total current assets.............................. 248,143 208,956
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Furniture and equipment................................... 4,694 6,895
Less accumulated depreciation.......................... (931) (2,261)
---------- ----------
3,763 4,634
---------- ----------
CONTRACT RIGHTS AND OTHER ASSETS (Note 2)................... 2,609,648 2,326,613
---------- ----------
$2,861,554 $2,540,203
========== ==========
LIABILITIES AND ACCUMULATED DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 325,704 $ 262,887
Accrued liabilities....................................... 13,602 --
Related-party payable..................................... 1,367,206 2,080,169
Unearned revenue.......................................... -- 63,323
Current maturities of note payable........................ 800,000 840,000
---------- ----------
Total current liabilities......................... 2,506,512 3,246,379
---------- ----------
LONG-TERM NOTE PAYABLE...................................... 800,000 --
COMMITMENTS AND CONTINGENCIES (Notes 2, 5 and 6)
ACCUMULATED DEFICIT......................................... (444,958) (706,176)
---------- ----------
$2,861,554 $2,540,203
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
F-99
<PAGE> 222
DBS OPERATIONS OF NRTC SYSTEM NO. 1025
STATEMENTS OF EXPENSES OVER REVENUES
AND CHANGES IN ACCUMULATED DEFICIT
FOR THE PERIOD FROM MARCH 10, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995
AND THE PERIOD FROM JANUARY 1, 1996 THROUGH AUGUST 28, 1996
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
REVENUE:
Programming revenue....................................... $ 486,108 $ 689,229
Equipment and installation revenue........................ 219,962 --
--------- ---------
Total revenue..................................... 706,070 689,229
--------- ---------
COST OF REVENUE:
Programming expense....................................... 243,206 340,218
Cost of equipment and installation........................ 201,964 --
Service fees.............................................. 48,459 67,789
--------- ---------
Total cost of revenue............................. 493,629 408,007
--------- ---------
GROSS PROFIT................................................ 212,441 281,222
--------- ---------
OPERATING EXPENSES:
Sales and marketing....................................... 29,057 38,604
General and administrative................................ 217,625 141,965
Depreciation and amortization............................. 264,289 288,630
--------- ---------
Total operating expenses 510,971 469,199
--------- ---------
OPERATING LOSS.............................................. (298,530) (187,977)
--------- ---------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (146,428) (80,146)
Other income.............................................. -- 6,905
--------- ---------
(146,428) (73,241)
--------- ---------
EXPENSES OVER REVENUES...................................... (444,958) (261,218)
ACCUMULATED DEFICIT at beginning of period.................. -- (444,958)
--------- ---------
ACCUMULATED DEFICIT at end of period........................ $(444,958) $(706,176)
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-100
<PAGE> 223
DBS OPERATIONS OF NRTC SYSTEM NO. 1025
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM MARCH 10, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995
AND THE PERIOD FROM JANUARY 1, 1996 THROUGH AUGUST 28, 1996
<TABLE>
<CAPTION>
1995 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Expenses over revenues.................................... $ (444,958) $(261,218)
----------- ---------
Adjustments to reconcile expenses over revenues to net
cash provided by operating activities:
Depreciation and amortization.......................... 264,289 288,630
Changes in operating assets and liabilities:
Trade accounts receivable, net....................... (99,759) (12,839)
Other assets......................................... (48,226) 11,115
Related-party payable................................ 1,367,206 712,963
Accounts payable..................................... 325,704 (62,817)
Accrued liabilities.................................. 13,602 (13,602)
Unearned revenue..................................... -- 63,323
----------- ---------
Total adjustments................................. 1,822,816 986,773
----------- ---------
Net cash provided by operating activities......... 1,377,858 725,555
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (4,694) (2,201)
Increase in other assets.................................. (2,873,006) (4,265)
----------- ---------
Net cash used in investing activities............. (2,877,700) (6,466)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes payable................................. 1,600,000 --
Repayment of notes payable................................ -- (760,000)
----------- ---------
Net cash provided by (used in) financing
activities...................................... 1,600,000 (760,000)
----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 100,158 (40,911)
CASH AND CASH EQUIVALENTS at beginning of period............ -- 100,158
----------- ---------
CASH AND CASH EQUIVALENTS at end of period.................. $ 100,158 $ 59,247
=========== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest............................ $ 146,428 $ 80,146
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-101
<PAGE> 224
DBS OPERATIONS OF NRTC SYSTEM NO. 1025
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND AUGUST 28, 1996
1. ORGANIZATION AND NATURE OF BUSINESS
The DBS Operations of NRTC System No. 1025 (the "System") is an
unincorporated division of Teg DBS Services, Inc. ("Teg"), a Nevada corporation,
which began operations March 10, 1995. The System operates the exclusive rights
to distribute direct broadcast satellite ("DBS") services ("DIRECTV Services")
offered by DirecTv, Inc. ("DirecTv") in certain rural markets in New Mexico. The
accompanying financial statements present the financial position and excess of
expenses over revenues of the System.
Teg obtained the rights to distribute DIRECTV Services in the System's
territory pursuant to an agreement (the "NRTC Member Agreement") with the
National Rural Telecommunications Cooperative ("NRTC"). Under the provisions of
the NRTC Member Agreement, Teg has the exclusive right to provide DIRECTV
Services within certain rural territories in New Mexico.
In June 1996, Teg entered into an asset purchase agreement (the
"Agreement") with Digital Television Services of New Mexico, LLC ("DTS New
Mexico"), a subsidiary of DTS Management, LLC ("DTS"). DTS is a subsidiary of
Digital Television Services, LLC (a Delaware limited liability company). The
Agreement provides that DTS New Mexico will purchase Teg's NRTC Member Agreement
and other assets used in connection with the System's business, as defined in
the Agreement, and will assume certain liabilities of the System, as defined in
the Agreement, for a purchase price which is subject to an adjustment for
working capital at the date of closing of the Agreement. The closing date of the
Agreement was August 28, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION
The System is not a separate subsidiary of Teg nor has it been operated as
a separate division of Teg. The financial statements of the System have been
derived from the records of Teg and have been prepared to present its financial
position, excess of expenses over revenues and changes in accumulated deficit,
and cash flows on a stand-alone basis. Accordingly, the accompanying financial
statements include certain costs and expenses which have been allocated to the
System from Teg. Such allocated expenses may not be indicative of what such
expenses would have been had the System been operated as a separate entity.
REVENUE RECOGNITION
The System earns programming revenue by providing DIRECTV Services to its
subscribers. Programming revenue includes DIRECTV Services purchased by
subscribers in monthly, quarterly, or annual subscriptions; additional premium
programming available on an a la carte basis; sports programming available under
monthly, annual, or seasonal subscriptions; and movies and events programming
available on a pay-per-view basis. Programming purchased on a monthly,
quarterly, annual, or seasonal basis, including premium programming, is billed
in advance and is recorded as unearned revenue. All programming revenue is
recognized when earned.
Equipment and installation revenue primarily consists of the sale of DSS(R)
equipment and accessories and related installation charges. Equipment revenue is
recognized upon delivery of the equipment to the customer. Installation revenue
is recognized when the equipment is installed.
COST OF REVENUES
Cost of revenues includes the cost associated with providing DIRECTV
Services to the System's subscribers. These costs include the direct wholesale
cost of purchasing related programming from DirecTv (through the NRTC [Note 6]);
monthly subscriber maintenance fees charged by DirecTv, such as security fees,
ground service fees, system authorization fees, and fees for subscriber
billings; costs of equipment sold; and certain subscriber operating costs.
INVENTORIES
The System maintains inventories consisting of DSS(R) equipment and related
accessories. Inventory is valued at the lower of cost or market, generally on a
specific identification basis.
F-102
<PAGE> 225
DBS OPERATIONS OF NRTC SYSTEM NO. 1025
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major property additions,
replacements, and betterments are capitalized, while maintenance and repairs
which do not extend the useful lives of these assets are expensed currently.
Depreciation for property and equipment is provided using the straight-line
method over the estimated useful lives of the respective assets, ranging from
five to six years. Depreciation expense for the period from March 10, 1995
(inception) through December 31, 1995 and for the period from January 1, 1996
through August 28, 1996 was $931 and $1,330, respectively. Upon retirement or
disposal of assets, the cost and related accumulated depreciation are removed
from the statements of assets and liabilities and accumulated deficit and any
gain or loss is reflected in earnings.
CONTRACT RIGHTS AND OTHER ASSETS
Contract rights and other assets consist of the following at December 31,
1995 and August 28, 1996:
<TABLE>
<CAPTION>
1995 1996
------------ ----------
<S> <C> <C>
Contract rights.................................... $2,873,006 $2,873,006
Accumulated amortization........................... (263,358) (550,658)
---------- ----------
2,609,648 2,322,348
Other.............................................. -- 4,265
---------- ----------
$2,609,648 $2,326,613
========== ==========
</TABLE>
Contract Rights: Contract rights represent the cost of acquiring rights to
distribute DIRECTV Services. Contract rights are being amortized over ten years,
the estimated remaining useful life of the satellites operated by DirecTv which
provide service under the related contracts. Amortization expense, included in
depreciation and amortization in the accompanying statements of expenses over
revenues and changes in accumulated deficit, for the period from March 10, 1995
(inception) through December 31, 1995 and the period from January 1, 1996
through August 28, 1996 was $263,358 and $287,300, respectively.
INCOME TAXES
Teg, and thus the System, is a taxable entity for federal and state income
tax purposes. No benefit or deferred tax assets have been recorded for the
System as of December 31, 1995 or August 28, 1996 or for the periods then ended,
as the realization of deferred tax assets associated with net operating loss
carryforwards is dependent upon generating sufficient taxable income prior to
their expiration, and management believes that there is a risk that these net
operating loss carryforwards may expire unused.
CASH AND CASH EQUIVALENTS
The System considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The carrying amount
approximates fair value due to the relatively short period to maturity of these
instruments.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk with respect to accounts receivable is limited
due to the large number of subscribers. As a result, at August 28, 1996,
management does not believe any significant concentration of credit risk exists.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. When
events or changes in circumstances occur
F-103
<PAGE> 226
DBS OPERATIONS OF NRTC SYSTEM NO. 1025
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
related to long-lived assets, management estimates the future cash flows
expected to result from the use of the asset and its eventual disposition.
Having found no instances whereby the sum of expected future cash flows
(undiscounted and without interest charges) was less than the carrying amount of
the asset and thus requiring the recognition of an impairment loss, management
believes that the long-lived assets in the accompanying statements of assets and
liabilities and accumulated deficit are appropriately valued.
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 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.
3. RELATED-PARTY TRANSACTIONS
Certain administrative services are performed by Teg on behalf of the
System on the accompanying statements of expenses over revenues and changes in
accumulated deficit. Costs attributable to these support functions are included
in general and administrative expenses. The costs allocated to the System were
approximately $36,000 and $11,000 for the period from March 10, 1995 (inception)
through December 31, 1995 and the period from January 1, 1996 through August 28,
1996, respectively. Such allocations do not necessarily represent actual and/or
ongoing expenses of the System.
Teg either advances funds to or borrows funds from the System. Included in
the accompanying statements of assets and liabilities and accumulated deficit is
a net payable to Teg representing amounts due for the initial purchase of
contract rights and net operating activities as funded by Teg.
4. NOTE PAYABLE
In connection with Teg's acquisition of the NRTC Member Agreement, Teg
entered into a promissory note dated April 1, 1995 payable to Multimedia
Development Corporation in the amount of $1,600,000, of which $800,000 was due
on April 1, 1996 with the balance due on April 1, 1997. The note bears interest
at 11% per annum, payable monthly. This note was repaid subsequent to August 28,
1996 in connection with the Agreement (Note 1) and, therefore, is classified as
current at August 28, 1996 in the accompanying statements of assets and
liabilities and accumulated deficit.
5. COMMITMENTS AND CONTINGENCIES
As part of the NRTC Member Agreements, the System is required to pay
certain fees based on a minimum number of subscribers beginning in the fourth
year of operations of the NRTC Member Agreement. The System had achieved the
minimum subscriber requirement at December 31, 1996.
6. RELIANCE ON DIRECTV AND THE NRTC AND OTHER MATTERS
The NRTC has contracted with third parties to provide the NRTC members with
certain services, including billing services and centralized remittance
processing services. The NRTC bills the System for these services on a monthly
basis. These fees are recorded as service fees on the accompanying statements of
expenses over revenues and changes in accumulated deficit. The NRTC also sells
DSS(R) equipment to its members.
Because the System is, through the NRTC, a distributor of DIRECTV Services,
the System would be adversely affected by any material adverse changes in the
assets, financial condition, programming, technological capabilities, or
services of DirecTv or its parent corporation, Hughes Communication Galaxy, Inc.
("Hughes"), including DirecTv's failure to retain or renew its Federal
Communication Commission ("FCC") licenses to transmit radio frequency signals
from the orbital slots occupied by its satellites.
The NRTC is a cooperative organization whose members are engaged in the
distribution of telecommunications and other services in predominantly rural
areas of the United States. Pursuant to an agreement between the
F-104
<PAGE> 227
DBS OPERATIONS OF NRTC SYSTEM NO. 1025
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NRTC and Hughes (the "Hughes Agreement") and the NRTC Member Agreements,
participating NRTC members acquired the exclusive rights to provide DIRECTV
Services to residential and commercial subscribers in certain rural DirecTv
markets. In general, upon default by the NRTC under the Hughes Agreement, the
System would have the right to acquire DIRECTV Services directly from DirecTv.
The NRTC has contracted with third parties to provide the NRTC members with
certain services, including billing services and centralized remittance
processing services. If the NRTC is unable to provide these services for
whatever reason, the System would be required to acquire the services from other
sources. There can be no assurance that the cost to the System to obtain these
services elsewhere would not exceed the amounts currently payable to the NRTC.
The System would also be adversely affected by the termination of the NRTC
Member Agreements by the NRTC prior to the expiration of their respective terms.
If the NRTC Member Agreements are terminated by the NRTC, the System would no
longer have the right to provide DIRECTV Services. There can be no assurance
that the System would be able to obtain similar DBS services from other sources.
Both the Hughes Agreement and the NRTC Member Agreements expire when Hughes
removes its current satellites from their assigned orbital locations. Although,
according to Hughes, the three DirecTv satellites have estimated orbital lives
of approximately 15 years from their respective launches in December 1993 and
1994, there can be no assurance as to the longevity of the satellites and thus
no assurance as to how long the System will be able to continue to acquire DBS
services pursuant to the NRTC Member Agreements.
While management believes that it will have access to DIRECTV Services
following the expiration of the current Hughes Agreement by virtue of the NRTC's
right of first refusal in the Hughes Agreement and the System's existing
contractual and membership relationship with the NRTC, there can be no assurance
that such services will be available to the System from Hughes or the NRTC, and,
if available, there can be no assurance with regard to the financial and other
terms under which the System could acquire the services.
The System's DBS business is a new business with a limited operating
history. There are numerous risks associated with satellite transmission
technology. There can be no assurance as to the longevity of the satellites or
that loss, damage, or changes in the satellites will not occur and have a
material adverse effect on DirecTv and the System's DBS business.
DirecTv, and therefore the System, is dependent on third parties to provide
high-quality programming that appeals to mass audiences. DirecTv's programming
agreements have terms which expire on various dates and different renewal and
cancellation provisions. There can be no assurance that any such agreements will
be renewed or will not be canceled prior to expiration of their original terms.
DBS operators, such as DirecTv, are free to set prices and serve
subscribers according to their business judgment, without rate of return and
other regulation. However, DirecTv is subject to the regulatory jurisdiction of
the FCC.
F-105
<PAGE> 228
======================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN SECURITIES
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY 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 AN IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 11
The Company.......................... 21
Use of Proceeds...................... 22
The Exchange Offer................... 24
Capitalization....................... 32
Selected Financial Data.............. 33
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 35
Business............................. 43
Management........................... 59
Certain Relationships and Related
Transactions....................... 64
Security Ownership of Certain
Beneficial Owners and Management... 65
Description of Certain
Indebtedness....................... 67
Limited Liability Company Agreement.. 70
Description of the Notes............. 73
Certain United States Federal Income
Tax Considerations................. 109
Plan of Distribution................. 110
Notice to Investors.................. 111
Legal Matters........................ 113
Experts.............................. 113
Forward-looking Statements........... 114
Available Information................ 114
Index to Financial Statements........ F-1
</TABLE>
======================================================
======================================================
PROSPECTUS
$155,000,000
(LOGO) DIGITAL TELEVISION SERVICES
DIGITAL
TELEVISION
SERVICES, LLC
DTS CAPITAL, INC.
OFFER TO EXCHANGE
$1,000 PRINCIPAL AMOUNT OF THEIR
SERIES B 12 1/2% SENIOR SUBORDINATED
NOTES DUE 2007 WHICH HAVE BEEN
REGISTERED UNDER
THE SECURITIES ACT FOR EACH $1,000
PRINCIPAL AMOUNT OF THEIR OUTSTANDING
SERIES A 12 1/2% SENIOR SUBORDINATED
NOTES DUE 2007
THE EXCHANGE AGENT FOR THE
EXCHANGE OFFER IS:
THE BANK OF NEW YORK
BY FACSIMILE:
(212) 571-3080
BY REGISTERED OR CERTIFIED MAIL:
THE BANK OF NEW YORK
101 BARCLAY STREET, 7E
NEW YORK, NEW YORK 10286
ATTENTION: REORGANIZATION SECTION
THE BANK OF NEW YORK
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
CORPORATE TRUST SERVICES WINDOW
GROUND LEVEL
ATTENTION: REORGANIZATION SECTION
, 1997
======================================================
<PAGE> 229
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
THE COMPANY. The Company is a limited liability company organized under
the laws of the State of Delaware. Section 18-108 of the Delaware Limited
Liability Company Act provides that, subject to such standards and restrictions,
if any, as are set forth in its limited liability company agreement, a limited
liability company may, and shall have the power to, indemnify and hold harmless
any member or manager or other person from and against any and all claims and
demands whatsoever.
Article V ("Article V") of the Company's Limited Liability Company
Agreement (the "LLC Agreement") provides, among other things, that the Company
shall indemnify and save harmless its manager, DTS Management, LLC (the
"Manager"), and each member of the Company, its affiliates and all such persons'
respective members, managers, partners, shareholders, directors, officers,
trustees, employees and agents ("Representatives"), and persons to whom the
Manager have delegated management authority pursuant to the LLC Agreement
(collectively, the "Indemnities") from and against any and all claims,
liabilities, damages, losses, costs and expenses (including amounts paid in
satisfaction of judgments, compromises and settlements, as fines and penalties
and legal or other costs and expenses of investigating or defending against any
claim or alleged claim) of any nature whatsoever, that are incurred by any
Indemnitee and arise out of or in connection with the business of the Company or
the performance by such Indemnitee of any of the person's responsibilities under
the LLC Agreement. Indemnification under Article V shall continue as to an
Indemnitee who has ceased to be the Manager or a member of the Company, or
person to whom management authority is delegated, or a Representative.
Article V also provides that the Company shall pay or reimburse, and
indemnify and hold harmless each Indemnitee against, expenses incurred by such
Indemnitee in connection with his appearances as a witness or other
participation in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, any appeal in such an action, suit or proceeding, and any inquiry
or investigation that could lead to such an action, suit or proceeding (a
"Proceeding") involving or affecting the Company at a time when the Indemnitee
is not a named defendant or respondent in the Proceeding.
Article V also provides that the Company may maintain insurance, in
reasonable amounts and with responsible carriers, at the Company's expense, to
insure any amounts indemnifiable under Article V as well as to protect the
Indemnities or any employee or agent of the Company or another enterprise
against any expense, liability or loss of the kind referred to in Article V,
whether or not the Company would have the power to indemnify such person against
such expense, liability or loss under the applicable law.
In the event that the indemnification provided for in Article V is for any
reason finally judicially determined to be unavailable, the Company shall
contribute to the payment of any and all expenses, liability and loss (including
attorneys' fees, judgments, fines or excise taxes or penalties, and amounts paid
in settlement) in such proportion as is appropriate to reflect the relative
fault of the Company and the Indemnitee with respect to such expenses, liability
and loss.
The Company intends to obtain insurance policies covering all of the
managers and officers of Management against certain liabilities for actions
taken in such capacities, including liabilities under the Securities Act of
1933.
CAPITAL. Capital is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware, inter alia
("Section 145"), provides that a Delaware corporation may indemnify any persons
who were, are or are threatened to be made, parties to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of such corporation),
by reason of the fact that such person is or was an officer, director, employee
or agent of such corporation, or is or was serving at the request of such
corporation as a director, officer employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts pain in settlement actually and reasonably incurred
by such person
II-1
<PAGE> 230
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, were or are
threatened to be made, a party to any threatened, pending or completed action or
suit by or in the right of the corporation by reasons of the fact that such
person was a director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the corporation's best interests, provided that no
indemnification is permitted without judicial approval if the officer, director,
employee or agent is adjudged to be liable to the corporation. Where an officer,
director, employee or agent is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses which such officer or director has actually and reasonably
incurred.
Capital's Certificate of Incorporation provides that Capital shall, to the
fullest extent permitted by the provisions of the General Corporation Law of
Delaware, as the same exists or may hereafter be amended, indemnify all persons
whom it may indemnify under such provisions. The indemnification provided by
Capital's Certificate of Incorporation provide that such provisions shall not
limit or exclude any rights, indemnities or limitations of liability to which
any person may be entitled, whether as a matter of law, under the bylaws of the
Corporation, by agreement, vote of the stockholders or disinterested directors
of the corporation or others. The personal liability of the directors of Capital
is eliminated to the fullest extent permitted by paragraph (7) of subsection (b)
of Section 102 of the General Corporation Law of the State of Delaware as the
same may be amended or supplemented. Except as specifically required by the
Delaware General Corporation Law as the same exists or may hereafter amended, no
director of Capital shall be liable to Capital or its stockholders for monetary
damages for breach of his or her fiduciary duty as a director. No amendment to
or repeal of the foregoing provision shall apply to or have any effect on the
liability or alleged liability of any director for or with respect to any acts
or omissions of such director occurring prior to such amendment or repeal.
Article VII of the Bylaws of Capital ("Article VII") provides that Capital
shall indemnify each director and officer of Capital, and each person serving at
the request of Capital as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, to the fullest extent
permitted by the laws of Delaware, as from time to time in effect. Capital may,
if and to the extent authorized by the Board of Directors of Capital in a
specific case, indemnify employees or agents of Capital in the same manner and
to the same extent. The indemnification obligations set forth in Article VII
shall inure to the benefit of heirs, executors, administrators and personal
representatives of those entitled to indemnification and shall be binding upon
any successor to Capital to the fullest extent permitted by the laws of
Delaware, as from time to time in effect. The Board of Directors may also
provide any other rights of indemnity which it may deem appropriate.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnity him under Section 145.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S> <C>
3.1(a) -- Certificate of Formation of Digital Television Services,
LLC.
3.1(b) -- Certificate of Conversion to Limited Liability Company of
Digital Television Services, LLC.
3.1(c) -- Certificate of Amendment to Certificate of Formation of
Digital Television Services, LLC.
</TABLE>
II-2
<PAGE> 231
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S> <C>
3.1(d) -- Amended and Restated Limited Liability Company Agreement of
Digital Television Services, LLC.
3.1(e) -- First Amendment of Amended and Restated Limited Liability
Company Agreement of Digital Television Services, LLC.
3.2(a) -- Certificate of Incorporation of DTS Capital, Inc.
3.2(b) -- Bylaws of DTS Capital, Inc.
3.3(a) -- Articles of Organization of DTS Management, LLC.
3.3(b) -- Articles of Amendment of DTS Management, LLC.
3.3(c) -- Amended and Restated Operating Agreement of DTS Management,
LLC.
3.4(a) -- Certificate of Formation of Digital Television Services of
California, LLC.
3.4(b) -- Limited Liability Company Agreement of Digital Television
Services of California, LLC.
3.5(a) -- Articles of Organization of Digital Television Services of
Digital Television Services of Colorado, LLC.
3.5(b) -- Operating Agreement of Digital Television Services of
Colorado, LLC.
3.6(a) -- Articles of Organization of Digital Television Services of
Digital Television Services of Georgia, LLC.
3.6(b) -- Operating Agreement of Digital Television Services of
Georgia, LLC.
3.7(a) -- Articles of Organization of Digital Television Services of
Kansas, LLC.
3.7(b) -- Operating Agreement of Digital Television Services of
Kansas, LLC.
3.8(a) -- Articles of Organization of Digital Television Services of
Kentucky, LLC.
3.8(b) -- Operating Agreement of Digital Television Services of
Kentucky, LLC.
3.9(a) -- Articles of Organization of Digital Television Services of
New Mexico, LLC.
3.9(b) -- Operating Agreement of Digital Television Services of New
Mexico, LLC.
3.10(a) -- Articles of Organization of Digital Television Services of
New York I, LLC.
3.10(b) -- Operating Agreement of Digital Television Services of New
York I, LLC.
3.11(a) -- Articles of Organization of Digital Television Services of
South Carolina I, LLC.
3.11(b) -- Operating Agreement of Digital Television Services of South
Carolina I, LLC.
3.12(a) -- Articles of Organization of Digital Television Services of
Vermont, LLC.
3.12(b) -- Operating Agreement of Digital Television Services of
Vermont, LLC.
3.13(a) -- Articles of Incorporation of Spacenet, Inc.
3.13(b) -- Certificate of Amendment of Spacenet, Inc.
3.13(c) -- Bylaws of Spacenet, Inc.
4.1 -- Indenture dated as of July 30, 1997 among the Issuers, the
Guarantors, and The Bank of New York, as Trustee.
4.2 -- Form of Notes (included in Exhibit 4.1 above).
4.3 -- Registration Rights Agreement dated as of July 30, 1997
among the Issuers, the Guarantors, Donaldson, Lufkin &
Jenrette Securities Corporation, CIBC Wood Gundy Securities
Corp. and J.P. Morgan Securities Inc.
4.4 -- Interest Escrow Agreement dated as of July 30, 1997 among
The Bank of New York, as Escrow Agent and Collateral Agent,
and the Issuers.
4.5 -- Escrow Security Agreement dated as of July 30, 1997 between
The Bank of New York, as Collateral Agent, and the Issuers.
</TABLE>
II-3
<PAGE> 232
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S> <C>
*5.1 -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to the Registrants, as to the legality of the
securities being registered.
10.1 -- Second Amended and Restated Credit Agreement dated as of
July 30, 1997 among Digital Television Services, LLC, and
the several Lenders, CIBC Wood Gundy Securities Corp., as
arranger, Morgan Guaranty Trust Company of New York, Fleet
National Bank, and Canadian Imperial Bank of Commerce.
10.2 -- Guarantee and Collateral Agreement among the Guarantors
named therein and Canadian Imperial Bank of Commerce.
10.3 -- Stock Purchase Agreement dated as of January 30, 1996 by and
between Edward Botefuhr and Janet Blakeley Botefuhr and
Digital Television Services, LLC (formerly DBS Holdings,
L.P.).
10.4(a) -- Asset Purchase Agreement dated as of March 19, 1996 between
Digital Television Services of California, LLC (formerly
Columbia DBS San Luis Obispo, L.P.) and Pacific Coast DBS,
Inc. (the "Pacific Coast Purchase Agreement").
10.4(b) -- Amendment to Pacific Coast Purchase Agreement dated as of
April 1, 1996.
10.5(a) -- Asset Purchase Agreement dated as of June 11, 1996 between
Omega Cable and Dale Hazard and Scott Alexander and Digital
Television Services of Colorado, LLC (formerly Digital
Television Services of Colorado, LP) (the "Omega Purchase
Agreement").
10.5(b) -- Amendment to Omega Purchase Agreement dated July 14, 1996.
10.6(a) -- Asset Purchase Agreement dated as of June 26, 1996 among
Falls Earth Station, Inc. and Gerald R. Barnes and Digital
Television Services of New York I, LLC (successor by merger
to Digital Television Services of New York II, LP) (the
"Falls Earth Purchase Agreement").
10.6(b) -- First Amendment dated July 11, 1996 to the Falls Earth
Purchase Agreement.
10.7(a) -- Asset Purchase Agreement dated as of June 28, 1996 among TEG
DBS Services, Inc. and Kulwinder Singh and Jadwinder Singh
and Digital Television Services of New Mexico, LLC (formerly
Digital Television Services of New Mexico, LP) (the "Teg
Purchase Agreement").
10.7(b) -- First Amendment dated July 11, 1996 to Teg Purchase
Agreement.
10.8(a) -- Asset Purchase Agreement dated as of June 28, 1996 between
Northeast Cable Services, Inc. and Digital Television
Services of New York I, LLC (formerly Digital Television
Services of New York I, LP) (the "Northeast Cable Purchase
Agreement").
10.8(b) -- Amendment dated August 28, 1996 to the Northeast Cable
Purchase Agreement.
10.9(a) -- Asset Purchase Agreement dated as of October 5, 1996 among
Pee Dee Electricom, Inc. and Pee Dee Electric Cooperative,
Inc. and Digital Television Services of South Carolina I,
LLC (formerly Digital Television Services of South Carolina
I, LP) (the "Pee Dee Purchase Agreement").
10.9(b) -- First Amendment dated November 4, 1996 to the Pee Dee
Purchase Agreement.
10.9(c) -- Second Amendment dated November 25, 1996 to the Pee Dee
Purchase Agreement.
10.10(a) -- Asset Purchase Agreement dated as of October 5, 1996 among
Santee Satellite Systems, Inc. Santee Electric Cooperative,
Inc. and Digital Television Services of South Carolina I,
LLC (successor by merger to Digital Television Services of
South Carolina II, LP) (the "Santee Purchase Agreement").
10.10(b) -- First Amendment dated November 4, 1996 to the Santee
Purchase Agreement.
10.11(a) -- Asset Purchase Agreement dated as of October 28, 1996
between Direct Programming Services Limited Partnership and
Digital Television Services of Kentucky, LLC (formerly
Digital Television Services of Kentucky, LP) (the "Direct
Purchase Agreement").
10.11(b) -- First Amendment dated November 26, 1996 to the Direct
Purchase Agreement.
</TABLE>
II-4
<PAGE> 233
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S> <C>
10.12(a) -- Asset Purchase Agreement dated as of November 13, 1996
between Northeast DBS Enterprises, L.P., DTS Management, LLC
(formerly DBS Management, LLC) (the "Northeast DBS Purchase
Agreement")
10.12(b) -- Amendment dated February 11, 1997 to the Northeast DBS
Purchase Agreement among Northeast DBS Enterprises, L.P.,
DTS Management, LLC and Digital Television Services of
Vermont, LLC.
10.13 -- Asset Purchase Agreement dated as of November 22, 1996
between Skywave Communications, Inc. and Digital Television
Services of Kansas, LLC (formerly Digital Television
Services of Kansas, LP).
10.14 -- Asset Purchase Agreement dated as of November 22, 1996
between Kansas DBS, L.L.C. and Digital Television Services
of Kansas, LLC (formerly Digital Television Services of
Kansas, LP).
10.15 -- Asset Purchase Agreement dated as of February 19, 1997
between Mitchell Electric Membership Corporation and Digital
Television Services of Georgia, LLC.
10.16(a) -- Asset Purchase Agreement dated as of February 19, 1997
between DigiCom Services, Inc. and Digital Television
Services of Georgia, LLC (the "DigiCom Purchase Agreement").
10.16(b) -- First Amendment dated April 15, 1997 to the DigiCom Purchase
Agreement.
10.17 -- Asset Purchase Agreement dated as of February 19, 1997
between Planters Electric Membership Corporation and Digital
Television Services of Georgia, LLC.
10.18 -- Asset Purchase Agreement dated as of February 19, 1997
between Washington Electric Membership Corporation and
Digital Television Services of Georgia, LLC.
10.19 -- Form of NRTC/Member Agreement for Marketing and Distribution
of DBS Services, as amended by Amendment to NRTC/Member
Agreement for Marketing and Distribution of DBS Services.
(1)
10.20 -- Employee Unit Plan
10.21(a) -- Lease Agreement dated August 2, 1996 between Fund II, Fund
III, Fund IV and Fund VII Associates and DTS Management, LLC
(the "Lease Agreement").
10.21(b) -- Amendment dated December 20, 1996 to the Lease Agreement.
10.22 -- Employment Agreement effective April 1, 1996 between DTS
Management, LLC and Douglas S. Holladay, Jr.
10.23 -- Employment Agreement effective March 24, 1997 between DTS
Management, LLC and Earle A. MacKenzie.
10.24 -- Employment Agreement effective April 1, 1996 between DTS
Management, LLC and William J. Dorran.
10.25 -- Employment Agreement effective April 15, 1996 between DTS
Management and Donald A. Doering.
*12 -- Statement regarding Computation of Ratios.
21.1 -- Subsidiaries of Registrants.
23.1 -- Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(include in Exhibit 5.1).
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Fishbein & Company, P.C.
24.1 -- Powers of Attorney (included on signature pages to this
Registration Statement).
25.1 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of The Bank of New York, as Trustee of
the Indenture relating to the 12 1/2% Senior Subordinated
Notes due 2007.
</TABLE>
II-5
<PAGE> 234
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S> <C>
27.1 -- Financial data schedule Digital Television Services, LLC.
27.2 -- Financial data schedule DTS Capital, Inc.
27.3 -- Financial data schedule DTS Management, LLC.
27.4 -- Financial data schedule Digital Television Services of
California, LLC.
27.5 -- Financial data schedule Digital Television Services of
Colorado, LLC.
27.6 -- Financial data schedule Digital Television Services of
Georgia, LLC.
27.7 -- Financial data schedule Digital Television Services of
Kansas, LLC.
27.8 -- Financial data schedule Digital Television Services of
Kentucky, LLC.
27.9 -- Financial data schedule Digital Television Services of New
Mexico, LLC.
27.10 -- Financial data schedule Digital Television Services of New
York I, LLC.
27.11 -- Financial data schedule Digital Television Services of South
Carolina, LLC.
27.12 -- Financial data schedule Digital Television Services of
Vermont, LLC.
27.13 -- Financial data schedule Spacenet, Inc.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Securities Dealers, Commercial Banks,
Trust Companies and Other Nominees.
99.4 -- Form of Letter to Clients.
99.5 -- Guidelines for Certification of Taxpayer Identification
Number on Form W-9.
</TABLE>
- ---------------
(1) See Schedule 1 to Exhibit 10.19 for list of the NRTC/Member Agreements for
Marketing and Distribution of DBS Services to which the Registrants are
party.
* To be filed by amendment.
(b) Financial Statement Schedules
None
II-6
<PAGE> 235
ITEM 22. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the registrant pursuant to
the provisions described under Item 20 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 the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suite 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.
(2) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
(3) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-7
<PAGE> 236
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of Digital
Television Services, LLC; DTS Management, LLC ("Management"); Digital Television
Services of California, LLC; Digital Television Services of Colorado, LLC;
Digital Television Services of Georgia, LLC; Digital Television Services of
Kansas, LLC; Digital Television Services of Kentucky, LLC; Digital Television
Services of New Mexico, LLC; Digital Television Services of New York I, LLC;
Digital Television Services of South Carolina I, LLC; and Digital Television
Services of Vermont, LLC has duly caused this Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Atlanta, State of Georgia on September 23, 1997.
DIGITAL TELEVISION SERVICES, L.L.C.
DTS MANAGEMENT, LLC
DIGITAL TELEVISION SERVICES OF CALIFORNIA, LLC
DIGITAL TELEVISION SERVICES OF COLORADO, LLC
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC
DIGITAL TELEVISION SERVICES OF KANSAS, LLC
DIGITAL TELEVISION SERVICES OF KENTUCKY, LLC
DIGITAL TELEVISION SERVICES OF NEW MEXICO, LLC
DIGITAL TELEVISION SERVICES OF NEW YORK I, LLC
DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA I,
LLC
DIGITAL TELEVISION SERVICES OF VERMONT, LLC
By: /s/ DOUGLAS S. HOLLADAY, JR.
---------------------------------------------
Douglas S. Holladay, Jr.
President, Chief Executive Officer
and Manager of Management*
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
managers of DTS Management, LLC, a Georgia limited liability company, for
himself and not for one another, does hereby constitute and appoint Donald A.
Doering for each of them, a true and lawful attorney in his name, place and
stead, in any and all capacities to sign his name to any and all amendments,
including post-effective amendments, to this Registration Statement with respect
to the proposed issuance, sale and delivery by Digital Television Services, LLC
and DTS Capital, Inc. of their 12 1/2% Senior Subordinated Notes due 2007, and
to cause the same to be filed with the Securities and Exchange Commission,
granting unto said attorney full power and authority to do and perform any act
and thing necessary and proper to be done in the premises, as fully to all
intents and purposes as the undersigned could do if personally present, and each
of them shall lawfully do or cause to be done by virtue hereof.
II-8
<PAGE> 237
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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATES
- --------- -------- -----
<C> <S> <C>
/s/ DOUGLAS S. HOLLADAY, JR. President, Chief Executive
- --------------------------------------------------- Officer and Manager of
Douglas S. Holladay, Jr. Management* (Principal September 23, 1997
Executive Officer)
/s/ DONALD A. DOERING Vice President and Chief
- --------------------------------------------------- Financial Officer of
Donald A. Doering Management* (Principal September 23, 1997
Financial and Accounting
Officer)
/s/ MICHAEL C. BROOKS Manager of Management*
- ---------------------------------------------------
Michael C. Brooks September 23, 1997
/s/ HARRY F. HOPPER, III Manager of Management*
- ---------------------------------------------------
Harry F. Hopper, III September 23, 1997
/s/ WILLIAM LAVERACK, JR. Manager of Management*
- ---------------------------------------------------
William Laverack, Jr. September 23, 1997
/s/ DAVID P. MIXER Manager of Management*
- ---------------------------------------------------
David P. Mixer September 23, 1997
/s/ JAMES B. MURRAY, JR. Manager of Management*
- ---------------------------------------------------
James B. Murray, Jr. September 23, 1997
/s/ RIORDON B. SMITH Manager of Management*
- ---------------------------------------------------
Riordon B. Smith September 23, 1997
</TABLE>
- ---------------
* Management is the Manager of Digital Television Services, LLC and the sole
member of each of Digital Television Services of California, LLC; Digital
Television Services of Colorado, LLC; Digital Television Services of Georgia,
LLC; Digital Television Services of Kansas, LLC; Digital Television Services
of Kentucky, LLC; Digital Television Services of New Mexico, LLC; Digital
Television Services of New York I, LLC; Digital Television Services of South
Carolina I, LLC and Digital Television Services of Vermont, LLC.
II-9
<PAGE> 238
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, DTS CAPITAL,
INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ATLANTA,
STATE OF GEORGIA ON SEPTEMBER 23, 1997.
DTS CAPITAL, INC.
By: /s/ DOUGLAS S. HOLLADAY, JR.
--------------------------------------
Douglas S. Holladay, Jr.
President and Director
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
directors of DTS Capital, Inc., a Delaware corporation for himself and not for
one another, does hereby constitute and appoint Donald A. Doering for each of
them, a true and lawful attorney in his name, place and stead, in any and all
capacities to sign his name to any and all amendments, including post-effective
amendments, to this Registration Statement with respect to the proposed
issuance, sale and delivery by Digital Television Services, LLC and DTS Capital,
Inc. of their 12 1/2% Senior Subordinated Notes due 2007, and to cause the same
to be filed with the Securities and Exchange Commission, granting unto said
attorney full power and authority to do and perform any act and thing necessary
and proper to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present, and each of them shall lawfully
do or cause to be done by virtue hereof.
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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATES
- --------- -------- -----
<C> <S> <C>
/s/ DOUGLAS S. HOLLADAY, JR. President and Director September 23, 1997
- --------------------------------------------------- (Principal Executive
Douglas S. Holladay, Jr. Officer)
/s/ DONALD A. DOERING Vice President, Treasurer and September 23, 1997
- --------------------------------------------------- Secretary and Director
Donald A. Doering (Principal Financial and
Accounting Officer)
</TABLE>
II-10
<PAGE> 239
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, SPACENET, INC.
HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ATLANTA,
STATE OF GEORGIA ON SEPTEMBER 23, 1997.
SPACENET, INC.
By: /s/ HARRY F. HOPPER, III
------------------------------------
Harry F. Hopper, III
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
directors of Spacenet, Inc., a New Mexico corporation, for himself and not for
one another, does hereby constitute and appoint Donald A. Doering for each of
them, a true and lawful attorney in his name, place and stead, in any and all
capacities to sign his name to any and all amendments, including post-effective
amendments, to this Registration Statement with respect to the proposed
issuance, sale and delivery by Digital Television Services, LLC and DTS Capital,
Inc. of their 12 1/2% Senior Subordinated Notes due 2007, and to cause the same
to be filed with the Securities and Exchange Commission, granting unto said
attorney full power and authority to do and perform any act and thing necessary
and proper to be done in the premises, as fully to all intents and purposes as
the undersigned could do if personally present, and each of them shall lawfully
do or cause to be done by virtue hereof.
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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATES
- --------- -------- ------------------
<C> <S> <C>
/s/ HARRY F. HOPPER, III President, (Principal Executive
- ------------------------------------------------ Officer) September 23, 1997
Harry F. Hopper, III
/s/ NEIL P. BYRNE Vice President Secretary and
- ------------------------------------------------ Treasurer (Principal Financial
Neil P. Byrne and Accounting Officer) September 23, 1997
/s/ ROBERT B. BLOW Director September 23, 1997
- ------------------------------------------------
Robert B. Blow
/s/ MARK J. KINGTON Director September 23, 1997
- ------------------------------------------------
Mark J. Kington
/s/ DAVID P. MIXER Director September 23, 1997
- ------------------------------------------------
David P. Mixer
/s/ JAMES B. MURRAY, JR. Director September 23, 1997
- ------------------------------------------------
James B. Murray, Jr.
</TABLE>
II-11
<PAGE> 1
EXHIBIT 3.1(a)
CERTIFICATE OF FORMATION
OF
COLUMBIA DBS HOLDINGS, LLC
The undersigned, desiring to form a limited liability company pursuant
to Sections 18-214(b)(2) and 18-201 of the Delaware Limited Liability Company
Act, 6 Delaware Code, Chapter 18, do hereby certify as follows:
I.
The name of the limited liability company is COLUMBIA DBS HOLDINGS,
LLC.
II.
The address of the registered office of the LLC in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of
New Castle. The name of the LLC's registered agent for service of process in the
State of Delaware at such address is The Corporation Trust Company.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Formation of Columbia DBS Holdings, LLC as of November ___, 1996.
Member:
COLUMBIA DBS, INC.
By: /s/
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Member:
COLUMBIA DBS INVESTORS, L.P.
By: Columbia Capital Corporation,
its general partner
By: /s/
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
<PAGE> 1
EXHIBIT 3.1(b)
CERTIFICATE OF CONVERSION TO LIMITED LIABILITY COMPANY
OF
DBS HOLDINGS, L.P.
TO
COLUMBIA DBS HOLDINGS, LLC
The undersigned, desiring to convert DBS HOLDINGS, L.P., a Delaware
limited partnership, to COLUMBIA DBS HOLDINGS, LLC, a Delaware limited liability
company, pursuant to Section 18-214 of the Delaware Limited Liability Company
Act, 6 Delaware Code, Chapter 18, do hereby certify as follows:
I.
The date on which and jurisdiction where the entity that is converting
to a limited liability company was first formed was January 30, 1996 in the
State of Delaware.
II.
The name of the entity that is converting to a limited liability
company immediately prior to the filing of this Certificate of Conversion is DBS
HOLDINGS, L.P.
III.
The name of the limited liability company as set forth in its
certificate of formation filed in accordance with Section 18-214(b) of the
Delaware Limited Liability Company Act is COLUMBIA DBS HOLDINGS, LLC.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Conversion of DBS Holdings, L.P. to Columbia DBS Holdings, LLC as of November
___, 1996.
General Partner:
COLUMBIA DBS, INC.
By: /s/
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Limited Partner:
COLUMBIA DBS INVESTORS, L.P.
By: Columbia Capital Corporation,
its general partner
By: /s/
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
<PAGE> 1
EXHIBIT 3.1(c)
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF FORMATION
OF
COLUMBIA DBS HOLDINGS, LLC
The undersigned, desiring to amend the Certificate of Formation
pursuant to Sections 1.2 and 6.1(a) of the Limited Liability Agreement of
Columbia DBS Holdings, LLC and Section 18-202 of the Delaware Limited Liability
Company Act, 6 Delaware Code, Chapter 18, do hereby certify as follows:
I.
The name of the limited liability company is COLUMBIA DBS HOLDINGS,
LLC.
II.
Item I. of the Certificate of Formation of Columbia DBS Holdings, LLC,
setting forth the name of the limited liability company, shall be amended by
deleting the name of the limited liability company as currently set forth
therein and replacing it with the following:
The name of the limited liability company is DIGITAL TELEVISION
SERVICES, LLC.
* * * * *
IN WITNESS WHEREOF, the undersigned, constituting a majority in
Interest of the Members of the Company and having the authority to execute this
Certificate pursuant to Sections 1.2 and 6.1(a) of the Limited Liability Company
Agreement of Columbia DBS Holdings, LLC, have executed this Certificate of
Amendment to Certificate of Formation of Columbia DBS Holdings, LLC as of
January 31, 1997.
MEMBERS:
COLUMBIA DBS, INC.,
A VIRGINIA CORPORATION
By: /s/ Harry F. Hopper
----------------------------------
Name: Harry F. Hopper
----------------------------------
Title: President
----------------------------------
COLUMBIA DBS INVESTORS, L.P.,
A DELAWARE LIMITED PARTNERSHIP
BY: COLUMBIA CAPITAL CORPORATION,
ITS GENERAL PARTNER
By: /s/ Neil P. Byrne
----------------------------------
Name: Neil P. Byrne
----------------------------------
Title: Vice President
----------------------------------
<PAGE> 1
EXHIBIT 3.1(d)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
RECITALS ......................................................................1
ARTICLE I-FORMATION............................................................1
SECTION 1.1. Formation; Conversion; Continuation; General Terms;
Effective Date.........................................1
SECTION 1.2. Name...................................................2
SECTION 1.3. Purposes...............................................2
SECTION 1.4. Registered Agent; Registered Office....................2
SECTION 1.5. Commencement and Term..................................2
SECTION 1.6. Tax Classification.....................................2
ARTICLE II-CAPITAL CONTRIBUTIONS; ISSUANCE OF ADDITIONAL
INTERESTS; CAPITAL ACCOUNTS...........................................3
SECTION 2.1. Initial Capital Contributions..........................3
SECTION 2.2. Additional Capital Contributions; Issuance of
Additional Interests...................................3
SECTION 2.3. Liability of Members...................................5
SECTION 2.4. Maintenance of Capital Accounts; Withdrawals;
Interest...............................................5
SECTION 2.5. Classes of Members and Units...........................5
SECTION 2.6. Registration Rights....................................6
ARTICLE III-INTERIM DISTRIBUTIONS..............................................6
SECTION 3.1. Tax Distributions......................................6
SECTION 3.2. Discretionary Distributions............................7
SECTION 3.3. Withholding............................................7
SECTION 3.4. Noncash Interim and Liquidating Distributions..........7
ARTICLE IV-ALLOCATIONS.........................................................8
SECTION 4.1. Profits................................................8
SECTION 4.2. Losses.................................................8
SECTION 4.3. Code Section 704(c) Tax Allocations....................9
SECTION 4.4. Miscellaneous..........................................9
<PAGE> 3
ARTICLE V-MANAGEMENT..........................................................10
SECTION 5.1. Management by the Manager Acting Through its Board of
Managers; Actions Requiring Member Vote...............10
SECTION 5.2. Ascertaining the Action of the Manager................14
SECTION 5.3. Direct Authority of Members with Respect to the
Manager; Restrictions on Authority of Manager.........14
SECTION 5.4. Limitation of Liability...............................17
SECTION 5.5. Indemnification.......................................18
SECTION 5.6. Expense Reimbursement.................................18
SECTION 5.7 Insurance.............................................18
ARTICLE VI-MEMBER MEETINGS....................................................18
SECTION 6.1. Actual Meetings of Members............................18
SECTION 6.2. Written Consent to Action in Lieu of
Actual Meetings.......................................19
ARTICLE VII-TRANSFER OF INTERESTS; RIGHTS OF FIRST REFUSAL AND
CO-SALE; CORPORATE CONVERSIONS.......................................19
SECTION 7.1. In General; Registration and Certification of
Interests; Mandatory Pledge of Interests..............19
SECTION 7.2 Conditions Precedent to Transfer of
Member's Interest.....................................20
SECTION 7.3. Rights of Assignees...................................21
SECTION 7.4. Admission of Assignees as Members.....................21
SECTION 7.5. Distributions and Allocations With Respect to
Transferred Interests.................................22
SECTION 7.6. Transfer of Interest of Columbia Inc. to
Columbia B or Columbia Capital........................22
SECTION 7.7. Right of First Refusal................................22
SECTION 7.8. Right of Co-Sale......................................26
SECTION 7.9. Corporate Conversions.................................27
SECTION 7.10. Limited Power of Attorney.............................30
ARTICLE VIII-CESSATION OF MEMBERSHIP..........................................31
SECTION 8.1. When Membership Ceases................................31
SECTION 8.2. Deceased, Incompetent or Dissolved Members............32
SECTION 8.3. Consequences of Cessation of Membership...............32
SECTION 8.4. No Voluntary Withdrawal or Resignation by Members.....32
ARTICLE IX-DISSOLUTION, WINDING UP AND LIQUIDATING
DISTRIBUTIONS........................................................32
SECTION 9.1. Dissolution Triggers..................................32
SECTION 9.2. Winding Up or Sale....................................33
SECTION 9.3. Liquidating Distributions.............................33
ii
<PAGE> 4
ARTICLE X-BOOKS AND RECORDS; INFORMATION RIGHTS...............................35
SECTION 10.1. Books and Records; Visit to Business Premises.........35
SECTION 10.2. Taxable Year; Tax Accounting Methods..................35
SECTION 10.3. Information Rights....................................35
SECTION 10.4. Tax Information.......................................35
ARTICLE XI-MISCELLANEOUS......................................................36
SECTION 11.1. Notices...............................................36
SECTION 11.2. Binding Effect........................................36
SECTION 11.3. Construction..........................................36
SECTION 11.4. Entire Agreement; No Oral Limited Liability
Company Agreements; Amendments to the Limited
Liability Company Agreement...........................36
SECTION 11.5. Headings..............................................36
SECTION 11.6. Severability..........................................37
SECTION 11.7. Additional Documents..................................37
SECTION 11.8. Variation of Pronouns.................................37
SECTION 11.9. Governing Law; Consent to Jurisdiction;
Dispute Resolution................................... 37
SECTION 11.10. Waiver of Action for Partition........................37
SECTION 11.11. Counterpart Execution; Facsimile Execution............37
SECTION 11.12. Tax Matters Member....................................37
SECTION 11.13. Time of the Essence...................................38
SECTION 11.14. Exhibits; Preferred Stock Corporate
Conversion Documents..................................38
EXHIBIT A: Certificates of Conversion and Formation.
EXHIBIT B: Information Exhibit.
EXHIBIT C: Glossary of Terms.
EXHIBIT D: Regulatory Allocations Exhibit.
EXHIBIT E: Indemnification Exhibit.
EXHIBIT F: Dispute Resolution Exhibit.
EXHIBIT G: Appraisal Exhibit.
EXHIBIT H: Registration Rights Agreement.
EXHIBIT I: Draft Certificate of Designations of Preferred Stock.
EXHIBIT J: Draft Certificate of Merger -- Preferred Stock
Corporate Conversion.
EXHIBIT K: Draft Certificate of Merger -- Common Stock
Corporate Conversion.
EXHIBIT L: Draft Stockholders Agreement
EXHIBIT M: Draft Certificate of Incorporation and Bylaws
Upon Qualified Corporate Conversion
EXHIBIT N: Certificate of Limited Liability Company Interest
EXHIBIT O: Operating Agreement of DTS Management, LLC
EXHIBIT P: Designees to Management's Board of Managers
iii
<PAGE> 5
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT is made
and entered into as of February 10, 1997, by and among the Persons whose names,
addresses and taxpayer identification numbers are listed on the attached
Information Exhibit attached hereto as Exhibit B. Unless otherwise indicated,
capitalized words and phrases in this Amended and Restated Limited Liability
Company Agreement (the "Agreement") shall have the meanings set forth in the
attached Glossary of Terms attached hereto as Exhibit C.
RECITALS
A. DBS Holdings, L.P., a Delaware limited partnership (the
"Partnership"), was formed on January 30, 1996.
B. Pursuant to Act Section 18-214(d) the Partnership was converted into
a Delaware limited liability company (the "LLC") on November 19, 1996.
C. The Members now wish to amend and restate the Agreement for the
purposes of, among other things, creating multiple classes of Units and
admitting certain new Persons as Members in exchange for Capital Contributions
from such Persons as reflected on the Information Exhibit attached hereto as
Exhibit B.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree that the limited liability company agreement of the LLC
shall be amended and restated to read as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; CONVERSION; CONTINUATION; GENERAL TERMS;
EFFECTIVE DATE.
The LLC is the successor in interest by conversion to the Partnership.
The LLC was formed upon the filing of the Certificate of Formation with the
Delaware Secretary of State on November 19, 1996, and the conversion of the
Partnership to the LLC occurred on that date. It is agreed that those Persons
whose names are listed on the attached Information Exhibit who were not Members
prior to the date hereof shall be admitted to the LLC as Members as of the date
of this Agreement. The initial and newly admitted Members agree that the LLC
shall continue to carry on the business of the LLC subject to the terms of this
Agreement in accordance with the provisions of the Act.
<PAGE> 6
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law. This Agreement
shall be effective as of the date hereof.
The Manager shall cause to be executed and filed on behalf of the LLC
all other instruments or documents, and shall do or cause to be done all such
filing, recording, or other acts, including the filing of the LLC's annual
statement for the annual tax with the Delaware Secretary of State, as may be
necessary or appropriate from time to time to comply with the requirements of
law for the continuation and operation of a limited liability company in
Delaware and in the other states and jurisdictions in which the LLC shall
transact business.
SECTION 1.2. NAME. The name of the LLC shall be Digital Television
Services, LLC. The name of the LLC shall be the exclusive property of the LLC,
and no Member shall have any rights in the LLC's name or any derivation thereof,
even if the name contains such Member's own name or a derivation thereof. The
LLC's name may be changed only by an amendment to the Certificate of Formation
attached hereto as Exhibit A adopted pursuant to the voting requirements set
forth in this Agreement.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to acquire,
own, hold and manage directly, or through investments in other entities, rights
to distribute direct broadcast satellite services, programming, and products, or
other services and products utilizing orbital satellites and related radio
frequencies, (ii) to own, hold, maintain, encumber, lease, sell, transfer or
otherwise dispose of all property or assets or interests in property or assets
as may be necessary, appropriate or convenient to accomplish the activities
described in clause (i) above, (iii) to incur indebtedness or obligations in
furtherance of the activities described in clauses (i) and (ii) above, and (iv)
to conduct such other activities as may be necessary or incidental to the
foregoing and in the best interest of the LLC, all on the terms and conditions
and subject to the limitations set forth in this Agreement.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent and registered office are set forth in the Certificate of Formation
attached hereto as Exhibit A, and may be changed from time to time upon the vote
of the Members or as otherwise provided in the Act.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced on
November 19, 1996, with the LLC being the successor in interest by conversion to
the Partnership the term of which commenced January 30, 1996. The term of the
LLC shall continue until it is dissolved, its affairs are wound up and final
liquidating distributions are made pursuant to this Agreement. Pursuant to Act
Section 18-801(1), and except as otherwise provided herein, the LLC shall have
perpetual existence.
SECTION 1.6. TAX CLASSIFICATION. The parties acknowledge that pursuant
to Treasury Regulation Section 301.7701-3, the LLC shall be classified as a
partnership for federal income tax purposes until the effective date of any
election it may make to change its classification for federal income tax
purposes to that of a corporation on IRS Form 8832, Entity
2
<PAGE> 7
Classification Election. It is agreed that the Manager shall have authority, on
behalf of the LLC and each Member, to file and make such election to change the
tax classification of the LLC from a partnership to a corporation at such time
as the Manager determines that such a change is in the best interests of the
LLC; provided, however, that no such election shall be made without the vote of
the holders of Class A Units as provided in Section 5.3(c)(xii) of this
Agreement.
ARTICLE II
CAPITAL CONTRIBUTIONS; ISSUANCE OF
ADDITIONAL INTERESTS;
CAPITAL ACCOUNTS
SECTION 2.1. INITIAL CAPITAL CONTRIBUTIONS. As of the date hereof, the
Members have made the Capital Contributions as set forth in the Information
Exhibit. The Class A Capital Contributions have been made and the related
Interests have been issued pursuant to that certain Class A Unit Membership
Interest Purchase Agreement between the LLC, Whitney, Fleet and Columbia A dated
the date hereof (the "Purchase Agreement").
SECTION 2.2. ADDITIONAL CAPITAL CONTRIBUTIONS; ISSUANCE OF ADDITIONAL
INTERESTS. No Member shall be permitted or required to make any additional
Capital Contributions except as expressly set forth in this Agreement. The LLC
shall accept no additional Capital Contributions and shall issue no additional
Interest except as set forth in this Section 2.2.
The Manager may at any time and from time to time cause the LLC to
issue Interests to and to admit any Person as a Member in exchange for such
Capital Contributions and pursuant such other terms and conditions as the
Manager shall determine, subject in all events to the following provisions:
(a) PARTICIPATION RIGHTS. Except in the case of issuance of Interests
(i) pursuant to the Employee Unit Plan, (ii) in connection with a Qualified
Financing, (iii) in exchange for Capital Contributions consisting of property
other than cash or (iv) to effectuate adjustments to the number of Class A Units
pursuant to Subsections 2.2(b) and 2.2(c), prior to issuing any additional
Interests all Members holding Class A Units, Class B Units or Class C Units
shall have been offered the right to purchase their proportionate share of such
additional Interests on the same terms and subject to the same conditions as the
proposed issuance to others, which rights to purchase shall be offered to such
Members in the ratio that their aggregate number of Class A Units, Class B Units
and Class C Units bear to the aggregate number of all such Units. Any Interests
not initially subscribed for by those Members holding Class A Units, Class B
Units and Class C Units shall be reoffered to those Members electing initially
to purchase their proportionate share hereunder in proportion to the relative
number of such Units held by those Members initially electing to purchase their
proportionate share. The Manager shall determine the timing and such other
procedures as may be necessary and appropriate to enable those Members holding
Class A Units, Class B Units or Class C Units to exercise their rights
3
<PAGE> 8
hereunder, provided that in any event such Members shall be given no less than
five (5) business days prior notice before being required to commit to purchase
the Interests subject to the Participation Rights hereunder.
(b) PRICE PROTECTION FOR CLASS A UNITS. Subject to the last sentence of
this Subsection 2.2(b), if the LLC shall issue any Interests or rights to
acquire Interests for a per Unit Capital Contribution less than the Second Round
Price, then, and in any such case, the number of Class A Units held by each
Person holding Class A Units shall be deemed automatically increased (and such
increase shall be reflected on the books and records of the LLC and additional
Certificates evidencing such increase shall be issued to such Persons) to an
amount equal to the number of Class A Units held by such Person immediately
before such issuance multiplied by the following ratio:
(B + N)/(B + X)
Where:
B equals the total number of Class A and Class B Units
outstanding immediately before the application of
this Subsection (and any such Units underlying any
rights to acquire Units).
N equals the number of Units to be issued at a price
less than the Second Round Price (or Units underlying
rights to acquire Units), which issuance results in
the application of this Subsection.
X equals the (i) aggregate amount of the Capital
Contributions to be received by the LLC in connection
with the issuance of Units that results in the
application of this Subsection, (ii) divided by the
Second Round Price.
Example:
Suppose that immediately after the date of this Agreement, the LLC
issues Interests in exchange for $50,000,000 in cash represented by 2,500,000
Units, i.e. $50,000,000 at $20 per Unit. The application of the foregoing
formula is illustrated as follows:
Class A Units
before adjustment = 1,333,333
B = 1,333,333 + 2,050,000 = 3,383,333
N = 2,500,000
X = 50,000,000/22.50 = 2,222,222
4
<PAGE> 9
Class A Units
after adjustment = 1,333,333 x (3,383,333+2,500,000)/
(3,383,333+2,222,222)
= 1,399,405
The adjustment described in this Subsection 2.2(b) shall become effective
concurrent with the issuance of the Interests resulting in the application of
this Subsection. The Manager shall promptly amend Exhibit B to reflect the
adjustment and provide the amended Exhibit B to all Members. In no event shall
any adjustment to the number of Class A Units outstanding be made pursuant to
this Subsection in respect of (i) any issuance of Interests pursuant to the
Employee Unit Plan, or (ii) any issuance of Interests in connection with any
Qualified Financing or Interim Financing.
(c) INTERIM FINANCING. If, in connection with any Interim Financing,
the LLC is required to issue Units or rights to acquire Units, then in lieu of
the price protection provided in Section 2.2(b) of this Agreement, the number of
Class A Units shall be increased so that the ratio of Class A Units to total
Units outstanding immediately after such Interim Financing equals the ratio of
Class A Units to total Units outstanding immediately before such Interim
Financing. In addition, any commitment, underwriting, structuring or syndication
fees (other than customary periodic agency fees for administrative services) in
excess of 4% of the principal amount of the Interim Financing which are payable
by the LLC in connection therewith shall be borne by Columbia A, Columbia B and
Columbia Inc. in proportion to their Interests without recourse to the LLC.
SECTION 2.3. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC other than Capital Contributions to the extent provided in
this Article.
SECTION 2.4. MAINTENANCE OF CAPITAL ACCOUNTS; WITHDRAWALS; INTEREST.
Separate Capital Accounts shall be maintained for each of the Members. In the
case of Members who hold more than one class of Units, a separate Capital
Account shall be maintained with respect to each such separate class. No Member
shall be entitled to withdraw any part of its Capital Account or to receive any
distribution except as provided in this Agreement. No Member shall be entitled
to receive any interest on its Capital Contributions or with respect to its
Capital Account except as provided in this Agreement. Each Member shall look
solely to the assets of the LLC for the return of its Capital Contributions and,
except as otherwise provided in this Agreement, shall have no right or power to
demand or receive property other than cash from the LLC. No Member shall have
priority over any other Member as to the return of its Capital Contributions,
distributions or allocations, except as provided in this Agreement.
SECTION 2.5. CLASSES OF MEMBERS AND UNITS. As authorized in Act Section
18-302, there shall be multiple classes of Members. Each Member shall hold an
Interest. Each Member's Interest shall be denominated in Units, and the relative
rights, privileges, preferences and obligations with respect to the Member's
Interest shall be determined under this Agreement and the Act based upon the
number and class of Units held by the Member with respect to the Member's
Interest. The classes of Units are as follows:
5
<PAGE> 10
(a) CLASS A UNITS. Class A Units shall consist of those Units held by
Members listed on the attached Information Exhibit as holding Class A Units as
may be adjusted from time to time pursuant to Subsections 2.2(b) and 2.2(c).
Class A Units shall have all the rights, privileges, preferences, and
obligations as are specifically provided for in this Agreement for Class A
Units, and as may otherwise be generally applicable to all classes of Units,
unless such application is specifically limited to one or more other classes of
Units.
(b) CLASS B UNITS. Class B Units shall consist of those Units held by
Members listed on the attached Information Exhibit as holding Class B Units.
Class B Units shall have all the rights, privileges, preferences, and
obligations as are specifically provided for in this Agreement for Class B
Units, and as may otherwise be generally applicable to all classes of Units,
unless such application is specifically limited to one or more other classes of
Units.
(c) CLASS C UNITS. Class C Units shall consist of those Units held by
Members listed on the attached Information Exhibit as holding Class C Units.
Class C Units shall have all the rights, privileges, preferences, and
obligations as are specifically provided for in this Agreement for Class C
Units, and as may otherwise be generally applicable to all classes of Units,
unless such application is specifically limited to one or more other classes of
Units.
(d) CLASS D UNITS. Class D Units shall consist of those Units that may
be issued pursuant to the Employee Unit Plan. Class D Units shall have all the
rights, privileges, preferences, and obligations as are specifically provided
for in this Agreement for Class D Units, and as may otherwise be generally
applicable to all classes of Units, unless such application is specifically
limited to one or more other classes of Units.
SECTION 2.6. REGISTRATION RIGHTS. The Members shall have registration
rights with respect to their Interests as specified in that certain Registration
Rights Agreement attached hereto as Exhibit H.
ARTICLE III
INTERIM DISTRIBUTIONS
SECTION 3.1. TAX DISTRIBUTIONS. If the LLC expects that as of the end
of any Tax Estimation Period the LLC will have Net Positive Taxable Income, then
the LLC shall distribute to each Member in proportion to their Units on or
before the 15th day after the end of the Tax Estimation Period, cash in an
amount equal to the LLC's estimate of the increase in Net Positive Taxable
Income over such Tax Estimation Period multiplied by the Combined Effective
Marginal Tax Rate, and on or before March 15th of each year shall adjust the
distributions pursuant to this Section 3.1 with respect to the previous Fiscal
Year to conform with the LLC's income tax returns for such Fiscal Year, which
adjustments shall take into account any withholding required pursuant to Section
3.3. Tax distributions made pursuant to this Section shall be deemed to
constitute an advance (without interest) against any distributions provided for
in Section 3.2 below. There shall be no tax distributions with respect to Profit
allocations under Sections
6
<PAGE> 11
4.1(c) and 4.1(d) (because the Members receive cash distributions in the full
amount of those allocations).
SECTION 3.2. DISCRETIONARY DISTRIBUTIONS. Prior to the dissolution of
the LLC, the LLC shall distribute cash or property, subject to Section 3.4, in
such amounts, at such times and as of such record dates as the Manager shall
determine, in the following order and priority:
(a) First to the holders of Class A Units in proportion to the Class A
Units held by them until they have received cumulative distributions pursuant to
this Subsection 3.2(a) equal to the Preferred Return;
(b) Next, to the holders of Class A and Class B Units in proportion to
such Units held by them until they have received cumulative distributions
pursuant to this Subsection 3.2(b) equal to $10.00 per such Unit;
(c) Next, to the holders of Class A, Class B, and Class C Units until
they have received cumulative distributions pursuant to this Subsection 3.2(c)
equal to $12.50 per such Unit;
(d) Next, to all Members in accordance with their Residual Interests.
SECTION 3.3. WITHHOLDING. In the event any federal, foreign, state or
local jurisdiction requires the LLC to withhold taxes or other amounts with
respect to any Member's allocable share of Profits, taxable income or any
portion thereof, or with respect to distributions, the LLC shall withhold from
distributions or other amounts then due to such Member (or shall pay to the
relevant taxing authority with respect to amounts allocable to such Member) an
amount necessary to satisfy the withholding responsibility. In such a case, the
Member for whom the LLC has paid the withholding tax shall be deemed to have
received the withheld distribution or other amount so paid, and to have paid the
withholding tax directly.
If it is anticipated that at the due date of the LLC's withholding
obligation the Member's share of cash distributions or other amounts due is less
than the amount of the withholding obligation, the Member to which the
withholding obligation applies shall have the option to pay to the LLC the
amount of such shortfall. In the event a Member fails to make such payment and
the LLC nevertheless pays the withholding, the amount paid by the LLC shall be
deemed a nonrecourse loan from the LLC to such Member bearing interest at the
Prime Rate, and the LLC shall apply all distributions or payments that would
otherwise be made to such Member toward payment of the loan and interest, which
payments or distributions shall be applied first to interest and then to
principal until the loan is repaid in full.
SECTION 3.4. NONCASH INTERIM AND LIQUIDATING DISTRIBUTIONS. The LLC
shall make interim and liquidating distributions to the Members other than in
cash only upon the vote of the Members specified in Sections 5.3(b)(vi) and
5.3(c) below. Notwithstanding such votes, no Member shall be required to accept
a noncash distribution unless such distribution is a distribution with respect
to Residual Interests under Section 3.2(d) and all Members receive a
proportionate interest in each item of property distributed based upon their
Residual Interests. In the event of such a noncash distribution, the Agreed
Value of the property to be distributed
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shall be determined, and any resulting Profits or Losses shall be posted to the
Capital Accounts as of the date the noncash distribution is made. Distributions
pursuant to this Section 3.4 shall be made in the priority set forth in Sections
9.3 and 3.2 and for purposes of Sections 9.3 and 3.2, noncash distributions
shall be deemed to constitute distributions to the extent of the Agreed Value of
the distributed property.
ARTICLE IV
ALLOCATIONS
SECTION 4.1. PROFITS. Except as provided in the Regulatory Allocations
Exhibit, Profits shall be allocated as follows:
(a) First, to the holders of Class A Units in proportion to their Units
until the cumulative Profits allocated pursuant to this Subsection 4.1(a) equal
the cumulative prior allocations of Losses under Subsection 4.2(c).
(b) Next, to the holders of Class B Units (and to the holders of Class
C and Class D Units if they have been allocated Losses under Subsection 4.2(b)
below) until the cumulative Profits allocated pursuant to this Subsection 4.1(b)
equal the cumulative prior allocations of Losses under Subsection 4.2(b).
(c) Next, to the holders of Class A Units in proportion to such Units
until the cumulative Profits allocated pursuant to this Subsection 4.1(c) equal
the cumulative distributions of the Preferred Return pursuant to Section 3.2(a)
above.
(d) Next, to the holders of Class B Units in proportion to such Units
and Class C Units in proportion to such Units until the cumulative amount
allocated pursuant to this Subsection equals the cumulative distributions with
respect to Class B and Class C Units pursuant to Section 3.2(c) above.
(e) All remaining Profits shall be allocated to the Members in
accordance with their Residual Interests.
SECTION 4.2. LOSSES. Except as provided in the Regulatory Allocations
Exhibit, Losses shall be allocated as follows:
(a) First, to the Members in proportion to their Units until the
cumulative Losses allocated pursuant to this Subsection 4.2(a) equal the
cumulative prior allocations of Profits under Subsection 4.1(e).
(b) Next, to the holders of Class B Units (and to the holders of the
Class C and Class D Units to the extent that they may have positive Capital
Accounts) in proportion to such Units until their Capital Account balances are
zero.
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(c) Next and finally, to the holders of the Class A Units in proportion
to such Units until their Capital Account balances are zero.
SECTION 4.3. CODE SECTION 704(c) TAX ALLOCATIONS. Income, gain, loss,
and deduction with respect to any property contributed to the capital of the LLC
shall, solely for tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to the LLC
for federal income tax purposes and its initial Agreed Value pursuant to any
method allowable under Code Section 704(c) and the Treasury Regulations
promulgated thereunder.
In the event the Agreed Value of any LLC asset is adjusted after its
contribution to the LLC, subsequent allocations of income, gain, loss and
deduction with respect to such asset shall take into account any variation
between the adjusted basis of such asset for federal income tax purposes and its
Agreed Value pursuant to any method allowable under Code Section 704(c) and the
Treasury Regulations promulgated thereunder.
Any elections or other decisions relating to allocations under this
Section shall be determined by the Manager. Absent a determination by the
Manager, the remedial allocation method under Treasury Regulation Section
1.704-3(d) shall be used. Allocations pursuant to this Section are solely for
purposes of federal, state, and local taxes and shall not be taken into account
in computing any Member's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
It is acknowledged and agreed by the Members that on the date of this
Agreement the Agreed Value of the LLC's assets equals the adjusted basis of
those assets for federal income tax purposes.
SECTION 4.4. MISCELLANEOUS.
(a) Allocations Attributable to Particular Periods. For purposes of
determining Profits, Losses or any other items allocable to any period, such
items shall be determined on a daily, monthly, or other basis, as determined by
the Manager using any permissible method under Code Section 706 and the Treasury
Regulations thereunder.
(b) Other Items. Except as otherwise provided in this Agreement, all
items of LLC income, gain, loss, deduction, credit and any other allocations not
otherwise provided for shall be divided among the Members in the same proportion
as they share Profits or Losses, as the case may be, for the year.
(c) Tax Consequences; Consistent Reporting. The Members are aware of
the income tax consequences of the allocations made by this Article IV and by
the Regulatory Allocations and hereby agree to be bound by those allocations as
reflected on the information returns of the LLC in reporting their shares of LLC
income and loss for income tax purposes. Each Member agrees to report its
distributive share of LLC items of income, gain, loss, deduction and credit on
its separate return in a manner consistent with the reporting of such items to
it by the LLC.
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ARTICLE V
MANAGEMENT
SECTION 5.1. MANAGEMENT BY THE MANAGER ACTING THROUGH ITS BOARD OF
MANAGERS; ACTIONS REQUIRING MEMBER VOTE.
(a) General Authority of Manager; Size, Composition and Voting of
Manager's Board of Managers; Vote Shifts; Authority of Members. The Manager
shall be DTS Management, LLC, a Georgia limited liability company, all of the
member interests of which are owned by the LLC. Except as set forth in those
provisions of this Agreement that specifically require the vote, consent,
approval or ratification of the Members, the Manager shall have complete
authority and exclusive control over the management of the business and affairs
of the LLC. Complete authority and exclusive control over the management of the
business and affairs of the Manager shall in turn be vested in the Manager's
seven (7) person board of managers (the "Board"), the composition of which shall
be governed by this Agreement and the operating agreement of the Manager, which
shall be in the form of Exhibit O attached hereto. Unless required by this
Agreement and then in accordance with Section 5.3 below (to the extent such
Section is applicable to the subject action), the LLC shall take no action with
respect to its interest in the Manager, including without limitation, any action
that would affect the size, voting or composition of, or designation of Persons
to, the Board, the LLC's ownership interest in the Manager or any amendment to
the operating agreement of the Manager, without action by the Members as
specified in Section 5.3 below. The Members agree that they shall in all events
cause the LLC to vote the LLC's member interest in the Manager or otherwise
cause the Board to consist at all times of the following individuals (each of
whom shall have one vote, except as expressly provided otherwise in this
Agreement):
(i) Two (2) individuals designated in writing by Whitney (the
"Whitney Designees").
(ii) One (1) individual designated in writing by Chisholm (the
"Chisholm Designee").
(iii) The chief executive officer of the Manager, as may be elected
from time to time by the board of managers of the Manager,
which individual is currently Douglas S. Holladay, Jr.
(iv) Those two (2) individuals elected by a vote of the holders of
Class B Units (the "B Unit Designees") with each such holder
being entitled to cast that number of votes equal to the
number of such Units held by such holder, which vote shall be
taken separately with respect to each of the two (2) seats
without cumulative voting. The two (2) individuals designated
pursuant to this clause (iv) shall be entitled to two (2)
votes each on all matters before the Board until such time
that the size of the Board is increased to nine members as
provided below, or until there is a Vote Shift.
(v) One (1) individual elected by a vote of the holders of the
Class B, C and D Units, with each such holder being entitled
to cast that number of votes equal to the number of such Units
held by such holder.
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The individual designees to the Board, effective on the date hereof,
are listed on Exhibit P attached hereto. Such Persons shall continue to serve
until their death or resignation, or until their successor is designated as
provided herein.
Upon the affirmative vote of Columbia A, Whitney and Chisholm, the size
of the Board shall be increased from seven (7) to nine (9). The two additional
seats shall be filled by individuals approved by Columbia A, Whitney, and
Chisholm, and elected by holders of a majority of the Units, and who are not
otherwise Affiliates of any of the Columbia Entities, Whitney or Fleet. In the
event of such an increase in the size of the Board, the two (2) B Unit Designees
and the two (2) new designated individuals shall be entitled to one vote each.
Within five (5) days following any Change in Control of Columbia, then
the Columbia Entities shall give notice of such event to Whitney and Chisholm
("Change Notice"). If the Columbia Entities do not give the required Change
Notice, Columbia A and Columbia B shall be in breach of this Agreement, and in
addition Whitney or Chisholm still have the right at any time to give the Change
Notice. At any time following a Change Notice and continuing for a period of one
year thereafter, either Whitney or Chisholm shall have the right to implement
the Vote Shift by notice to the Board and all of the Members. The Vote Shift
shall be effective immediately upon such notice; provided however, if the Change
in Control of Columbia is curable, the Columbia Entities shall have 90 days
following the Vote Shift to cure the Change in Control of Columbia, and if cured
within such period the Vote Shift shall be deemed rescinded as of the date of
such cure. In addition, the holders of the Class A Units may, by majority vote
of such Units, implement the Vote Shift under the circumstances described in
Section 9.2 below.
The Board shall meet not less often than once per quarter. In the event
that the Board shall create an "Executive Committee," a "Compensation
Committee," an "Audit Committee," or committees with similar functions such
committees shall have at least one member designated by each of Columbia A,
Whitney and Chisholm.
Except as set forth in Subsection 5.3(a) below, no Member shall have
the actual or apparent authority to cause the LLC to become bound to any
contract, agreement or obligation, and no Member shall take any action
purporting to be on behalf of the LLC. The Manager shall not cause the LLC to
become bound to any contract, agreement or obligation, and shall take no other
action on behalf of the LLC if such matter requires action by the Members,
unless such matter has received the Member vote, consent, approval or
ratification as required pursuant to this Agreement with respect to such matter.
(b) Specific Actions Authorized. Without limiting the generality of the
preceding Subsection, the Manager shall have the authority on behalf of the LLC,
if, as and when it deems necessary or appropriate, subject only to the express
terms, conditions and limitations of such authority contained in this Agreement
(including, without limitation, Section 5.3 below), to take any of the actions
listed below in furtherance of or relating to the LLC's business and purposes:
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(i) Expend Funds; Invest. Expend the LLC's funds; and
invest in debt obligations (including, but not
limited to, obligations of federal and state
governments and their agencies, commercial paper, and
certificates of deposit of federally-insured
commercial banks, savings banks, or savings and loan
associations) such of the LLC's funds as are
temporarily not required for the operation of the
business and affairs of the LLC.
(ii) Retain Service Providers. Employ, contract with or
retain from time to time, on such terms and for such
compensation as they may deem appropriate, such
Persons as it may deem advisable, including, without
limitation, attorneys, accountants, financial and
technical consultants, investment bankers, loan
brokers, insurance brokers, or others.
(iii) Acquire, Finance, Operate, Sell Assets. Enter into
and execute agreements for the purchase of securities
or the acquisition of real and personal property
(whether tangible or intangible) appropriate to the
LLC's business, and make and implement all decisions
relating to the financing, operation, sale or
disposition of the LLC's business and assets.
(iv) Exercise Rights of Ownership. Exercise all the LLC's
rights, powers, and privileges of ownership with
respect to the assets of the LLC, and any other
rights held by the LLC, including the transfer of
title to all or any portion of the assets of the LLC.
(v) Modify Agreements. Consent to the modification,
renewal, or extension of any obligations of the LLC
to any Person or of any agreement to which the LLC is
a party or of which it is a beneficiary.
(vi) Convey and Encumber Assets. Execute any security
agreement, financing statement, collateral
assignment, pledge, hypothecation agreement, deed,
lease, deed of trust, mortgage, promissory note, bill
of sale, assignment, contract or other instrument
purporting to convey or encumber the interests of the
LLC in any other entity or any other LLC assets or to
create indebtedness of the LLC.
(vii) Repay, Refinance Indebtedness. Repay in whole or in
part, refinance, recast, increase, modify, or extend
any indebtedness of the LLC.
(viii) Prosecute Actions; Defend Claims. Adjust, compromise,
settle, or refer to arbitration any claim against or
in favor of the LLC; and institute, prosecute and
defend any actions or proceedings relating to the
LLC, and its business and assets.
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(ix) Acquire Insurance. Acquire and enter into any
contract of insurance (including without limitation
life insurance, property and casualty insurance,
workers compensation insurance and general liability
insurance) which they deem necessary or appropriate
for the protection of the LLC, for the conservation
of LLC assets, or for any purpose convenient or
beneficial to the LLC.
(x) Incur Debt. Cause the LLC to borrow funds from any
Person in such amounts and upon such terms (including
interest rates, payment provisions and security) as
they may determine to be desirable under the
circumstances; and, as security for any such
borrowing, mortgage, pledge, hypothecate or otherwise
encumber LLC assets, or Interests as provided in
Section 7.1 below.
(xi) CIBC Credit Facility. Cause the LLC (X) to execute,
deliver, and perform the LLC's obligations set forth
in that certain Credit Agreement dated as of November
27, 1996 by and among CIBC Wood Gundy Securities
Corp., J.P. Morgan Securities, Inc., Morgan Guaranty
Trust Company of New York, and Canadian Imperial Bank
of Commerce (the "CIBC Credit Facility") and any
other of the "Loan Documents" as such term is defined
in the CIBC Credit Facility, including, without
limitation, the granting of the liens to be created
pursuant to the "Security Documents" as such term is
defined in the CIBC Credit Facility, (Y) to effect
the borrowings contemplated under the CIBC Credit
Facility, and (Z) to execute and deliver all
acknowledgements, statements, certificates or
affirmations that may be required or contemplated
under the Loan Documents.
(xii) Maintain Books and Reports. Exercise all rights and
powers necessary to produce and maintain the books,
bank accounts, accounting reports, financial
statements and tax returns of the LLC.
(xiii) Make Tax Elections. Cause the LLC to make any and all
elections for federal, state and local tax purposes
including, without limitation, any election to adjust
the basis of LLC assets pursuant to Code Sections
734(b), 743(b), 754 and 755 or comparable provisions
of state or local law, in connection with Transfers
of Interests and LLC distributions.
(xiv) Merge, Convert or Reorganize. Subject to Section 7.9
below, cause the LLC or any entity controlled by the
LLC to merge with or convert by filing into any other
form of entity, or engage in any reorganization or
similar transaction, and in connection therewith
cause the conversion of the Interests or the equity
interests of any entity controlled by the LLC into
capital stock of any resulting corporation or equity
interests in any other resulting entity, which
capital stock or equity interests in the resulting
entity having relative rights, limitations,
preferences and other terms consistent with the
Interests or other equity interests so converted.
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(xv) Execute Documents. Execute, acknowledge, and deliver
any and all documents or instruments in connection
with any of the foregoing.
(c) Right to Rely on Action of the Manager. Persons dealing with the
LLC shall have no duty to inquire whether the act of the Manager in carrying on
in the usual way the business of the LLC is pursuant to the Manager's actual
authority under this Agreement, and such acts shall be binding upon the LLC
regardless of whether the Manager had actual authority, unless the Person
dealing with such Manager had actual knowledge that the Manager was exceeding
his authority.
(d) Delegation of Authority. The Manager may, but shall not be required
to, delegate by written resolutions of its board of managers, which resolutions
may be general or may be limited to specific matters, to one Person, several
Persons or a committee of Persons (with such titles as the Manager shall
select), which Persons may but need not be Members, any powers or authority
granted to the Manager pursuant to this Agreement or pursuant to the Act;
provided, however, that the delegation of authority by the Manager pursuant to
this Subsection shall not relieve the Manager from the duties, limitations, and
responsibilities set forth in the Act or in this Agreement.
SECTION 5.2. ASCERTAINING THE ACTION OF THE MANAGER.
The requisite vote, consent, approval or ratification of the Manager
with respect to any matter may, pursuant to Act Section 18-404(c), be evidenced
in writing signed by the Manager or may be ascertained and evidenced in any
other formal or informal matter.
SECTION 5.3. DIRECT AUTHORITY OF MEMBERS WITH RESPECT TO THE MANAGER;
RESTRICTIONS ON AUTHORITY OF MANAGER.
(a) Direct Member Action Required. The Members and not the Manager
shall have and shall exercise complete authority and exclusive control over all
matters pertaining to the LLC's member interest in the Manager, including
without limitation, authority with respect to (i) the designation of the
Manager's board of managers (which designations the Members agree to make as set
forth in Subsection 5.1(a) above), (ii) amendments to the Manager's operating
agreement or articles of organization, (iii) the merger, consolidation or
conversion of the Manager with or into another entity or other matters in which
the LLC as a member of the Manager shall have voting or other rights and (iv)
the sale, pledge, encumbrance or any other transfer of the LLC's member interest
in the Manager (other than the granting of a security interest in such member
interest pursuant to the Guarantee and Collateral Agreement). The exercise of
the Members' direct authority hereunder shall be by vote of those Members
holding a majority of the Units and such class vote as may be required in any
instance, and shall be pursuant to the procedures set forth in Article VI below,
except in those cases in which other procedures are expressly set forth.
(b) Member Vote Required. Without the vote of the holders of a majority
of the Units voting together as a single class, as well as holders of seventy
percent (70%) of the Class A Units and seventy percent (70%) of the Class B
Units, each voting separately as a class, the Manager shall have no authority
to:
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(i) do any act in contravention of this Agreement.
(ii) amend this Agreement, except as expressly provided
otherwise herein.
(iii) possess any property or assign, transfer, or pledge
the rights of the LLC in specific property, for other
than the benefit of the LLC or any Person in which
the LLC has an interest.
(iv) employ, or permit to be employed, the funds or assets
of the LLC in any manner except for the benefit of
the LLC or any Person in which the LLC has an
interest.
(v) commingle the LLC's funds with its own or any other
Person's funds.
(vi) make distributions other than in cash.
(vii) cause the LLC to convert to a corporation by merger
or otherwise, other than pursuant to a Qualified
Corporate Conversion.
(c) Class Unit Votes Required. Subject to the last paragraph of this
Section 5.3(c), other than with respect to a Qualified Corporate Conversion as
described in Section 7.9 below, without the vote of the holders of at least
seventy percent (70%) of the Class A Units and, if there has been a Vote Shift
as a result of a Change of Control of Columbia, seventy percent (70%) of the
Class B Units, none of the LLC, the Manager and any of the Members shall have
any authority to take any action, directly or indirectly, that:
(i) Alters or changes the rights, preferences or
privileges with respect to the Class A Units (or, if
there has been a Vote Shift, the Class B Units).
(ii) Creates, by reclassification, amendment to this
Agreement or otherwise, any new class or series of
Units or Interests having rights, preferences or
privileges senior or pari passu to the Class A Units
(or, if there has been a Vote Shift, the Class B
Units).
(iii) Results in any merger, reorganization, Change of
Control of the LLC or any transaction or a series of
related transactions in which all or substantially
all of the assets, properties, or businesses of the
LLC and its Subsidiaries taken as a whole are sold or
otherwise transferred to Persons other than the LLC
or any of its Subsidiaries, unless such transaction
would result in cash proceeds to the holders of the
Class A Units with respect to those Units of an
amount equal to or greater than the Class A Capital,
plus the Preferred Return.
(iv) Results in an IPO that is not a Qualified IPO,
subject to the rights of the Members under the
Registration Rights Agreement.
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(v) Results in the redemption or repurchase of any
Interest, whether in the form of cash or promissory
notes, or otherwise (except in connection with the
redemption or acquisition of Interests held by
employees, managers, or consultants of the LLC or any
Subsidiary, or Permitted Transferees of such Persons,
in connection with or in furtherance of the
termination of such relationship).
(vi) Results in the issuance of any Interest or other
equity interest in the LLC or in any Subsidiary, or
rights to acquire such interests, other than under
the Employee Unit Plan or in connection with a
Qualified Financing or an Interim Financing.
(vii) Results in any distribution with respect to any
Interest (other than as permitted in clause (v)
above), other than the tax distributions under
Section 3.1, withholding under Section 3.3, Preferred
Return distributions under Section 3.2(a), or
liquidating distributions under Section 9.3.
(viii) Results in any contract, agreement, loan, transaction
or other relationship with the LLC or any Subsidiary
and any of the Columbia Entities, Whitney or Fleet,
or with an Affiliate of any of them (excluding for
this purpose any Subsidiary), other than the payment
of Permitted Reimbursements.
(ix) Results in a change in the size, voting or
composition of the Board.
(x) Results in an increase in the number of Class D Units
authorized to be issued under the Employee Unit Plan.
(xi) Results in the LLC being engaged in any business
other than the distribution of, or the indirect
holding of rights to distribute, DirecTv broadcast
satellite services, programming and products.
(xii) Results in the LLC or any Subsidiary that is not a
juridical corporation electing on IRS Form 8832 or
otherwise electing to be treated as a corporation for
federal tax purposes as provided in Section 1.6 of
this Agreement.
(xiii) Results in any amendment to this Agreement adversely
affecting the holders of the class or classes of
Units entitled to a class vote under this Section
5.3(c).
In the event that the Class A Capital and Preferred Return has been
reduced to zero, the class vote required above by the holders of Class A Units
shall apply only to the items in clauses (i), (iv), (viii), (ix) and (xiii)
above. In the event a class vote is required above by the holders of the Class B
Units, such class vote shall not apply to the item in clause (vii) above.
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(d) Special Class Vote on Acquisitions. Without the vote of at least
fifty percent (50%) of the Class A Units (and a 50% vote of the Class B Units if
there has been a Vote Shift) neither the LLC nor any Subsidiary shall enter into
or consummate an acquisition of any NRTC System (other than those NRTC Systems
under contract on the date hereof or referred to in the definition of Interim
Financing), or more than one NRTC System in the same or a series of related
transactions from a single seller or a group of Affiliated sellers, if the
acquisition price per household is greater than $120 or the aggregate purchase
price exceeds $25,000,000; provided, however, that this Section 5.3(d) shall
expire on the date that is two years after the date hereof.
SECTION 5.4. LIMITATION OF LIABILITY.
(a) Notwithstanding any other provision to the contrary contained in
this Agreement, no Manager, Member or member of the Manager's board of managers
shall be liable, responsible, or accountable in damages or otherwise to the LLC
or to any Member or assignee of a Member for any loss, damage, cost, liability,
or expense incurred by reason of or caused by any act or omission performed or
omitted by such Manager, Member or member of the Manager's board of managers,
whether alleged to be based upon or arising from errors in judgment, negligence,
or breach of duty (including alleged breach of any duty of care or duty of
loyalty or other fiduciary duty), except for (i) acts or omissions the Manager,
Member or member of the Manager's board of managers knew at the time of the acts
or omissions were clearly in conflict with the interests of the LLC, (ii) any
transaction from which the Manager, Member or member of the Manager's board of
managers derived an improper personal benefit, (iii) a willful breach of this
Agreement, or (iv) gross negligence, recklessness, or willful misconduct or
knowing violation of law. Without limiting the foregoing, no Manager, Member or
member of the Manager's board of managers shall in any event be liable for (A)
the failure to take any action not specifically required to be taken by the
Manager, Member or member of the Manager's board of managers under the terms of
this Agreement, (B) any action or omission taken or suffered by any other
Manager, Member or member of the Manager's board of managers, or (C) any
mistake, misconduct, negligence, dishonesty or bad faith on the part of any
employee or other agent of the LLC appointed by such Manager, or Member or
member of the Manager's board of managers in good faith.
(b) Any Manager, Member or member of the Manager's board of managers
may consult with legal counsel selected by it, and any act or omission suffered
or taken by it on behalf of the LLC or in furtherance of the interests of the
LLC in good faith reliance upon and in accordance with the prior written advice
of such counsel shall be full justification for any such act or omission, and
the Manager, Member or member of the Manager's board of managers shall be fully
protected in so acting or omitting to act, provided that if it is ultimately
determined that such action was a breach of this Agreement or results in the
improper receipt, directly or indirectly, of personal benefit to such Manager,
Member or member of the Manager's board of managers, the Manager, Member or
member of the Manager's board of managers shall be accountable to the Members
for such action or omission notwithstanding such prior legal advice.
(c) The Manager may, but is not required to, provide for the limitation
of liability of Persons to whom the Manager may delegate management authority,
which limitation of liability must be in writing in order to be effective.
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SECTION 5.5. INDEMNIFICATION. The provisions regarding the
indemnification of the Manager, Members and members of the Board and their
representatives are set forth in the Indemnification Exhibit attached hereto as
Exhibit E.
SECTION 5.6. EXPENSE REIMBURSEMENT. The LLC shall reimburse all
reasonable out-of-pocket expenses incurred by the members of the Board in
connection with attendance at meetings of such Board (including any meetings of
committees of the Board). In addition, the LLC shall make Permitted
Reimbursements.
SECTION 5.7 INSURANCE. The LLC shall obtain "directors and officers"
insurance or comparable insurance for the members of the Board in such form and
with such coverage amounts as shall be determined by the Board and satisfactory
to Whitney and Fleet (but in no event shall coverage in excess of $3,000,000 be
required by Whitney and Fleet) within 45 days after the date hereof, and in any
event prior to the closing of any Qualified Financing. The LLC shall obtain
within sixty (60) days of the date hereof, and thereafter maintain in force so
long as requested to do so by Whitney, Fleet, or Columbia A, key man insurance
on the life of Douglas S. Holladay, Jr. in an amount of coverage not less than
$10,000,000 and on the life of Donald A. Doering in an amount of coverage not
less than $3,000,000, provided, however, that such individuals are insurable at
commercially reasonable rates.
ARTICLE VI
MEMBER MEETINGS
SECTION 6.1. ACTUAL MEETINGS OF MEMBERS.
(a) Meetings of the Members may be called by any 10% Unit Member by
notice to the other Members setting forth the date and time of the meeting, the
nature of the business to be transacted, and, unless the meeting is a conference
call meeting as provided in Subsection (d) below, the place of the meeting.
Notice of any meeting shall be given pursuant to Section 11.1 below to all
Members not less than two (2) days nor more than ninety (90) days prior to the
meeting.
Notice of any meeting of the Members shall be deemed to have been
waived by attendance at the meeting, unless the Member attends the meeting
solely for the purpose of objecting to notice and so objects at the beginning of
the meeting. Members may attend and vote in person or by proxy at such meeting,
and the LLC shall make reasonable arrangements to permit Members to attend and
vote at meetings by telephone. Whenever the vote or consent of Members is
permitted or required under this Agreement, such vote or consent may be given at
a meeting of Members or may be given in accordance with the procedure prescribed
in the following Section for written consent to action in lieu of actual
meetings. Except as otherwise provided in this Agreement, the vote, consent,
approval or ratification of Members holding a majority of the Units shall be
required in order to constitute Member action.
(b) For the purpose of determining the Members entitled to receive
notice of, or to vote at, any meeting of the Members or any adjournment thereof
or entitled to take any other
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action (including informal action authorized by the following Section), the
Person(s) requesting such meeting or seeking such informal action may fix, in
advance, a date as the record date for any such determination of Members. Such
date shall not be more than ten (10) days prior to any such meeting or action.
(c) At the beginning of any meeting of Members, the Manager shall
designate an individual to preside over the meeting, and the meeting shall be
conducted pursuant to such rules of order as the presiding individual deems
appropriate. The presiding individual shall cause a record to be kept of the
meeting, which shall be filed with the LLC's permanent records.
(d) Meetings may be held via conference call with no physical location
designated as the place of the meeting, provided that all Members and other
persons on the conference call can hear and speak to one another and notice of
the conference call is given or waived as required in the case of a meeting
called for a specific place. The Member calling a conference call meeting shall
be responsible for arranging the conference call and shall specify in the notice
of the conference call meeting the method by which the Members can participate
in the conference call.
SECTION 6.2. WRITTEN CONSENT TO ACTION IN LIEU OF ACTUAL MEETINGS.
Pursuant to Act Section 18-302(c), any action that is permitted or required to
be taken by Members, including any amendment to the Certificate of Formation or
to this Agreement, may be taken or ratified by written consent setting forth the
specific action to be taken and sent to all Members and signed within thirty
(30) days of being sent by that number of Members required in order to take the
specified action (including such class vote as may be required under Section
5.3).
ARTICLE VII
TRANSFER OF INTERESTS; RIGHTS OF FIRST REFUSAL AND CO-SALE;
CORPORATE CONVERSIONS
SECTION 7.1. IN GENERAL; REGISTRATION AND CERTIFICATION OF INTERESTS;
MANDATORY PLEDGE OF INTERESTS. Every Transfer shall be subject to all of the
terms, conditions, restrictions, and obligations of this Agreement. Any
attempted Transfer which does not comply with the provisions of this Article
shall be void and the LLC shall not recognize the attempted purchaser, assignee,
or transferee for any purpose whatsoever, and the Member attempting such
Transfer shall have breached this Agreement for which the LLC and the
non-breaching Members shall have all remedies available for breach of contract.
Ownership of the Interests (whether by Members or assignees) shall be
registered upon the books and records of the LLC and, pursuant to Section
18-702(c) of the Act, evidenced by certificates issued to the owners of such
Interests in the form of Exhibit N attached hereto and any Transfer of Interests
shall be effected only by the surrender of such certificates to the LLC and
reissuance of the certificates and re-registration of ownership on the books and
records of the LLC. The Manager shall also establish procedures for the
replacement of lost, destroyed or stolen certificates upon such undertaking as
the Manager deems advisable to indemnify the LLC with respect to the reissuance
of replacement certificates.
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Each Member and other owner of an Interest hereby agrees to grant a
security interest in, collaterally assign, pledge or hypothecate its Interest as
security for the debts of the LLC and its Subsidiaries pursuant to the
Collateral and Guarantee Agreement. Each Member and other owners of an Interest
agrees to execute any and all further instruments and documents as may be
necessary or appropriate to give effect to these provisions. This provision
shall no longer apply after such security interest is released by the
administrative agent under the Collateral and Guarantee Agreement.
SECTION 7.2 CONDITIONS PRECEDENT TO TRANSFER OF MEMBER'S INTEREST.
Subject to Sections 7.7 and 7.8 below, a Member may Transfer all or any portion
of his Interest if all the following conditions are satisfied:
(a) Prior Notice. At least ten (10) days prior to any proposed Transfer
of an Interest otherwise permitted pursuant to this Section, the Member
proposing to Transfer all or any portion of its Interest gives a Transfer
Notice.
(b) Expenses. The transferor agrees to reimburse the LLC for any
expenses reasonably incurred by the LLC in connection with the consummation of
the Transfer.
(c) Transfer Documents; Effective Time of Transfer. Such Member and its
purchaser, transferee or assignee, shall execute, acknowledge, and deliver to
the LLC such instruments of transfer and assignment with respect to such
transaction as are in form and substance reasonably satisfactory to the LLC,
including, without limitation, the written agreement of the purchaser,
transferee or assignee to assume and be bound by all of the obligations of the
transferor under this Agreement.
(d) No Tax Termination. The Transfer does not result in the tax
termination of the LLC within the meaning of Code Section 708(b).
(e) Securities Law Compliance. Either (i) the Transfer is to the heirs,
devisee or legatees of a deceased Member; (ii) the LLC determines that the
Interests are not securities; (iii) the Interests are registered under the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "1933 Act"), and any applicable state securities laws; or (iv) the LLC
determines that the Transfer qualifies for an exemption from the registration
requirements of the 1933 Act and any applicable state securities laws. Except as
specifically provided in the Registration Rights Agreement, the LLC has no
obligation or intention to register Interests for resale under any federal or
state securities laws or to take any action which would make available any
exemption from the registration requirements of such laws.
(f) Not a Publicly Traded Partnership. The Transfer does not result in
the LLC being treated as a corporation pursuant to Code Section 7704 or Treasury
Regulations Section 1.7704-1.
(g) Opinion of Counsel. In its discretion, the Manager may require as a
condition precedent to any Transfer of an LLC Interest, delivery to the LLC, at
the proposed transferor Member's expense, of an opinion of counsel satisfactory
(both as to the counsel and substance
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of the opinion) to the Manager that the proposed Transfer will satisfy all or
certain of the conditions set forth in Sections 7.2(c)-(f).
(h) Other Agreements. The Transfer complies with the provision of any
employment agreement or other agreement between the Member and the LLC or any
Subsidiary.
(i) Consent of Holder of Security Interest. In the event the Interest
is subject to a security interest, collateral assignment, pledge or
hypothecation pursuant to Section 7.1 above, the Member proposing to make the
Transfer obtains the written consent to the Transfer of the holder or
beneficiary of such encumbrance, and such Transfer must in any event be subject
to such prior encumbrance.
SECTION 7.3. RIGHTS OF ASSIGNEES. If a Transfer complies with the
provisions of the preceding Section, but the Person acquiring such Interest is
not admitted as a Member pursuant to the following Section, such Person shall
become an assignee with respect to such Interest pursuant to Section
18-702(b)(1) of the Act.
An assignee with respect to an Interest is entitled only to receive
distributions and allocations with respect to such Interest as set forth in this
Agreement, and shall have no other rights, benefits or authority of a Member
under this Agreement or the Act, including without limitation no right to
receive notices to which Members are entitled under this Agreement, no right to
vote, no right to inspect the books or records of the LLC, no right to bring
derivative actions on behalf of the LLC, and no other rights of a Member under
the Act or this Agreement. Provided, however, the Interest of an assignee shall
be subject to all of the restrictions, obligations and limitations under this
Agreement and the Act, including, without limitation, the restrictions on
Transfers of Interests, the obligations (but not the rights) pursuant to the
co-sale provisions and provisions giving Members an option to purchase the
Interest of an assignee upon the occurrence of an Optional Purchase Event with
respect to the assignee, as contained in this Article.
SECTION 7.4. ADMISSION OF ASSIGNEES AS MEMBERS. No Person taking or
acquiring, by whatever means, the Interest of any Member in the LLC shall be
admitted as a Member unless either (i) such Person is a Permitted Transferee of
the transferor, or (ii) such Person is admitted as a Member with the consent of
the Manager. In determining whether to consent to the admission of a Member's
transferee, only those members of the Board who are not Affiliates or Family
Members of the transferor and the transferee shall have a vote. In addition, no
Person shall be admitted as a Member unless such Person:
(a) Elects to become a Member by executing and delivering such Person's
written acceptance and adoption of the provisions of this Agreement;
(b) Executes, acknowledges, and delivers to the LLC such other
instruments as the LLC may deem necessary or advisable to effect the admission
of such Person as a Member; and
(c) Pays a transfer fee to the LLC in an amount sufficient to cover all
reasonable expenses of the LLC incurred in connection with the admission of such
Person as a Member.
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The Manager shall amend the Information Exhibit from time to time to
reflect the admission of Members or the assignment of Interests pursuant to this
Article, any permitted issuance of additional Interests, the operation of
Section 2.2 or any other provision of this Agreement pursuant to which matters
set forth on the Information Exhibit have changed pursuant to or as permitted
under this Agreement and shall promptly provide such amended Information Exhibit
to the Members.
SECTION 7.5. DISTRIBUTIONS AND ALLOCATIONS WITH RESPECT TO TRANSFERRED
INTERESTS. If any Interest is Transferred during any Fiscal Year in compliance
with the provisions of this Article, then (i) Profits, Losses, and all other
items attributable to the Interest for such period shall be divided and
allocated between the transferor and the transferee by taking into account their
varying interests during the period in accordance with Code Section 706(d),
using any conventions permitted by the Code and selected by the Members; (ii)
all distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee;
and (iii) the transferee shall succeed to and assume the Capital Account, the
Class A Capital, the number and type of Units, and other similar items of the
transferor to the extent related to the transferred Interest. Solely for
purposes of making the allocations and distributions, the LLC shall recognize
such Transfer not later than the end of the calendar month during which the LLC
receives notice of such Transfer. If the LLC does not receive a notice stating
the date the Interest was transferred and such other information as the LLC may
reasonably require within thirty days after the end of the Fiscal Year during
which the Transfer occurs, then all of such items shall be allocated, and all
distributions shall be made to the Person, who, according to the books and
records of the LLC on the last day of the Fiscal Year during which the Transfer
occurs, was the owner of the Interest. Neither the LLC nor any Member shall
incur any liability for making allocations and distributions in accordance with
the provisions of this Section, whether or not any Member or the LLC had
knowledge of any Transfer of ownership of any Interest.
SECTION 7.6. TRANSFER OF INTEREST OF COLUMBIA INC. TO COLUMBIA B OR
COLUMBIA CAPITAL. Any provision in this Agreement to the contrary
notwithstanding, in the event Columbia Inc. transfers its Interest to Columbia B
via a contribution to the capital of Columbia B or otherwise, or to Columbia
Capital via a merger of Columbia Inc., with and into Columbia Capital, then in
either such case the transferee shall succeed to all of the rights of Columbia
Inc. in and to its Interest, including its rights as a Member, and shall be
bound by all of the obligations of Columbia Inc. under this Agreement, all
without the necessity of the execution or delivery of any further agreement,
document or instrument.
SECTION 7.7. RIGHT OF FIRST REFUSAL.
(a) Grant of Option. Upon the occurrence of an Optional Purchase Event
with respect to a Member, the LLC (acting through the Manager), followed by all
of the 10% Unit Members, shall have successive options to purchase all, but not
less than all, of such Member's Interest pursuant to the terms and conditions
set forth in this Agreement; provided, however, that if the Optional Purchase
Event is a proposed Transfer of only a portion of the Member's Interest, the
LLC's and the 10% Unit Members' options shall apply only to the portion of the
Interest that is proposed to be Transferred. In those cases in which the Manager
is acting on behalf of the LLC under this Section 7.7, such action shall be
taken by the Board, provided that any member
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of the Board who is an Affiliate or designee of any Member with an interest in
the right of first refusal transaction under this Section 7.7 as a selling
Member shall not participate in the Board action.
Upon the occurrence of an Optional Purchase Event, the Member with
respect to whom the Optional Purchase Event has occurred shall immediately give
written notice to the LLC and to all 10% Unit Members, which notice shall
describe the Optional Purchase Event (unless the Optional Purchase Event is the
giving of a Transfer Notice, in which case the Transfer Notice shall suffice).
If the Member with respect to whom the Optional Purchase Event has occurred does
not provide such notice and another Member or the Manager knows of the
occurrence of such Optional Purchase Event, such Member or the Manager may send
written notice of the Optional Purchase Event to the LLC, and if the LLC
determines that Optional Purchase Event has occurred, the LLC shall provide to
all 10% Unit Members the Transfer Notice.
(b) Optional Purchase Events. For purposes of this Agreement, the term
"Optional Purchase Event" shall mean any of the following events with respect to
a Member:
(i) The delivery of a Transfer Notice by the Member
unless such Transfer is to a Permitted Transferee.
(ii) In the case of any Member that is an individual, the
entry by any court of an order or adjudication that
the current or former spouse of the Member has
acquired any rights in the Member's Interest as a
result of divorce, equitable distribution or
community property partition proceedings pursuant to
the laws of any state or jurisdiction.
(iii) In the case of any Member who holds Class C or Class
D Units, if the Member who initially received such
Units from the LLC or its predecessor is no longer an
officer, director, employee, manager or an
independent contractor of the LLC or any Subsidiary.
(iv) In the case of Whitney, Columbia A, Columbia B,
Columbia Inc., or any other Member substantially all
of the assets of which consist of such Member's
Interest in the LLC, any Transfer of its capital
stock or other equity interests, or the sale or
issuance of any capital stock or equity interest in
such Member, unless such Transfer, sale or issuance
is to a Person who is an owner of such Member on the
date of this Agreement or a Permitted Transferee of
such Member (an "Indirect Transfer"); provided
however, Columbia A, Columbia B or Columbia Inc. may
admit partners, members or shareholders without
triggering this clause if such partners, members or
shareholders are employees of Columbia Capital or if
such additional partners, members or shareholders do
not acquire in the aggregate more than ten percent
(10%) of the equity interests in such Columbia
Entity. In the case of an Indirect Transfer, the
right of first refusal under this Section 7.7 and the
right of co-sale under Section 7.8 shall apply to a
proportionate part of the Interest of the Member with
respect to which an Indirect Transfer has occurred
based upon the amount
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of the equity interest of such Member that is
Transferred or issued in the Indirect Transfer
relative to the total equity interests in such
Member.
(c) Proposed Transfer for Consideration. If the Optional Purchase Event
is the delivery of a Transfer Notice or an Indirect Transfer and the Transfer or
Indirect Transfer is for cash, indebtedness, property or other consideration,
then the LLC's and the 10% Unit Members' successive options shall be to purchase
the Interest for the fair market value of the consideration proposed to be
received in the Transfer or Indirect Transfer or payable at the closing
described below, and pursuant to all of the other terms and conditions of the
proposed Transfer or Indirect Transfer. The Member desiring to Transfer its
Interest (or the Member with respect to which an Indirect Transfer has occurred)
and the Manager (acting on behalf of all Persons who exercise their option to
purchase hereunder) shall attempt to agree, in writing, on the fair market value
of any noncash consideration to be received in the proposed Transfer. If the
Member and the Manager are unable to agree on the fair market value of the
noncash consideration within thirty (30) days following the exercise of the
options to purchase granted in this Section, either the Member or the Manager
may by notice to the other commence the Appraisal Process described in the
Appraisal Exhibit.
(d) Other Optional Purchase Events. If the Optional Purchase Event is
not a proposed Transfer or Indirect Transfer for consideration, then the
successive options shall be for a purchase price equal to (i) the fair market
value of such Interest as of the last day of the calendar month immediately
prior to the occurrence of the Optional Purchase Event (the "Valuation Date"),
plus (ii) interest at the Prime Rate on the amount determined under clause (i)
from the Valuation Date to the closing date, compounded monthly, reduced by
(iii) any distributions with respect to such Interest from the Valuation Date
through the closing. For purposes of determining the purchase price, the fair
market value of an Interest shall equal the amount that would be received by the
owner of such Interest if all of the assets of the LLC were sold for cash equal
to their fair market value, the LLC paid all of its liabilities and liquidated
in accordance with this Agreement, all as of the Valuation Date. The selling
Member and the Manager (acting on behalf of all Persons who have options to
purchase hereunder) shall attempt in good faith to agree on the fair market
value of the Interest. If they are unable to agree, in writing, on the fair
market value of the Interest within thirty (30) days following the exercise of
the options to purchase granted in this Section, either the selling Member or
the Manager may by notice to the other commence the Appraisal Process described
in the Appraisal Exhibit.
(e) Exercise of Option by LLC. The Manager shall provide written notice
of exercise of the option to the Member with respect to whom an Optional
Purchase Event has occurred and to all 10% Unit Members within thirty (30) days
following the Transfer Notice or the other written notice to all 10% Unit
Members of the occurrence of the Optional Purchase Event, specifying whether or
not the LLC is exercising its option to purchase the Interest pursuant to this
Section. A failure by the Manager to give notice within such period shall be
deemed to be a notice of nonexercise.
(f) Exercise of Option by 10% Unit Members. In the event the LLC does
not exercise its option, then each of the 10% Unit Members shall have the option
to (i) purchase the Interest pursuant to this Section 7.7 on the same terms as
the LLC in proportion to the relative number of Units held by all the 10% Unit
Members; (ii) exercise the rights of co-sale specified
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in Section 7.8 below; or (iii) neither purchase a proportionate part of such
Interest nor exercise rights of co-sale. In order to exercise its option
pursuant to this Section, a 10% Unit Member shall provide written notice of
exercise of the option to the Member with respect to whom an Optional Purchase
Event has occurred, to the LLC and to all other 10% Unit Members within thirty
(30) days following the LLC's nonexercise. If any 10% Unit Member elects not to
exercise their option, then those 10% Unit Members that do exercise their option
shall have the option, for an additional fifteen (15) days following the end of
the option period for all 10% Unit Members, to acquire the Interest that could
have been acquired by the nonexercising 10% Unit Members in proportion to the
relative number of Units held by the exercising 10% Unit Members.
(g) Waiver; Failure to Exercise Options. Any party with an option to
purchase an Interest pursuant to this Article may waive its option at any time
by notice of such waiver to the Manager. With respect to an Optional Purchase
Event that is the giving of a Transfer Notice, if Persons with options under
this Section shall fail to exercise their options to purchase such Interest, or
such portion thereof, within the applicable periods, or in the event the
purchaser(s) shall fail to tender the required consideration at the closing
referred to below, then subject to the rights of co-sale described in Section
7.8 below, the transferring Member may transfer the Interest to the Person, and
upon the terms and price, specified in the notice of the proposed Transfer, but
only if such Transfer is consummated within ninety (90) days after the
expiration or withdrawal of the last option, or the failure to tender the
consideration if applicable; provided, however, the holder of such transferred
Interest shall be a mere assignee and shall not become a Member unless admitted
as such pursuant to the terms of the Agreement. If the subject Interest is not
so transferred within the applicable period, the Interest shall again become
subject to all of the terms and conditions of the Agreement and may not
thereafter be transferred except in the manner and on the terms herein provided.
In the event the LLC or any 10% Unit Member exercises an option hereunder, but
fails to tender the required consideration at the closing, the transferring
Member shall have all rights and remedies against the LLC or the exercising 10%
Unit Members, as the case may be, available for breach of contract, including
the remedy of specific performance.
(h) Closing of Purchase of Interest; Payment of Purchase Price;
Security. The closing of the purchase of any Interest by the LLC or any of the
10% Unit Members pursuant to this Section shall occur at the offices of the LLC
within thirty (30) days after the earlier of (a) the written agreement of the
parties on the fair market value of the Interest or the consideration to be
received therefor, as the case may be, or (b) the conclusion of the Appraisal
Process. At the closing, the selling Member shall deliver to the purchaser(s) of
the Interest an executed assignment of the subject Interest satisfactory in form
to counsel for the LLC, and the purchaser(s) shall deliver the purchase price as
provided below to the owner of the Interest. The selling Member and the
purchaser(s) each shall execute and deliver such other documents as may
reasonably be requested by the other.
The purchase price shall be delivered at closing as follows:
(i) If the purchase of the Interest is as a result of a proposed
Transfer to a third party for consideration, the purchase
price determined under this Agreement shall be
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payable on the same basis as the purchase price was to have
been paid by the third party.
(ii) If the purchase of the Interest is as a result of any other
Optional Purchase Event the purchase price shall be payable in
cash or same day funds at closing.
SECTION 7.8. RIGHT OF CO-SALE.
(a) Right of Co-Sale. In the event of a proposed Transfer of an
Interest to a Person who is not a Permitted Transferee, to the extent the
Interest proposed to be transferred is not purchased by the LLC pursuant to its
right of first refusal described in Section 7.7, each other Member shall have
the right to participate in the Transfer in the manner set forth in this Section
7.8. Each such nontransferring Member may Transfer to the proposed transferee
identified in the Transfer Notice a pro rata share (defined below) of such
nontransferring Member's Interest by giving written notice to the Manager and to
the transferring Member within the thirty (30) day period specified in Section
7.7(f), which notice shall state that the Member elects to exercise its rights
of co-sale under this Section 7.8. A notice of exercise of a Member's right of
first refusal under Section 7.7(f) and a notice of exercise of a Member's rights
of co-sale hereunder shall be mutually exclusive and the first such notice given
shall be binding and irrevocable. Each nontransferring Member shall be deemed to
have waived its right of co-sale hereunder either if it fails to give notice
within the prescribed time period or if such Member gives notice exercising its
right of first refusal pursuant to Section 7.7(f). A nontransferring Member's
pro rata share for this purpose shall equal that portion of the nontransferring
Member's Interest represented by that number of Units obtained by multiplying
the number of Units that are the subject of the proposed Transfer by fraction,
the numerator of which is the number of Units then held by such nontransferring
Member, and the denominator of which is the number of Units then held by all
persons entitled to this right of co-sale plus the number of Units represented
by the Interests proposed to be Transferred by the transferring Member. Insofar
as possible this right of co-sale shall apply to Units of the same class or
classes as the Units subject to the Transfer Notice. If any Member desiring to
exercise its rights of co-sale hereunder does not have a sufficient number of
Units of the same class as the Units subject to the Transfer Notice, such Member
may substitute Units of another class so long as such class ranks senior in
liquidation to the class of Units subject to the Transfer Notice. In the event
the proposed Transfer is of Class B Units and a Person wishing to exercise its
rights of co-sale hereunder does not have sufficient Class B Units, but has
Class A Units, such Person may convert a sufficient portion of such Class A
Units into Class B Units on the same basis as in the case of a Common Stock
Corporate Conversion so as to enable such Person to exercise its rights of
co-sale without surrendering such Person's accrued Preferred Return as of the
date of such conversion or the Preferred Return which shall accrue on such
Person's remaining Class A Units (and on any remaining accrued Preferred Return)
after the exercise of the rights of co-sale.
(b) Consummation of Co-Sale. Each nontransferring Member, in exercising
its right of co-sale hereunder, may participate in the Transfer by delivering to
the transferring Member at the closing of the Transfer of the transferring
Member's Interest to the transferee (the "Closing") one or more certificates
duly endorsed (if the Interests are certificated and are not pledged as
authorized in this Agreement) or an assignment (if the Interests are not
certificated or if they are pledged as authorized in this Agreement),
representing the Interest to be
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transferred by such nontransferring Member. At the Closing, such certificates or
assignments will be delivered to the purchaser (whether such purchaser is the
proposed transferee set forth in the Transfer Notice or those Members who have
exercised their rights of first refusal under Section 7.7) and the transferring
Member will remit, or will cause to be remitted, to the nontransferring Member
at the Closing that portion of the proceeds of the Transfer to which such
nontransferring Member would otherwise be entitled by reason of such
nontransferring Member's participation in such Transfer pursuant to these rights
of co-sale.
(c) Indirect Transfers. In the case of an Indirect Transfer, the right
of co-sale under this Section 7.8 shall be the right to put a portion of the
Interest of the Members electing their rights of co-sale hereunder to the Member
with respect to whom the Indirect Transfer has occurred, as if such member had
Transferred that proportionate part of such Member's Interest described in
Section 7.7(b)(iv) above.
SECTION 7.9. CORPORATE CONVERSIONS.
(a) In General. Upon the formation of the LLC, it was the express
intention and understanding of the Persons who were then the Members of the LLC
that upon the occurrence of certain specified events the LLC was to be converted
into a corporation by action of the Manager without the necessity of any action
or any investment decision on the part of any such Member. Upon the execution of
this Agreement, it is the express intention and understanding of the existing
Members and those Persons who became Members at the time of the execution of
this Agreement that upon the occurrence of those events specified below the LLC
shall be converted into a corporation in the manner set forth herein by the
action of the Manager and without the necessity of any action or any investment
decision on the part of any Member.
(b) Qualified Corporate Conversion -- Preferred Stock Corporate
Conversion. Upon the determination at any time by the Manager acting by a
majority vote of its board of managers that it is in the best interests of the
LLC that it be converted into a corporation, the Manager shall cause to be
executed and filed the certificate of merger in the form of Exhibit J attached
hereto, and cause to be executed and delivered such other instruments and
documents as it shall determine to be necessary or appropriate in order to
effectuate a Preferred Stock Corporate Conversion.
(c) Qualified Corporate Conversion -- Common Stock Corporate
Conversion.
(i) Conversion in Connection with a Qualified IPO. Upon
the determination by the Manager acting by a majority
vote of the Board in connection with the consummation
of a Qualified IPO that it is in the best interests
of the LLC that it be converted into a corporation
with a single class of common stock and after the
request of the managing underwriter of the Qualified
IPO selected by the Board, the Manager shall cause to
be executed and filed the certificate of merger in
the form of Exhibit K attached hereto, and cause to
be executed and delivered such other instruments
and documents as it shall determine to be necessary
or appropriate, in order to effectuate a Common
Stock Corporate Conversion.
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(ii) Conversion in Connection with any other IPO. Upon the
determination by the Manager acting by a majority
vote of its board of managers in connection with the
consummation of an IPO that is not a Qualified IPO,
but which has been approved by the requisite class
vote of the holders of the Class A Units as specified
in Section 5.3(c) above, that it is in the best
interests of the LLC that it be converted into a
corporation with a single class of common stock, the
Manager shall cause to be executed and filed the
certificate of merger, and cause to be executed and
delivered such other instruments and documents as it
shall determine to be necessary or appropriate, in
order to effectuate a Common Stock Corporate
Conversion.
(d) Satisfaction of Preferred Return in Cash in Connection with a
Qualified Corporate Conversion. In connection with the consummation of a
Qualified Corporate Conversion, the Manager shall have the authority acting by
majority vote of the Board to cause the LLC to declare a distribution of all or
any portion of any remaining unpaid Preferred Return, which amounts shall be
paid within five (5) business days following the consummation of the Qualified
Corporate Conversion and shall be treated as reducing the amount of the
Preferred Return outstanding on the date the Qualified Corporate Conversion is
consummated for purposes of determining the Common Stock Conversion Amount and
the Preferred Stock Conversion Amount.
(e) Board of Directors. In connection with the consummation of a
Preferred Stock Corporate Conversion the board of directors of the surviving
corporation shall be the same size and shall have the same composition and shall
be subject to the same voting and other rules as the board of managers of the
Manager. In the case of a Common Stock Corporate Conversion, the size,
composition and governing rules with respect to the board of directors of the
surviving corporation shall be determined by the Manager in consultation with
the managing underwriter.
(f) Procedures. In order to effectuate a Qualified Corporate Conversion
as authorized in this Section, the Manager shall execute the applicable
certificate of merger in the name of Whitney, as the surviving other business
entity in the merger, pursuant to the Manager's limited power of attorney set
forth in Section 7.10 below, shall date the certificate of merger as of the date
the Manager determines the Qualified Corporate Conversion should become
effective and shall file such certificate of merger in accordance with the Act.
For purposes of the General Corporation Law of the State of Delaware and Section
18-209(c)(2) of the Act this Agreement shall constitute the agreement of merger
approved and executed by each of the constituent entities to the merger. Whitney
hereby represents that the board of directors and the stockholders of Whitney
have approved and adopted this Agreement in accordance with the provisions of
the General Corporation Law of the State of Delaware relating to the adoption of
an agreement and plan of merger.
(g) Other Corporate Conversions. Upon a vote of the holders of a
majority of the Units and such class vote of the holders of the Class A Units as
may be required pursuant to Section 5.3(c) above, the Manager shall have the
authority to cause a Corporate Conversion by merger into another corporation or
otherwise, and in connection therewith cause the conversion
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of the Interests into the capital stock of any resulting corporation having
relative rights, limitations, preferences and other terms consistent with the
Interests so converted.
(h) No Appraisal Rights. The Members shall have no appraisal rights
pursuant to Act Section 18-210 or otherwise in connection with a Corporate
Conversion or any other transaction authorized under this Agreement.
(i) Other Permitted Ancillary Transactions. In connection with the
consummation of a Qualified Corporate Conversion, the Manager acting by majority
vote of its Board of Managers shall have the authority to merge, consolidate or
reorganize one or more of the Subsidiaries with one or more other Subsidiaries
or other entities wholly-owned directly or indirectly by the LLC or the Manager
or the surviving corporation in the Qualified Corporate Conversion.
(j) Covenants of Whitney. In order to ensure that the LLC can
effectuate a Qualified Corporate Conversion as described above, Whitney hereby
agrees not to take any of the following actions prior to the consummation of a
Corporate Conversion without the prior written consent of the Manager, which
shall not be unreasonably withheld:
(i) modify or amend in any respect its certificate of
incorporation, bylaws or any similar organizational document;
(ii) permit or allow any changes or modifications to be made to its
capital structure;
(iii) permit any of its capital stock to be owned by any Person who
does not agree to execute and be bound by the provisions of
this Agreement constituting an agreement and plan of merger
with respect to a Qualified Corporate Conversion;
(iv) enter into any merger, consolidation or amalgamation or
liquidate, wind up or dissolve itself (or permit any
liquidation or dissolution), or, convey, sell, lease, assign,
transfer or otherwise dispose of its Interests in the LLC;
(v) acquire or hold any asset, including, but not limited to, any
interest in any entity other than the LLC, other than its
Interests in the LLC and other than distributions received
from the LLC as may be invested and reinvested from time to
time;
(vi) create, incur, assume or permit to exist any indebtedness,
liabilities or other obligations other than pursuant to this
Agreement, and other than liabilities for corporate franchise
tax, fees due to Persons serving as registered agent and
similar amounts necessary to maintain its corporate status and
good standing and to prepare and file its tax returns and its
annual and periodic financial statements, and liabilities for
federal, state and local income taxes with respect to its
Interest hereinafter ("Permitted Liabilities");
(vii) create, incur, assume or permit to exist any lien upon its
assets or revenues;
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(viii) create, incur, assume or permit to exist any obligation
guaranteeing or in effect guaranteeing any indebtedness or
other obligations of any third Person in any manner, whether
directly or indirectly; or
(ix) declare or pay any dividend or distribution with respect to
its capital stock except to the extent its assets exceed its
Permitted Liabilities; or
(x) fail to have reserved for issuance sufficient shares of its
capital stock in order to implement a Qualified Corporate
Conversion.
In the event Whitney breaches any of the foregoing covenants with the result
that the LLC is unable to effectuate a Qualified Corporate Conversion as
contemplated herein, then the LLC shall have all the rights and remedies
available for breach of contract. In addition, the LLC shall have the right, to
effectuate the Qualified Corporate Conversion and to either (i) offset against
distributions or amounts otherwise receivable by Whitney with respect to their
shares received in the merger the amount any liabilities of Whitney as of the
date of the Qualified Corporate Conversion not authorized to be incurred
hereunder ("Unauthorized Liabilities"), or (ii) reduce the number of shares that
Whitney is entitled to receive in the Qualified Corporate Conversion by an
amount equal to the amount of Unauthorized Liabilities divided by the fair
market value per share of the shares to be issued in the Qualified Corporate
Conversion. For this purpose, the fair market value per share of the Common
Stock shall equal the price at which it is sold in the IPO, and the fair market
value of the Preferred Stock shall equal the fair market value of the underlying
Common Stock. Prior to exercising its right of offset or right to reduce the
number of shares Whitney is to receive, the LLC shall give notice to Whitney. If
Whitney's breach of covenant is curable, the LLC shall establish a reserve in
the amount of any such offset or consisting of the number of shares that would
be distributable to Whitney but for the breach. To the extent such breach is not
cured within 90 days of the LLC's notice, the LLC shall retain the reserve and
to the extent such breach is cured, the reserve shall be distributed to Whitney,
in each case at the end of such 90 day period.
(k) Further Assurances. The Manager is specifically authorized to take
any and all further action, and to execute, deliver and file any and all
additional agreements, documents or instruments, as it may determine to be
necessary or appropriate in order to effectuate the provisions of this Section
7.9, and each Member hereby agrees to execute, deliver and file any such
agreements, documents or instruments or to take such action as may be reasonably
requested by the Manager for the purpose of effectuating the provisions of this
Section 7.9.
SECTION 7.10. LIMITED POWER OF ATTORNEY. Each Member hereby constitutes
and appoints the Manager and each and every successor manager, with full power
of substitution and resubstitution, its true and lawful attorney-in-fact for
such Member and in such Member's name, place and stead and for such Member's use
and benefit, to sign, execute, certify, acknowledge, swear to, file, deliver and
record any and all agreements, certificates, instruments and other documents
which the Manager may deem necessary, desirable, or appropriate for the purposes
of (i) effecting any grant of security interest, collateral assignment, pledge
or hypothecation of its Interest as security as provided in Section 7.1, (ii) on
behalf of a selling Member closing the exercise of any rights of the LLC or any
right exercised by any 10% Unit Member to purchase
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an Interest, pursuant to the right of first refusal provision in Section 7.7
hereof, and (iii) effectuating any Corporate Conversion as authorized in Section
7.9.
Each Member authorizes each such attorney-in-fact to take any action
necessary or advisable in connection with the foregoing, hereby giving each
attorney-in-fact full power and authority to do and perform each and every act
or thing whatsoever requisite or advisable to be done in connection with the
foregoing as fully as such Member might or could do so personally, and hereby
ratifying and confirming all that any such attorney-in-fact shall lawfully do or
cause to be done by virtue thereof or hereof.
This power of attorney is a special power of attorney coupled with an
interest and is irrevocable, may be exercised by any such attorney-in-fact by
listing the Member executing any agreement, certificate, instrument, or other
document with the single signature of any such attorney-in-fact acting as
attorney-in-fact for such Members, shall survive the death, disability, legal
incapacity, bankruptcy, insolvency, dissolution, or cessation of existence of a
Member and shall survive the delivery of an assignment by a Member of the whole
or a portion of his Interest in the LLC, except that where the assignment is of
such Member's entire Interest in the LLC and the assignee is admitted as a
Member under the terms of this Agreement, the power of attorney shall survive
the delivery of such assignment for the sole purpose of enabling any such
attorney-in-fact to effect such substitution.
ARTICLE VIII
CESSATION OF MEMBERSHIP
SECTION 8.1. WHEN MEMBERSHIP CEASES. A Person who is a Member shall
cease to be a Member only upon the occurrence of one of the following events of
withdrawal:
(a) The Transfer, as permitted under this Agreement, of the Member's
entire Interest.
(b) The occurrence of an Event of Bankruptcy with respect to the
Member.
(c) In the case of an individual Member, the Member's death; provided,
however, Section 8.2 below shall apply with respect to the administration of the
deceased Member's estate, assignment of his Interest and admission of his heirs
as Members in the LLC.
(d) In the case of an individual Member, the adjudication by a court
that the Member is incompetent to manage his person or property; provided,
however, Section 8.2 below shall apply with respect to the administration of the
incompetent Member's property.
(e) In the case of a Member that is acting as a Member by virtue of
being the trustee of a trust, the termination of the trust.
(f) In the case of a Member that is a partnership or another limited
liability company, the dissolution and commencement of winding up of the Member;
provided, however, Section
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8.2 below shall apply with respect to the winding up and liquidation of the
entity, assignment of such Member's Interest and admission of such Member's
assignees as Members.
(g) In the case of a Member that is a corporation, the dissolution of
the Member, or the revocation of its charter unless the charter is reinstated
within 30 days of the corporation's actual notice of the revocation; provided,
however, Section 8.2 below shall apply with respect to the winding up and
liquidation of the corporation, assignment of such Member's Interest and
admission of such Member's assignees as Members.
(h) In the case of a Member that is a decedent's estate, the
distribution by the fiduciary of the Member's entire Interest.
If any of the foregoing events constitutes a Transfer, then in addition to the
Member ceasing to be a Member, Article VII shall apply with respect to the
former Member's Interest.
SECTION 8.2. DECEASED, INCOMPETENT OR DISSOLVED MEMBERS. The personal
representative, executor, administrator, guardian, conservator or other legal
representative of a deceased individual Member or of an individual Member who
has been adjudicated incompetent may exercise the rights of the Member for the
purpose of administration of such deceased Member's estate or such incompetent
Member's property. The beneficiaries of a deceased Member's estate may become
assignees of the deceased Member only upon compliance with the conditions of
this Agreement. If a Member who is a Person other than an individual is
dissolved, the legal representative or successor of such Person may exercise the
rights of the Member pending liquidation. The distributees of such Person may
become assignees of the dissolved Member only upon compliance with the
conditions of this Agreement.
SECTION 8.3. CONSEQUENCES OF CESSATION OF MEMBERSHIP. In the event a
Person ceases to be a Member as provided in Section 8.1 above, such Person (or
the Person's successor in interest) shall continue to be liable for all
obligations of the former Member to the LLC, including any obligation to make
Capital Contributions, and, with respect to any Interest owned by such Person,
shall be an assignee with only the rights and subject to the restrictions,
conditions and limitations described in Section 7.3 above, except as provided in
Section 8.2.
SECTION 8.4. NO VOLUNTARY WITHDRAWAL OR RESIGNATION BY MEMBERS. No
Member shall have the right to voluntarily withdraw or resign from the LLC under
this Agreement or under the Act.
ARTICLE IX
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 9.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) The vote of the Members following the recommendation of dissolution
by the Manager.
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(b) The entry of a decree of judicial dissolution under Act Section
18-802.
(c) The sale or other disposition of all or substantially all of the
assets of the LLC in accordance with this Agreement.
(d) At any time after the sixth (6th) anniversary of the date hereof,
if at such time the Class A Capital is equal to or greater than $7.5 million and
holders of at least a majority of Class A Units then outstanding vote to
dissolve the LLC and provide notice of such vote to the Manager; provided,
however, that in the event that such a vote and resulting dissolution of the LLC
would result in an event of default or an incipient default under any then
existing indebtedness of the LLC or any Subsidiary with an outstanding balance
of $10 million or more, then such majority vote shall not cause the dissolution
of the LLC, but rather shall constitute notice by the holders of the Class A
Units to the Manager that such holders desire that the Manager promptly arrange
the sale of the LLC (including its Subsidiaries) or a sale of all or
substantially all of its assets.
SECTION 9.2. WINDING UP OR SALE. Pursuant to Act Section 18-803, upon
dissolution of the LLC the Manager shall wind up the LLC's affairs; but the
Delaware Court of Chancery, upon cause shown, may wind up the LLC's affairs upon
application of any 10% Unit Member or Manager, his legal representative or
assignee, and in connection therewith, may appoint a liquidating trustee. The
Persons charged with winding up the LLC shall settle and close the LLC's
business, and dispose of and convey the LLC's noncash assets as promptly as
reasonably possible following dissolution as is consistent with obtaining the
fair market value for the LLC's assets (other than those noncash assets to be
distributed to the Members in liquidation pursuant to Section 3.4).
If the holders of the Class A Units have given notice under Section
9.1(d) (regardless of whether such notice has caused the dissolution of the
LLC), and if the LLC has not entered into a definitive agreement for the sale or
other disposition of substantially all of its equity interests or assets on or
prior to the date that is six (6) months after the date of such notice, or if
the LLC has not closed the sale or other disposition of substantially all of its
equity interests or assets on or prior to the date that is nine (9) months after
the date of such notice, then at any time after either of such dates the holders
of the Class A Units acting by a vote of the holders of a majority such Class A
Units may give notice of a Vote Shift, which Vote Shift shall be immediately
effective.
SECTION 9.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, upon the disposition of the LLC's noncash assets (other than those
noncash assets to be distributed to the Members in liquidation pursuant to
Section 3.4), the LLC's cash and the proceeds from the disposition of the LLC's
noncash assets and those noncash assets to be distributed in kind to the Members
pursuant to Section 3.4 shall be distributed in the following order of priority:
(a) To the LLC's creditors, including the Manager and Members if they
are creditors, to the extent otherwise permitted by law, in satisfaction of
liabilities of the LLC (whether by payment or the making of reasonable provision
for payment thereof) other than liabilities for
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which reasonable provision for payment has been made and liabilities for
distributions to Members and former Members under Act Sections 18-601 or 18-604;
(b) To the Members, Manager, and former Members who are creditors whose
claims are not satisfied by distributions pursuant to the preceding subsection
(including, with respect to Members or former Members, in satisfaction of
liabilities for distributions under Act Sections 18-601 or 18-604);
(c) To the holders of the Class A Units in an amount equal to the
remaining balance of the Class A Capital.
(d) To the holders of the Class A Units in an amount equal to the
remaining balance of the Preferred Return.
(e) To the Members in accordance with the provisions of Subsections
3.2(b), 3.2(c) and 3.2(d), taking into account that the holders of the Class A
Units have received their share of the distributions described in Subsections
3.2(b) and 3.2(c) by virtue of the distributions to them under Subsections
9.3(c) and 9.3(d) above.
To the extent that the credit balances in the Capital Accounts, after
adjusting the Capital Accounts for all allocations of Profits and Losses and all
Regulatory Allocations and all distributions other than liquidating
distributions under Subsections 9.3(c), 9.3(d) and 9.3(e) above (the "Tentative
Liquidation Capital Account") do not equal the amounts to be distributed
pursuant to Subsections 9.3(c), 9.3(d) and 9.3(e), then any provision in this
Agreement to the contrary notwithstanding the LLC shall allocate gross income or
gross deductions for its last Fiscal Year to the extent necessary in order that
the Tentative Liquidation Capital Accounts equal the distributions to be made to
the Members pursuant to such Subsections; and to the extent such gross income or
gross deductions are not sufficient, shall allocate gross income or gross
deductions for the next preceding Fiscal Year to the extent necessary in order
that the Capital Accounts equal such distributions; and to the extent such gross
income or gross deductions are not sufficient, shall allocate gross income or
gross deductions for the second preceding Fiscal Year, and so forth, with
respect to all LLC taxable years for which an amended return can be timely
filed, to the extent necessary to cause the Tentative Liquidation Capital
Accounts to equal the respective distributions under this Section 9.3.
Distributions pursuant to this Section 9.3 may be made to a liquidating
trust established by the Persons charged with winding up the LLC for the benefit
of the Members for the purposes of liquidating LLC assets, collecting amounts
owed to the LLC, and paying liabilities or obligations of the LLC. The assets of
any such trust shall be distributed to the Members from time to time, in the
reasonable discretion of the trustee of the liquidating trust, in the same
proportions as the amount distributed to such trust by the LLC would otherwise
have been distributed to the Members pursuant to this Agreement.
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ARTICLE X
BOOKS AND RECORDS; INFORMATION RIGHTS
SECTION 10.1. BOOKS AND RECORDS; VISIT TO BUSINESS PREMISES. The LLC
shall keep books and records at its principal place of business, which shall set
forth an accurate account of all transactions of the LLC. Any Member or its
designated representative shall have the right, during normal business hours and
upon two business days prior written notice to the Manager specifying the
records or information desired and the purpose for which the records or
information is sought, to have access to and inspect and copy, at its expense,
the contents of such books or records. Any 10% Unit Member or its designated
representative shall have the right, during normal business hours and upon three
(3) business days prior notice specifying the business premises of the LLC that
the Member wishes to visit and purpose for which the Member desires to visit, to
personally visit and inspect any business premises of the LLC. The provisions of
this Section 10.1 to the contrary notwithstanding, subject to Act Section
18-305(f), the Manager shall have the right to keep confidential from the
Members for such period of time as the Manager deems reasonable, any information
which the Manager reasonably believes to be in the nature of trade secrets or
other information the disclosure of which the Manager in good faith believes is
not in the best interest of the LLC.
SECTION 10.2. TAXABLE YEAR; TAX ACCOUNTING METHODS. The LLC shall use
the Fiscal Year as its taxable year. The LLC shall report its income for income
tax purposes using the accrual method of accounting.
SECTION 10.3. INFORMATION RIGHTS. Within ninety (90) days after the end
of each Fiscal Year, each Member shall be furnished with annual financial
statements containing a balance sheet, income statement, statement of Members'
capital and statement of changes in working capital as of or for the Fiscal Year
then ending which financial statements shall be prepared in accordance with
generally accepted accounting principles and shall include supplementary
statements prepared pursuant to the Capital Account accounting methods
prescribed by this Agreement and Treasury Regulations Section 1.704-1(b) and
shall be audited by Arthur Andersen & Co. or such other firm of independent
certified public accountants as may be selected by the Manager and reasonably
satisfactory to the holders of at least 70% of the Class A Units. The LLC shall
also provide to each of Whitney, Fleet and such other Members as the Manager may
determine (i) an annual operating budget and capital expenditure budget for the
balance of 1997 (which shall be delivered prior to February 28, 1997) and for
each subsequent Fiscal Year (which shall be delivered prior to December 1 of the
previous Fiscal Year); (ii) unaudited quarterly financial statements within 45
days of the completion of each calendar quarter of the Fiscal Year; and (iii)
unaudited monthly financial statements containing a balance sheet, a statement
of income, and a statement of changes in working capital and showing variances
to the annual operating budget and capital expenditure budget within 30 days
after the last day of each month.
SECTION 10.4. TAX INFORMATION. Tax information necessary to enable each
Member to prepare its state, federal, local and foreign income tax returns shall
be delivered to each Member as soon as reasonably available after the end of
each Fiscal Year.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1. NOTICES. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be delivered personally to the Person or to an officer or
manager of the Person to whom the same is directed, or sent by regular,
registered, or certified United States mail, or by facsimile transmission or by
private mail or courier service, addressed as follows: if to the LLC or to the
Manager, to the principal office address of the LLC, or to such other address as
may be specified from time to time by notice to the Members; if to a Member, to
the address set forth on the Information Exhibit attached hereto, or to such
other address as the Member may specify from time to time by notice to the
Members. Any such notice shall be deemed to be delivered, given, and received
for all purposes (i) as of the date of actual receipt if delivered personally or
if sent by regular mail, facsimile transmission or by private mail or courier
service, or (ii) four (4) business days after the date on which the same was
deposited in a regularly-maintained receptacle for the deposit of United States
mail, if sent by registered or certified United States mail, postage and charges
prepaid, return receipt requested.
SECTION 11.2. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members and Manager, and their
respective heirs, legatees, legal representatives, successors, transferees, and
assigns.
SECTION 11.3. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
The parties acknowledge that each party to this Agreement has shared equally in
the drafting and construction of this Agreement and, accordingly, no court
construing this Agreement shall construe it more strictly against one party
hereto than the other.
SECTION 11.4. ENTIRE AGREEMENT; NO ORAL LIMITED LIABILITY COMPANY
AGREEMENTS; AMENDMENTS TO THE LIMITED LIABILITY COMPANY AGREEMENT. This
Agreement constitutes the entire agreement among the Members with respect to the
affairs of the LLC and the conduct of its business, and supersedes all prior
agreements and understandings, whether oral or written. The LLC shall have no
oral operating agreements. This Agreement may be amended by one or more written
amendments approved by the Manager, the vote of the Members, and such class vote
as may be required under this Agreement. Any written amendment that receives
such a vote need not be signed by all Members to be effective, but shall be
effective in accordance with its terms and shall be binding upon all Members.
SECTION 11.5. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
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SECTION 11.6. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 11.7. ADDITIONAL DOCUMENTS. Each Member and Manager, upon the
request of the LLC, agrees to perform all further acts and execute, acknowledge,
and deliver any documents that may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
SECTION 11.8. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 11.9. GOVERNING LAW; CONSENT TO JURISDICTION; DISPUTE
RESOLUTION. The laws of the State of Delaware shall govern the validity of this
Agreement, the construction and interpretation of its terms, and organization
and internal affairs of the LLC and the limited liability of the Members. All
disputes between or among any Members or Manager arising out of or in any way
connected with the LLC or with the execution, interpretation and performance of
this Agreement (including the validity, scope and enforceability of the dispute
resolution provisions contained herein) shall be solely and finally settled in
accordance with the Dispute Resolution Exhibit attached hereto as Exhibit F.
Each Member and Manager hereby irrevocably consents to the personal jurisdiction
of the courts of the Commonwealth of Virginia with respect to matters arising
out of or related to the enforcement of the provisions of the Dispute Resolution
Exhibit and with respect to matters, if any, related to the LLC not required to
be resolved pursuant to the Dispute Resolution Exhibit.
SECTION 11.10. WAIVER OF ACTION FOR PARTITION. Each of the Members
irrevocably waives any right that it may have to maintain any action for
partition with respect to any of the assets of the LLC.
SECTION 11.11. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This
Agreement may be executed in any number of counterparts with the same effect as
if all of the Members and Manager had signed the same document. Such executions
may be transmitted to the LLC and/or the other Members and Manager by facsimile
and such facsimile execution shall have the full force and effect of an original
signature. All fully executed counterparts, whether original executions or
facsimile executions or a combination, shall be construed together and shall
constitute one and the same agreement.
SECTION 11.12. TAX MATTERS MEMBER. For so long as there are no Members
elected or designated as "member-managers" (as such term is defined in Treas.
Reg. Section 301.6231(a)(7)-2(b)(iii)), Donald A. Doering or such other Member
as the Manager shall subsequently designate (pursuant to Treas. Reg. Section
301.6231(a)(7)-1(d), (e), or (f)) shall be the Tax Matters Member, and as such
shall have all power and authority with respect to the LLC and its Members as a
"tax matters partner" would have with respect to a partnership and its partners
under the Code and in any similar capacity under state or local law. In
accordance with Treas. Reg. Section 301.6231(a)(7)-1(c), the LLC shall designate
the Tax Matters Member for an LLC taxable year on the partnership return for
that taxable year. After a Tax Matters
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Member has been designated for a particular taxable year, a successor Tax
Matters Member may be selected by the Manager, and the current Tax Matters
Member shall certify to the Internal Revenue Service that another Member has
been selected as the Tax Matters Member in accordance with Treas. Reg. Section
301.6231(a)(7)-1(d).
In addition, at any time after the filing of a partnership return for a
taxable year, the LLC may designate a Tax Matters Member for an LLC taxable year
pursuant to the provisions of Treas. Reg. Section 301.6231(a)(7)-1(e) or (f) by
filing a statement with the Internal Revenue Service, and obtaining the consent
of Members as provided in the regulations.
The Tax Matters Member shall continue to serve as such until the
earlier of (A) his death; (B) his incompetency (as determined pursuant to Treas.
Reg. Section 301.6231(a)(7)-1(l)(1)(ii)); (C) the liquidation or dissolution of
the Tax Matters Member, if the Tax Matters Member is an entity; (D) the
"partnership items" of the Tax Matters Member become "nonpartnership items"
under Code Section 6231(c); (E) the day on which the Tax Matters Member resigns
at any time by a written statement to that effect and filed with the Internal
Revenue Service pursuant to Treas. Reg. Section 301.6231(a)(7)-1(i); (F) the day
on which the LLC makes a subsequent designation of a Tax Matters Member pursuant
to Treas. Reg. Section 301.6231(a)(7)-1(d), (e), or (f); or (G) the day on which
the LLC revokes the designation of the Tax Matters Member for an LLC taxable
year pursuant to Treas. Reg. Section 301.6231(a)(7)-1(j). For purposes of items
(E), (F), and (G) of the preceding sentence, the day on which any of the
specified events occurs shall mean the day on which the statement that is
required to be filed with the Internal Revenue Service is filed.
The Tax Matters Member shall have the power and authority (i) to extend
the statute of limitations for assessment of tax deficiencies against Members
with respect to adjustments to the LLC's federal, state, or local tax returns;
and (ii) to represent the LLC and the Members before taxing authorities or
courts of competent jurisdiction in tax matters affecting the LLC and the
Members in their capacity as Members, and to execute any agreements or other
documents relating to or affecting such tax matters, including agreements or
other documents that bind the Members with respect to such tax matters or
otherwise affect the rights of the LLC or the Members; provided, however, that
the Tax Matters Member shall keep the LLC and the other Members reasonably
informed as to the status of any tax investigations, audits, lawsuits or other
judicial or administrative tax proceedings and shall promptly copy all other
Members on any correspondence to or from the Internal Revenue Service or state,
local or foreign taxing authority relating to such proceedings.
SECTION 11.13. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
SECTION 11.14. EXHIBITS; PREFERRED STOCK CORPORATE CONVERSION
DOCUMENTS. The Exhibits to this Agreement, each of which are incorporated by
reference, are:
EXHIBIT A: Certificates of Conversion and Formation.
EXHIBIT B: Information Exhibit.
EXHIBIT C: Glossary of Terms.
EXHIBIT D: Regulatory Allocations Exhibit.
38
<PAGE> 43
EXHIBIT E: Indemnification Exhibit.
EXHIBIT F: Dispute Resolution Exhibit.
EXHIBIT G: Appraisal Exhibit.
EXHIBIT H: Registration Rights Agreement.
EXHIBIT I: Draft of Certificate of Designations of
Preferred Stock.
EXHIBIT J: Draft Certificate of Merger -- Preferred Stock
Corporate Conversion.
EXHIBIT K: Draft Certificate of Merger -- Common Stock
Corporate Conversion.
EXHIBIT L: Draft of Stockholders Agreement.
EXHIBIT M: Draft Certificate of Incorporation and
Bylaws Upon Qualified Corporate Conversion.
EXHIBIT N: Certificate of Limited Liability Company Interest.
EXHIBIT O: Operating Agreement of DTS Management, LLC
EXHIBIT P: Designees to Management's Board of Managers
The parties acknowledge that on the date hereof Exhibits I, J, K, L and
M are in draft form. The parties agree that they shall complete and the LLC,
Columbia A, Columbia B, Whitney and Fleet shall initial final forms of those
Exhibits within 30 days of the date hereof, with the understanding that a
Preferred Stock Corporate Conversion and the forms of documents to implement it
shall, in so far as possible, mirror the relative terms, rights, privileges and
obligations of the parties reflected in this Agreement.
IN WITNESS WHEREOF, the Members and Manager have executed this
Agreement on the following execution pages, to be effective as of the date
described in Article I.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
39
<PAGE> 44
EXECUTION PAGE
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
PAGE 1 OF 4
MEMBERS:
_______________ COLUMBIA DBS, INC.,
Date Executed A VIRGINIA CORPORATION
By: /s/ Neil P. Byrne
-----------------------------
Name: Neil P. Byrne
Title: Vice President
________________ COLUMBIA DBS CLASS A INVESTORS, LLC,
Date Executed A DELAWARE LIMITED LIABILITY COMPANY
By: /s/ Mark J. Kington
-----------------------------
Name: Mark J. Kington
Title: Member
________________ COLUMBIA DBS INVESTORS, L.P.,
Date Executed A DELAWARE LIMITED PARTNERSHIP
By: Columbia Capital Corporation,
a Virginia corporation
Its: General Partner
By: /s/ Neil P. Byrne
----------------------
Name: Neil P. Byrne
Title: Vice President
/s/ Douglas S. Holladay, Jr.
- ---------------- ---------------------------------------
Date Executed Douglas S. Holladay, Jr.
/s/ Donald A. Doering
- ---------------- ---------------------------------------
Date Executed Donald A. Doering
/s/ William J. Dorran
- ---------------- ---------------------------------------
Date Executed William J. Dorran
<PAGE> 45
Execution Page to the
Amended and Restated Limited
Liability Company Agreement of
Digital Television Services, LLC, a
Delaware limited liability company
Page 2 of 4
- ---------------- WEP INTERMEDIATE CORP.,
Date Executed A DELAWARE CORPORATION
By: /s/ William Laverack, Jr.
--------------------------------
Name: William Laverack, Jr.
Title: President
- ---------------- FLEET VENTURE RESOURCES, INC.,
Date Executed A RHODE ISLAND CORPORATION
By: /s/ Riordon B. Smith
--------------------------------
Name: Riordon B. Smith
Title: Senior Vice President
- ---------------- FLEET EQUITY PARTNERS VI, L.P.,
Date Executed A DELAWARE LIMITED PARTNERSHIP
By: Fleet Growth Resources II, Inc.
Its: General Partner
By: /s/ Riordon B. Smith
--------------------------------
Name: Riordon B. Smith
Title: Senior Vice President
<PAGE> 46
Execution Page to the
Amended and Restated Limited
Liability Company Agreement of
Digital Television Services, LLC, a
Delaware limited liability company
Page 3 of 4
- ---------------- CHISHOLM PARTNERS III, L.P.,
Date Executed A DELAWARE LIMITED PARTNERSHIP
By: Silverado III, L.P.
Its: General Partner
By: Silverado III Corp.
Its: General Partner
By: /s/ Riordon B. Smith
--------------------------------
Name: Riordon B. Smith
Title: Senior Vice President
- ---------------- KENNEDY PLAZA PARTNERS,
Date Executed A RHODE ISLAND GENERAL PARTNERSHIP
By: /s/ Riordon B. Smith
--------------------------------
Name: Riordon B. Smith
Title: General Partner
MANAGER:
- ---------------- DTS MANAGEMENT, LLC,
Date Executed A GEORGIA LIMITED LIABILITY COMPANY
By: /s/ Douglas S. Holladay, Jr.
--------------------------------
Name: Douglas S. Holladay, Jr.
Title: President
<PAGE> 47
Execution Page to the
Amended and Restated Limited
Liability Company Agreement of
Digital Television Services, LLC, a
Delaware limited liability company
Page 4 of 4
THE UNDERSIGNED IS EXECUTING
THIS AGREEMENT FOR THE
PURPOSES OF AGREEING TO BE
BOUND BY THE PROVISIONS OF
SECTION 7.9 HEREOF:
- ---------------- WHITNEY EQUITY PARTNERS, L.P.
Date Executed By: J.H. Whitney Equity Partners LLC
Its General Partner
By: /s/ William Laverack, Jr.
---------------------------------
Name: William Laverack, Jr.
Title: Managing Member
<PAGE> 48
EXHIBIT A
CERTIFICATE OF FORMATION
OF
COLUMBIA DBS HOLDINGS, LLC
The undersigned, desiring to form a limited liability company pursuant
to Sections 18-214(b)(2) and 18-201 of the Delaware Limited Liability Company
Act, 6 Delaware Code, Chapter 18, do hereby certify as follows:
I.
The name of the limited liability company is COLUMBIA DBS HOLDINGS,
LLC.
II.
The address of the registered office of the LLC in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of
New Castle. The name of the LLC's registered agent for service of process in the
State of Delaware at such address is The Corporation Trust Company.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Formation of Columbia DBS Holdings, LLC as of November ___, 1996.
Member:
COLUMBIA DBS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Member:
COLUMBIA DBS INVESTORS, L.P.
By: Columbia Capital Corporation,
its general partner
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
A-1
<PAGE> 49
CERTIFICATE OF CONVERSION TO LIMITED LIABILITY COMPANY
OF
DBS HOLDINGS, L.P.
TO
COLUMBIA DBS HOLDINGS, LLC
The undersigned, desiring to convert DBS HOLDINGS, L.P., a Delaware
limited partnership, to COLUMBIA DBS HOLDINGS, LLC, a Delaware limited liability
company, pursuant to Section 18-214 of the Delaware Limited Liability Company
Act, 6 Delaware Code, Chapter 18, do hereby certify as follows:
I.
The date on which and jurisdiction where the entity that is converting
to a limited liability company was first formed was January 30, 1996 in the
State of Delaware.
II.
The name of the entity that is converting to a limited liability
company immediately prior to the filing of this Certificate of Conversion is DBS
HOLDINGS, L.P.
III.
The name of the limited liability company as set forth in its
certificate of formation filed in accordance with Section 18-214(b) of the
Delaware Limited Liability Company Act is COLUMBIA DBS HOLDINGS, LLC.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Conversion of DBS Holdings, L.P. to Columbia DBS Holdings, LLC as of November
___, 1996.
General Partner:
COLUMBIA DBS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Limited Partner:
COLUMBIA DBS INVESTORS, L.P.
By: Columbia Capital Corporation,
its general partner
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
A-2
<PAGE> 50
EXHIBIT B
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
INFORMATION EXHIBIT
<TABLE>
<CAPTION>
Class A Other
Taxpayer Capital Capital Total Capital
Member Name and Notice Address ID No. Contributions Contributions Contributions
- ------------------------------- ---------------- -------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
WEP Intermediate Corp. 06-1473713 $13,000,000.00 0 $13,000,000.00
177 Broad Street
Stamford, CT 06901
Fleet Venture Resources, Inc. 05-0315508 $5,503,450.00 0 $5,503,450.00
50 Kennedy Plaza
RI MO F12C
Providence, RI 02903
Fleet Equity Partners VI, L.P. 05-0481063 $2,358,621.43 0 $2,358,621.43
50 Kennedy Plaza
RI MO F12C
Providence, RI 02903
Chisholm Partners III, L.P. 05-0491430 $2,000,000.00 0 $2,000,000.00
50 Kennedy Plaza
RI MO F12C
Providence, RI 02903
Kennedy Plaza Partners 05-0489106 $137,928.57 0 $137,928.57
50 Kennedy Plaza
RI MO F12C
Providence, RI 02903
Columbia DBS Class A Investors, 54-1835909 $7,000,000.00 0 $7,000,000.00
LLC
201 N. Union St., Suite 300
Alexandria, VA 22314-2642
Columbia DBS Investors, L.P. 54-1787641 0 $19,375,790.00 $19,375,790.00
201 N. Union St., Ste. 300
Alexandria, VA 22314-2642
Columbia DBS, Inc. 54-1787645 0 $119,210.00 $119,210.00
201 N. Union St., Ste. 300
Alexandria, VA 22314-2642
Douglas S. Holladay, Jr. ###-##-#### 0 $460,000.00 $460,000.00
41 Palisades Road
Atlanta, GA 30309
William J. Dorran ###-##-#### 0 $370,000.00 $370,000.00
1371 Bay Street
San Francisco, CA 94123
Donald A. Doering ###-##-#### 0 $175,000.00 $175,000.00
560 Pennroyal Lane
Alpharetta, GA 30201
---------------- -------------------- ------------------ ----------------
TOTALS $30,000,000.00 $20,500,000.00 $50,500,000.00
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Units
----------------------------------------------------------------------------------
Member Name and Notice Address Class A Class B Class C Class D Total
- ------------------------------- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WEP Intermediate Corp. 577,778.00* 0 0 0 577,778.00
177 Broad Street
Stamford, CT 06901
Fleet Venture Resources, Inc. 244,597.53* 0 0 0 244,597.53
50 Kennedy Plaza
RI MO F12C
Providence, RI 02903
Fleet Equity Partners VI, L.P. 104,827.52* 0 0 0 104,827.52
50 Kennedy Plaza
RI MO F12C
Providence, RI 02903
Chisholm Partners III, L.P. 88,888.80* 0 0 0 88,888.80
50 Kennedy Plaza
RI MO F12C
Providence, RI 02903
Kennedy Plaza Partners 6,130.15* 0 0 0 6,130.15
50 Kennedy Plaza
RI MO F12C
Providence, RI 02903
Columbia DBS Class A Investors, 311,111.00* 0 0 0 311,111.00
LLC
201 N. Union St., Suite 300
Alexandria, VA 22314-2642
Columbia DBS Investors, L.P. 0 1,937,579* 0 0 1,937,579.00
201 N. Union St., Ste. 300
Alexandria, VA 22314-2642
Columbia DBS, Inc. 0 11,921* 0 0 11,921.00
201 N. Union St., Ste. 300
Alexandria, VA 22314-2642
Douglas S. Holladay, Jr. 0 46,000* 40,111* 0 86,111.00
41 Palisades Road
Atlanta, GA 30309
William J. Dorran 0 37,000* 26,882* 0 63,882.00
1371 Bay Street
San Francisco, CA 94123
Donald A. Doering 0 17,500* 20,056* 0 37,556.00
560 Pennroyal Lane
Alpharetta, GA 30201
----------------------------------------------------------------------------------
TOTALS 1,333,333.00 2,050,000 87,049 0 3,470,382.00
============ ========= ====== =========== ============
</TABLE>
* Subject to grant of security interest pursuant to the Guarantee and
Collateral Agreement.
<PAGE> 51
EXHIBIT C
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
GLOSSARY OF TERMS
Many of the capitalized words and phrases used in this Agreement are
defined below. Some defined terms used in this Agreement are applicable to only
a particular Section of this Agreement or an Exhibit and are not listed below,
but are defined in the Section or Exhibit in which they are used.
"Act" shall mean the Delaware Limited Liability Company Act, as in
effect in Delaware and set forth at 6 Delaware Code, Chapter 18, Sections 18-101
through 18-1109 (or any corresponding provisions of succeeding law).
"Affiliate" means, with respect to any specified Person, any other
Person that directly or indirectly controls, or is under common control with, or
is owned or controlled by, the specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, either
(x) the beneficial ownership of 50% or more of the equity securities issued by
such Person or (y) the power to direct the management and policies of the
specified Person through the ownership of voting securities or other equity
interests, by contract or otherwise, (ii) the terms "controlling," "control
with" and "controlled by," etc., shall have meanings correlative to the
foregoing, and (iii) the stockholders and partners of such Person shall be
deemed to be Affiliates of such Person, provided, however for purposes of the
limitation on transactions with Affiliates set forth in Section 5.3(c)(viii)
(including the definition of Permitted Reimbursements), the percentage in clause
(i)(x) above shall be ten percent (10%) and clause (iii) shall include officers,
directors and employees.
"Agreed Value" shall mean with respect to any noncash asset of the LLC
an amount determined and adjusted in accordance with the following provisions:
(a) The initial Agreed Value of any noncash asset contributed to the
capital of the LLC by any Member shall be its gross fair market value, as agreed
to by the contributing Member and the Manager.
(b) The initial Agreed Value of any noncash asset acquired by the LLC
other than by contribution by a Member shall be its adjusted basis for federal
income tax purposes.
(c) The initial Agreed Values of all the LLC's noncash assets,
regardless of how those assets were acquired, shall be reduced by depreciation
or amortization, as the case may be, determined in accordance with the rules set
forth in Treasury Regulations Section 1.704-1(b)(2)(iv)(f) and (g).
<PAGE> 52
(d) The Agreed Values, as reduced by depreciation or amortization, of
all noncash assets of the LLC, regardless of how those assets were acquired,
shall be adjusted from time to time to equal their gross fair market values, as
determined by appraisal by a nationally recognized investment banking firm or
other qualified Person selected pursuant to a vote of no less than seven (7) of
the nine (9) votes of the board of managers of the Manager, as of the following
times:
(i) the acquisition of an Interest or an additional
Interest in the LLC by any new or existing Member in
exchange for more than a de minimis Capital
Contribution;
(ii) the distribution by the LLC of more than a de minimis
amount of money or other property as consideration
for all or part of an Interest in the LLC; and
(iii) the termination of the LLC for federal income tax
purposes pursuant to Code Section 708(b)(1)(B).
If, upon the occurrence of one of the events described in (i), (ii) or
(iii) above the Manager does not determine the gross fair market values of the
LLC's assets, it shall be deemed that the fair market values of all the LLC's
assets equal their respective Agreed Values immediately prior to the occurrence
of the event and thus no adjustment to those values shall be made as a result of
such event.
"Agreement" shall mean this Limited Liability Company Agreement as
amended from time to time.
"B Unit Designees" shall mean the two individuals designated to the
Board by the holders of a majority of the B Units pursuant to their rights under
Section 5.1(a)(iv).
"Board" shall mean the board of managers of the Manager.
"Capital Account" shall mean with respect to each Member or assignee an
account maintained and adjusted in accordance with the following provisions:
(a) Each Person's Capital Account shall be increased by Person's
Capital Contributions, such Person's distributive share of Profits, any items in
the nature of income or gain that are allocated pursuant to the Regulatory
Allocations and the amount of any LLC liabilities that are assumed by such
Person or that are secured by LLC property distributed to such Person.
(b) Each Person's Capital Account shall be decreased by the amount of
cash and the Agreed Value of any LLC property distributed to such Person
pursuant to any provision of this Agreement, such Person's distributive share of
Losses, any items in the nature of loss or deduction that are allocated pursuant
to the Regulatory Allocations, and the amount of any liabilities of such Person
that are assumed by the LLC or that are secured by any property contributed by
such Person to the LLC.
C-2
<PAGE> 53
In the event any Interest is transferred in accordance with the terms
of this Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred Interest.
In the event the Agreed Values of the LLC assets are adjusted pursuant
to the definition of Agreed Value contained in this Agreement, the Capital
Accounts of all Members shall be adjusted simultaneously to reflect the
aggregate adjustments as if the LLC recognized gain or loss equal to the amount
of such aggregate adjustment.
In the case of Members who hold more than one class of Units, a
separate Capital Account shall be maintained for each such class, and Capital
Contributions, distributions and allocations that are with respect to a
particular class of Units shall be credited or debited, as the case may be, to
such separate Capital Account. Allocations of Profit pursuant to Section 4.1(e)
shall be credited to an unclassified Capital Account and distributions pursuant
to Section 3.2(d) shall be debited to such unclassified Capital Account.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in
a manner consistent with such regulations.
"Capital Contribution" shall mean with respect to any Member, the
amount of money and the initial Agreed Value of any property (other than money)
contributed to the LLC with respect to the Interest of such Member.
"Certificate of Formation" shall mean the certificate of formation
required to be filed by the LLC pursuant to the Act together with any amendments
thereto.
"Change Notice" shall mean notice required to be given by the Columbia
Entities in the event of a Change of Control of Columbia, or permitted to be
given by Whitney or Chisholm in the event of a Change of Control of Columbia.
"Change of Control of the LLC" means (i) the merger, consolidation or
other business combination of the LLC or any of its Subsidiaries with or into,
or the merger of, another Person (other than the LLC or a Subsidiary of the LLC)
with or into the LLC with the effect that, immediately after such transaction,
the Members of the LLC immediately prior to such transaction hold less than a
majority in interest of the total voting power entitled to vote in the election
of directors, managers or trustees of the Person surviving such transaction or
less than fifty percent of the economic interests in such Person, or (ii) the
acquisition by any Person or related group of Persons, by way of merger, sale,
transfer, consolidation or other business combination or acquisition, of (x) all
or substantially all of the assets, property or business of the LLC, (y) more
than fifty percent of the total voting power entitled to vote in the election of
directors, managers or trustees of the LLC or such other Person as survives the
transaction, or (z) more than fifty percent of the economic interests in the LLC
or such other Person as survives the transaction.
"Change of Control of Columbia" shall mean, and such change in Control
of Columbia shall be deemed to have occurred after, either of the following
events:
C-3
<PAGE> 54
(A) if at any time, any Person or group of Persons other than
those Persons identified in the Purchase Agreement as members
of Columbia A, partners of Columbia B, shareholders of
Columbia Capital or shareholders of Columbia Inc., and their
Family Members shall own in the aggregate 50% or more of the
partnership interests, member interests, capital stock or
other equity interests in either Columbia A or Columbia B or
any successor entity to either of them, or
(B) if at any time, Persons other than Robert B. Blow, James B.
Murray, Jr., David P. Mixer, Mark R. Warner, Mark J. Kington,
Harry F. Hopper III, R. Phillip Herget III, James Fleming,
Barton Schneider, or Neil P. Byrne shall constitute a majority
of the board of directors of the general partner of Columbia
B, the managers of Columbia A, or otherwise have a majority of
the votes on any board of directors, board of managers or
similar governing body that has plenary authority over the
business and affairs of Columbia A or Columbia B or otherwise
has the power to direct either of such Member's investment in
the LLC.
"Chisholm" shall mean Chisholm Partners III, L.P., a Delaware limited
partnership, one of the entities constituting the collective definition of
Fleet.
"Chisholm Designee" shall mean the individual designated to the Board
of Directors by Chisholm pursuant to its rights under Section 5.1(a)(ii).
"Class A, B, C, D Units" shall have the respective meanings set forth
in Section 2.5.
"Class A Capital" shall mean the sum of the Class A Capital
Contributions as set forth on the Information Exhibit less the cumulative amount
of distributions made by the LLC to the holders of the Class A Units pursuant to
Subsections 3.2(b), 3.2(c) and 9.3(c).
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor federal revenue law.
"Columbia A" shall mean Columbia DBS Class A Investors, LLC, a Delaware
limited liability company, or its successors or assigns.
"Columbia B" shall mean Columbia DBS Investors, L.P., a Delaware
limited partnership, or its successors or assigns.
"Columbia Capital" shall mean Columbia Capital Corporation, a Virginia
corporation, or its successors or assigns.
"Columbia Entities" shall mean Columbia Capital, Columbia A, Columbia
Inc. and Columbia B.
"Columbia Inc." shall mean Columbia DBS, Inc., a Virginia corporation.
"Combined Effective Marginal Tax Rate" shall mean the highest single
effective rate (expressed as a percentage) of United States federal, state and
local income taxation applicable
C-4
<PAGE> 55
to holders of 5% or more of the Units whose principal residence or commercial
domicile is within the United States determined as of the last day of each Tax
Estimation Period, giving effect to any limitation on the deductibility of state
and local income taxes in computing United States federal taxable income, and
assuming that such Unit holders are individuals and subject to the highest
United States federal and highest state and local marginal income tax rates then
applicable in the jurisdictions in which they have their principal residence or
commercial domicile.
"Common Stock Conversion Amount" shall mean the number of shares of
common stock of the surviving corporation in a Qualified Corporate Conversion
that a Member is entitled to receive with respect to its Units which amount
shall equal:
(i) In the case of Members holding Class A Units, zero shares if
the Qualified Corporate Conversion is a Preferred Stock
Conversion, or if the Qualified Corporate Conversion is a
Common Stock Corporate Conversion, one share for each Class A
Unit plus that number of shares equal to
(A) the accumulated unpaid Preferred Return that such
Member is entitled to as of the date of the
consummation of the Qualified Corporate Conversion,
divided by
(B) the price per share of common stock of the surviving
corporation upon its initial issuance pursuant to the
IPO,
rounded to the nearest whole share.
(ii) In the case of Members holding Class B Units, one share for
each such Unit.
(iii) In the case of Members holding Class C Units, (A) in the case
of a Common Stock Corporate Conversion as a result of a
Qualified IPO, .5556 share for each Class C Unit held, plus
the right to purchase .4444 share for $10 per share for each
Class C Unit held, and (B) in the case of any other Qualified
Corporate Conversion, the right to purchase one share for each
Class C Unit held for a purchase price of $10 per share, in
each case rounded to the nearest whole share.
(iv) In the case of Members holding Class D Units, the right to
purchase one share for each Class D Unit held for a purchase
price of $22.50 per share.
In the case of Members holding Class C or Class D Units, their rights to
purchase common stock of the surviving corporation may be exercised by
delivering cash, shares of common stock valued as set by the Manager just prior
to the consummation of the Qualified Corporate Conversion, or the holder's
nonrecourse, noninterest bearing promissory note secured by a pledge of the
purchased shares due at the earlier of (i) five (5) years from the date of the
Qualified Corporate Conversion, (ii) any sale or any other transfer (by
operation of law or otherwise) of the acquired shares, or (iii) the cessation of
employment by the LLC or any Subsidiary of the Member who originally received
such Class C or Class D Units from the LLC for any reason, and such promissory
note shall be prepaid with any dividends or distribution
C-5
<PAGE> 56
with respect to such purchased shares. Any shares received by any Member whose
Units are subject to vesting, repurchase rights or similar restrictions related
to their employment shall continue to be subject to those or to comparable
provisions. The form of subscription agreement, promissory note, pledge
agreement, restriction or vesting agreement and any other related instruments
shall be determined by the Manager.
"Common Stock Corporate Conversion" means a Qualified Corporate
Conversion pursuant to which the LLC is merged into Whitney pursuant to a
certificate of merger in the form of Exhibit K attached hereto and (i) the
Interests in the LLC held by Whitney are cancelled, (ii) all of the capital
stock of Whitney outstanding on the date of the Qualified Corporate Conversion
is converted into the right to receive that number of shares of common stock of
the surviving corporation equal to its Common Stock Conversion Amount, and (iii)
the Interests evidenced by Units held by Persons other than Whitney are
converted into that number of shares of common stock of the surviving
corporation equal to the Common Stock Conversion Amount.
"Corporate Conversion" shall mean any merger, consolidation, conversion
by filing, assignment of assets, or similar transaction or series of
transactions resulting in a corporation substantially all of the assets of which
consist of substantially all of the assets that were held directly or indirectly
by the LLC immediately prior to such transaction and substantially all the
capital stock of which corporation is held by Persons who were either (i)
Members immediately prior to such transaction or (ii) the owners of a Member the
sole or principal asset of which Member was an Interest in the LLC.
"Employee Unit Plan" shall mean the arrangements, terms and procedures
that the Manager may establish from time to time for the issuance of up to
180,000 Class D Units (or such larger number of Units as may be approved by (i)
the "Compensation Committee" of the board of managers of the Manager, or if no
such committee exists, the board of managers of the Manager and (ii) the holders
of at least 70% of the Class A Units) to employees or independent contractors of
the LLC or any Subsidiary at prices equal to the market value thereof as of the
date of issuance and pursuant to such terms and conditions (including vesting)
as the Manager shall determine.
"Event of Bankruptcy" shall mean, with respect to any Person, the
occurrence any of the events set forth in Section 18-304 of the Act.
"Family Member" shall mean (a) with respect to any individual, such
individual's spouse, any descendants (whether natural, adopted or in the process
of adoption), any trust all of the beneficial interests of which are owned by
any of such individuals or by any of such individuals together with any
organization described in Code Section 501(c)(3), the estate of any such
individual, and any corporation, association, partnership or limited liability
company all of the equity interests of which are owned by those above-described
individuals, trusts or organizations and (b) with respect to any trust, the
owners of the beneficial interests of such trust.
"Fiscal Year" shall mean, with respect to the first year of the LLC,
the period beginning upon the formation of the Partnership on January 30, 1996,
and ending on December 31, 1996 with respect to subsequent years of the LLC, the
calendar year, and, with respect to the last year
C-6
<PAGE> 57
of the LLC, the portion of the calendar year ending with the date of the final
liquidating distributions.
"Fleet" shall mean collectively, the group consisting of the following
entities, or their successors: Fleet Venture Resources, Inc. (a Rhode Island
corporation), Fleet Equity Partners VI, L.P. (a Delaware limited partnership),
Chisholm Partners III, L.P.(a Delaware limited partnership), and Kennedy Plaza
Partners(a Rhode Island general partnership).
"Guarantee and Collateral Agreement" shall mean that certain Guarantee
and Collateral Agreement made by Columbia DBS Holdings, LLC as a Grantor,
Columbia DBS Management, LLC, certain Subsidiaries of Columbia DBS Holdings,
LLC, as Guarantors and Grantors, and Columbia DBS, Inc., Columbia Capital
Corporation, Columbia DBS Investors, L.P. and certain individuals, as Investors
and Pledgors in favor of Canadian Imperial Bank of Commerce, as Administrative
Agent dated as of November 27, 1996.
"Indirect Transfer" shall have the meaning set forth in Section
7.7(b)(iv).
"Interim Financing" shall mean the issuance by the LLC of up to
$25,000,000 of indebtedness prior to any Qualified Financing or IPO the proceeds
of which are used to fund the LLC's acquisition of NRTC System Nos. 0422, 1071,
0120, 0073, and 0164 located in Georgia and Alabama.
"Interest" shall mean all of the rights, privileges, preferences and
obligations of each Member or assignee with respect to the LLC created under
this Agreement or under the Act. With respect to any provision of this Agreement
requiring the vote, approval, consent or similar action by the Members or a
group of Members with respect to any matter, unless otherwise specified,
reference to a majority (or a specified percentage) in Interest of the Members
or group thereof means those Members holding Units constituting a majority (or
specified percentage) of the Units of the Members or group of Members,
determined as the date of such vote, approval, consent or action unless an
earlier record date has been established for determining the Members entitled to
participate in such action, in which case the determination shall be made as of
the earlier record date.
"IPO" shall mean an offering of equity interests in the LLC or its
successor entity pursuant to a registration statement filed in accordance with
the Securities Act of 1933, as amended.
"LLC" shall mean the limited liability company formed pursuant to this
Agreement.
"Manager" shall mean DTS Management, LLC, a Georgia limited liability
company.
"Members" shall refer collectively to the Persons listed on the
Information Exhibit as Members and to any other Persons who are admitted to the
LLC as Members or who become Members under the terms of this Agreement until
such Persons have ceased to be Members under the terms of this Agreement.
"Member" means any one of the Members.
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"NRTC System" shall mean any one of the geographical areas with in the
United States of America specifically designated by the National Rural
Telecommunications Cooperative, or its successor, (the "NRTC") within which the
NRTC has granted to any Person rights to distribute direct broadcast satellite
services.
"Net Positive Taxable Income" shall mean, for any period, the LLC's
cumulative items of income or gain under the Code less cumulative items of loss
or deduction under the Code for the period beginning January 30, 1996 and ending
on the date of dissolution of the LLC.
"Optional Purchase Event" shall have the meaning set forth in Section
7.7(b).
"Partnership" shall have the meaning set forth in the Recitals of this
Agreement.
"Permitted Reimbursements" shall mean the reimbursement by the LLC or
any of its Subsidiaries to the Columbia Entities, Whitney or Fleet, or any of
their Affiliates of (i) actual out-of-pocket travel expenses not to exceed
$7,500 per year in the aggregate, and such other expenses as may be approved
prior to payment by the Chief Executive Officer or Chief Financial Officer of
the Manager, and the Chisholm Designee and one Whitney Designee, which expenses
in each case are incurred in connection with services to the LLC or any
Subsidiary in connection with the ongoing business and affairs (including
financing and acquisitions) of the LLC or any Subsidiary, other than services as
a member of the Board or similar services associated with monitoring the
investment by Columbia A, Columbia B, or Columbia Inc., Whitney or Fleet and
(ii) the costs not to exceed $5,000 per year actually incurred by Whitney for
corporate franchise tax, fees due to any Person serving as its registered agent,
and similar amounts necessary to maintain its corporate status and good standing
and to prepare and file its tax returns and its annual and periodic financial
statements.
"Permitted Transferee" shall mean (i) in the case of Whitney, (a)
Whitney's parent company (Whitney Equity Partners, L.P.) ("Whitney Parent") and
(b) Whitney Parent's and Whitney's Affiliates and the Family Members of those
Affiliates who are individuals, (ii) in the case of each entity comprising the
collective definition of "Fleet", the Affiliates of such entity and the Family
Members of those Affiliates who are individuals, (iii) in the case of Columbia,
(a) Columbia's general partner (Columbia Capital Corporation) ("CCC") and (b)
CCC's and Columbia's Affiliates' and the Family Members of those Affiliates who
are individuals, and (iv) in the case of any other Member, any Family Member of
such Member; provided, however, that in each case such Person shall agree in
writing with the parties hereto to be bound by and to comply with all applicable
provisions of this Agreement.
"Person" shall mean any natural person, partnership, trust, estate,
association, limited liability company, corporation, custodian, nominee,
governmental instrumentality or agency, body politic or any other entity in its
own or any representative capacity.
"Preferred Return" shall mean a return to Members in respect of their
Class A Units equal to (Y) a cumulative compounded annual rate of return equal
to eight percent (8%) applied to the Class A Capital less (Z) the cumulative
amount of distributions made by the LLC pursuant to Subsections 3.2(a) and
9.3(d).
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"Preferred Stock" shall mean the Series A Payment-in-Kind Convertible
Preferred Stock of the surviving corporation in a Preferred Stock Corporate
Conversion, which preferred stock shall have the powers, designations,
preferences and relative rights as set forth in the certificate of designations
of such surviving corporation substantially in the form of Exhibit I attached
hereto.
"Preferred Stock Conversion Amount" shall mean the number of shares of
Preferred Stock that a Person is entitled to receive in a Preferred Stock
Corporate Conversion, which number equals the number obtained by dividing (A)
such Member's Class A Capital plus Preferred Return, by (B) the amount equal to
the total Class A Capital Contributions divided by the number of Class A Units
then outstanding, rounded to the nearest whole share.
"Preferred Stock Corporate Conversion" means a Qualified Corporate
Conversion pursuant to which the LLC is merged into Whitney pursuant to a
certificate of merger in the form of Exhibit J hereto and (i) the Interests in
the LLC held by Whitney are cancelled, (ii) all of the capital stock of Whitney
outstanding on the date of the Qualified Corporate Conversion is converted into
the right to receive that number of shares of Preferred Stock equal to Whitney's
Preferred Stock Conversion Amount, (iii) the Interests evidenced by Class A
Units held by Persons other than Whitney are converted into that number of
shares of Preferred Stock equal to their respective Preferred Stock Conversion
Amounts, (iv) the Interests evidenced by Units other than Class A Units are
converted into the right to receive or purchase that number of shares of common
stock equal to the Common Stock Conversion Amount, and (v) all of the capital
stock is subject to a stockholders agreement in form of Exhibit L hereto.
"Prime Rate" as of a particular date shall mean the prime rate of
interest as published on that date in the Wall Street Journal, and generally
defined therein as "the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks." If the Wall Street Journal is not published on a
date for which the Prime Rate must be determined, the Prime Rate shall be the
prime rate published in the Wall Street Journal on the nearest-preceding date on
which the Wall Street Journal was published.
"Profits and Losses" shall mean, for each Fiscal Year or other period,
an amount equal to the LLC's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(l) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the LLC that is exempt from federal income tax and
not otherwise taken into account in computing Profits or Losses shall be added
to such taxable income or loss;
(b) Any expenditures of the LLC described in Code Section 705(a)(2)(B)
or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses, shall be subtracted from such taxable income or
loss;
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<PAGE> 60
(c) Gain or loss resulting from dispositions of LLC assets shall be
computed by reference to the Agreed Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Agreed Value.
"Purchase Agreement" shall mean that certain Class A Unit Membership
Interest Purchase Agreement between the LLC, Whitney, Fleet and Columbia A dated
as of February 10, 1997.
"Qualified Corporate Conversion" shall mean a Corporate Conversion
effectuated solely by action of the Manager without the necessity of any action
or any investment decision by any Member through the merger of the LLC with and
into Whitney pursuant to Section 18-209 of the Act and Sections 264 and 251 of
the Delaware General Corporation Law, which is either a Preferred Stock
Corporate Conversion or Common Stock Corporate Conversion, and pursuant to which
the certificate of incorporation attached hereto as Exhibit M shall become the
certificate of incorporation of the surviving entity.
"Qualified Financing" shall mean the first issuance after the date
hereof of $50,000,000 or more of indebtedness by the LLC or any Subsidiary in a
single transaction, in which case the LLC may issue equity (or rights to acquire
equity) in the LLC in the same transaction constituting no more than 5.0% of the
outstanding Units of the LLC on a fully-diluted basis without resulting in the
price protection under Section 2.2(b) or 2.2(c).
"Qualified IPO" shall mean an underwritten IPO resulting in gross
proceeds to the LLC or its successor, before fees and expenses, of at least
$25,000,000 and for a per share price, which shall be determined by dividing the
Total Equity Value of the LLC by the total number of Units outstanding, equal to
at least $33.75 per Unit if the IPO is consummated on or before July 31, 1998;
$39.37 per Unit if the IPO is consummated after July 31, 1998 but on or before
July 31, 1999; and $45.00 per Unit if the IPO is consummated after July 31,
1999.
"Registration Rights Agreement" shall mean that certain registration
rights agreement dated the date hereof by and among the LLC and the Members.
"Regulatory Allocations" shall mean those allocations of items of LLC
income, gain, loss or deduction set forth on the Regulatory Allocations Exhibit
and designed to enable the LLC to comply with the alternate test for economic
effect prescribed in Treasury Regulations Section 1.704-1(b)(2)(ii)(d), and the
safe-harbor rules for allocations attributable to nonrecourse liabilities
prescribed in Treasury Regulations Section 1.704-2.
"Residual Interest" shall mean the percentage of Units held by the
relevant Member of the total number of Units then outstanding.
"Second Round Price" shall mean a cash price per Unit equal to $22.50,
as adjusted for any Unit splits, Unit-on-Unit distributions (other than relating
to or resulting from the Preferred Return) or similar transactions.
"Subsidiary" shall mean any entity more than 50% of the equity
interests of which are owned directly or indirectly by the LLC or more than 50%
of the total voting power entitled to
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<PAGE> 61
vote in the election of directors, managers, general partners or trustees of
which is held directly or indirectly by the LLC.
"Tax Estimation Periods" shall mean (i) January, February and March
(ii) April and May, (iii) June, July and August, and (iv) September, October,
November and December of each year during the term of the LLC, or other periods
for which estimates of individual federal income tax liability are required to
be made under the Code.
"10% Unit Member" shall mean any Member that holds at least 10% of all
outstanding Units, and in all events the term "10% Unit Member" shall include
Columbia A, Columbia B, Whitney, and each entity that is part of the group of
entities collectively defined as "Fleet" pursuant to this Exhibit C.
"Total Equity Value" shall mean, as of any day of determination, the
enterprise value (without duplication) of the LLC (including the fair market
value of its equity, but excluding the fair market value of its debt), as
determined by an independent banking firm of national standing with experience
in such valuations (which firm may be an underwriter of the Qualified IPO) and
evidenced by a written opinion in customary form, directed to the Manager;
provided that for purposes of any such determination, the enterprise value of
the LLC shall be calculated as if all of the Interests in the LLC were
registered and publicly held with no restrictions on resale, and as if the LLC
had no controlling member. For purposes of any such determination, such banking
firm's written opinion may state that such fair market value is no less than a
specified amount.
"Transfer" shall mean any sale, assignment, transfer, conveyance,
pledge, hypothecation, or other disposition, voluntarily or involuntarily, by
operation of law, with or without consideration, or otherwise (including,
without limitation, by way of intestacy, will, gift, bankruptcy, receivership,
levy, execution, charging order or other similar sale or seizure by legal
process) of all or any portion of any asset.
"Transfer Notice" shall mean written notice given to the Manager and
all Members of all the details of any proposed Transfer of an Interest including
the name of the proposed transferee, the date of the proposed Transfer, the
portion of the Member's Interest to be transferred, the price or other
consideration, if any, to be received, and a complete description of all noncash
consideration to be received.
"Treasury Regulations" shall mean the final and temporary Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Units" represent the basis on which the Interests are denominated and
basis on which the Members' relative rights, privileges, preferences and
obligations are determined under this Agreement and the Act, and the total
number and class of Units attributed to each Member shall be the number recorded
on the Information Exhibit as of the relevant time.
"Valuation Date" shall have the meaning set forth in Section 7.7(d).
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"Vote Shift" shall mean (a) in the case there is a seven member Board,
(i) the elimination of the extra vote held by each of the two B Unit Designees,
and (ii) the increase in the number of votes held by one of the Whitney
Designees (as Whitney shall determine) and by the Chisholm Designee, in each
case from one vote to two votes, with the result that the Whitney Designees
(three votes) and Chisholm Designee (two votes) shall have five of the nine
votes on the seven-member Board, and (b) in the case there is a nine member
Board, (i) the increase in the number of votes held by each Whitney Designee
from one vote to two votes each, and (ii) the increase in the number of votes
held by the Chisholm Designee from one vote to three votes, with the result that
the Whitney Designees (four votes) and Chisholm Designee (three votes) shall
have seven of the thirteen total votes on the nine-member Board.
"Whitney" shall mean WEP Intermediate Corp., a Delaware corporation, or
its successors or assigns.
"Whitney Designees" shall mean the two individuals designated to the
Board by Whitney pursuant to its rights set forth in Section 5.1(a)(i).
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EXHIBIT D
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
REGULATORY ALLOCATIONS
This Exhibit contains special rules for the allocation of items of LLC
income, gain, loss and deduction that override the basic allocations of Profits
and Losses in Sections 4.1 and 4.2 of the Agreement to the extent necessary to
cause the overall allocations of items of LLC income, gain, loss and deduction
to have substantial economic effect pursuant to Treasury Regulations Section
1.704-1(b) and shall be interpreted in light of that purpose. Subsection (a)
below contains special technical definitions. Subsections (b) through (h)
contain the Regulatory Allocations themselves. Subsections (i), (j) and (k) are
special rules applicable in applying the Regulatory Allocations.
(a) Definitions Applicable to Regulatory Allocations. For purposes of
the Agreement, the following terms shall have the meanings indicated:
(i) "LLC Minimum Gain" has the meaning of "partnership minimum
gain" set forth in Treasury Regulations Section 1.704-2(d),
and is generally the aggregate gain the LLC would realize if
it disposed of its property subject to Nonrecourse Liabilities
in full satisfaction of each such liability, with such other
modifications as provided in Treasury Regulations Section
1.704-2(d). In the case of Nonrecourse Liabilities for which
the creditor's recourse is not limited to particular assets of
the LLC, until such time as there is regulatory guidance on
the determination of minimum gain with respect to such
liabilities, all such liabilities of the LLC shall be treated
as a single liability and allocated to the LLC's assets using
any reasonable basis selected by the Manager.
(ii) "Member Nonrecourse Deductions" shall mean losses, deductions
or Code Section 705(a)(2)(B) expenditures attributable to
Member Nonrecourse Debt under the general principles
applicable to "partner nonrecourse deductions" set forth in
Treasury Regulations Section 1.704-2(i)(2).
(iii) "Member Nonrecourse Debt" means any LLC liability with respect
to which one or more but not all of the Members or related
Persons to one or more but not all of the Members bears the
economic risk of loss within the meaning of Treasury
Regulations Section 1.752-2 as a guarantor, lender or
otherwise.
<PAGE> 64
(iv) "Member Nonrecourse Debt Minimum Gain" shall mean the minimum
gain attributable to Member Nonrecourse Debt as determined
pursuant to Treasury Regulations Section 1.704-2(i)(3). In the
case of Member Nonrecourse Debt for which the creditor's
recourse against the LLC is not limited to particular assets
of the LLC, until such time as there is regulatory guidance on
the determination of minimum gain with respect to such
liabilities, all such liabilities of the LLC shall be treated
as a single liability and allocated to the LLC's assets using
any reasonable basis selected by the Manager.
(v) "Nonrecourse Deductions" shall mean losses, deductions, or
Code Section 705(a)(2)(B) expenditures attributable to
Nonrecourse Liabilities (see Treasury Regulations Section
1.704-2(b)(1)). The amount of Nonrecourse Deductions for a
Fiscal Year shall be determined pursuant to Treasury
Regulations Section 1.704-2(c), and shall generally equal the
net increase, if any, in the amount of LLC Minimum Gain for
that taxable year, determined generally according to the
provisions of Treasury Regulations Section 1.704-2(d), reduced
(but not below zero) by the aggregate distributions during the
year of proceeds of Nonrecourse Liabilities that are allocable
to an increase in LLC Minimum Gain, with such other
modifications as provided in Treasury Regulations Section
1.704-2(c).
(vi) "Nonrecourse Liability" means any LLC liability (or portion
thereof) for which no Member bears the economic risk of loss
under Treasury Regulations Section 1.752-2.
(vii) "Regulatory Allocations" shall mean allocations of Nonrecourse
Deductions provided in Paragraph (b) below, allocations of
Member Nonrecourse Deductions provided in Paragraph (c) below,
the minimum gain chargeback provided in Paragraph (d) below,
the member nonrecourse debt minimum gain chargeback provided
in Paragraph (e) below, the qualified income offset provided
in Paragraph (f) below, the gross income allocation provided
in Paragraph (g) below, and the curative allocations provided
in Paragraph (h) below.
(viii) "Adjusted Capital Account" shall mean the Capital Account of
any Member adjusted for the items described in the next to
last sentences of Treasury Regulations Section
1.704-2(g)(1)(share of minimum gain) and Section
1.704-2(i)(5)(share of Member nonrecourse minimum gain).
(b) Nonrecourse Deductions. All Nonrecourse Deductions for any Fiscal
Year shall be allocated to the Members in proportion to their Units.
(c) Member Nonrecourse Deductions. All Member Nonrecourse Deductions
for any Fiscal Year shall be allocated to the Member who bears the economic risk
of loss under
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<PAGE> 65
Treasury Regulations Section 1.752-2 with respect to the Member Nonrecourse Debt
to which such Member Nonrecourse Deductions are attributable.
(d) Minimum Gain Chargeback. If there is a net decrease in LLC Minimum
Gain for a Fiscal Year, each Member shall be allocated items of LLC income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
such Member's share of such net decrease in LLC Minimum Gain, determined in
accordance with Treasury Regulations Section 1.704-2(g)(2) and the definition of
LLC Minimum Gain set forth above. This provision is intended to comply with the
minimum gain chargeback requirement in Treasury Regulations Section 1.704-2(f)
and shall be interpreted consistently therewith.
(e) Member Nonrecourse Debt Minimum Gain Chargeback. If there is a net
decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member
Nonrecourse Debt for any Fiscal Year, each Member who has a share of the Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt as of
the beginning of the Fiscal Year, determined in accordance with Treasury
Regulations Section 1.704-2(i)(5), shall be allocated items of LLC income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
such Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulations Sections 1.704-2(i)(4) and (5) and the definition of Member
Nonrecourse Debt Minimum Gain set forth above. This Paragraph is intended to
comply with the member nonrecourse debt minimum gain chargeback requirement in
Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(f) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6), items of LLC income
and gain (consisting of a pro rata portion of each item of LLC income, including
gross income, and gain for such year) shall be allocated to such Member in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, any deficit in such Member's Adjusted Capital Account
created by such adjustments, allocations or distributions as quickly as
possible.
(g) Gross Income Allocation. In the event any Member has a deficit in
its Adjusted Capital Account at the end of any Fiscal Year, each such Member
shall be allocated items of LLC gross income and gain, in the amount of such
Adjusted Capital Account deficit, as quickly as possible.
(h) Curative Allocations. When allocating Profits and Losses under
Sections 4.1 and 4.2, such allocations shall be made so as to offset any prior
allocations of gross income under Paragraph (g) above to the greatest extent
possible so that overall allocations of Profits and Losses shall be made as if
no such allocations of gross income occurred.
(i) Ordering. The allocations in this Exhibit to the extent they apply
shall be made before the allocations of Profits and Losses under Sections 4.1
and 4.2 and in the order in which they appear above.
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(j) Waiver of Minimum Gain Chargeback Provisions. If the Manager
determines that (i) either of the two minimum gain chargeback provisions
contained in this Exhibit would cause a distortion in the economic arrangement
among the Members, (ii) it is not expected that the LLC will have sufficient
other items of income and gain to correct that distortion, and (iii) the Members
have made Capital Contributions or received net income allocations that have
restored any previous Nonrecourse Deductions or Member Nonrecourse Deductions,
the Manager shall have the authority, but not the obligation, after giving
notice to the Members, to request on behalf of the LLC the Internal Revenue
Service to waive the minimum gain chargeback or member nonrecourse debt minimum
gain chargeback requirements pursuant to Treasury Regulations Sections
1.704-2(f)(4) and 1.704-2(i)(4). The LLC shall pay the expenses (including
attorneys' fees) incurred to apply for the waiver. The Manager shall promptly
copy all Members on all correspondence to and from the Internal Revenue Service
concerning the requested waiver.
(k) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any LLC asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis), and such gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
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EXHIBIT E
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
INDEMNIFICATION EXHIBIT
(a) Rights to Indemnification.
(i) Pursuant to Act Section 18-108, and to the full extent
otherwise permitted by law, the LLC shall indemnify and save
harmless each Manager and each Member, its Affiliates and all
such Persons' respective members, managers, partners,
shareholders, directors, officers, trustees, employees and
agents ("Representatives"), and Persons to whom the Manager
have delegated management authority pursuant to the Agreement
(collectively, the "Indemnitees") from and against any and all
claims, liabilities, damages, losses, costs and expenses
(including amounts paid in satisfaction of judgments,
compromises and settlements, as fines and penalties and legal
or other costs and expenses of investigating or defending
against any claim or alleged claim) of any nature whatsoever,
known or unknown, liquidated or unliquidated, that are
incurred by any Indemnitee and arise out of or in connection
with the business of the LLC or the performance by such
Indemnitee of any of the Person's responsibilities under this
Agreement. The rights created by this Exhibit shall continue
as to an Indemnitee who has ceased to be a Manager or a
Member, or Person to whom management authority is delegated,
or a Representative and shall inure to the benefit of such
Indemnitee's heirs, executors, administrators, legal
representatives, successors and assigns.
(ii) Without limiting any other provisions of this Exhibit, the LLC
shall pay or reimburse, and indemnify and hold harmless each
Indemnitee against, expenses incurred by such Indemnitee in
connection with his appearances as a witness or other
participation in a Proceeding involving or affecting the LLC
at a time when the Indemnitee is not a named defendant or
respondent in the Proceeding. For the purposes of this
Exhibit, a "Proceeding" shall mean any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in
such an action, suit or proceeding, and any inquiry or
investigation that could lead to such an action, suit or
proceeding.
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(iii) Notwithstanding any other provision of this Exhibit any
indemnification hereunder shall be provided out of and to the
extent of LLC assets only, and no Member (or Affiliate of, or
Representative of such Member) shall have personal liability
on account thereof.
(b) Indemnification Procedures.
(i) Any Person seeking indemnification pursuant to this Exhibit
(including any Advancement of Expenses as provided in
Subsection (c) of this Exhibit) shall be subject to the
procedures of this Subsection (b) for indemnification.
(ii) Any indemnification under this Exhibit, unless ordered by a
court or arbitration panel, shall be made by the LLC only as
authorized in the specific case and only upon a determination
by a majority in Interest of the disinterested Members (or by
special legal counsel pursuant to Subsection (v) below if so
requested by an Indemnitee) that (1) the Indemnitee acted in
good faith, (2) the Indemnitee reasonably believed that its
conduct was in the best interests of the LLC or at least not
opposed to the best interests of the LLC, and in the case of a
criminal Proceeding, had no cause to believe that its conduct
was criminal, and (3) Indemnitee's conduct did not constitute
gross negligence, recklessness, or intentional misconduct,
fraud, or a knowing violation or breach of this Agreement. The
termination of any Proceeding by judgment, order, settlement,
conviction or on a plea of nolo contendere or its equivalent
shall not alone determine that Indemnitee did not meet the
requirements set forth in the preceding sentence.
(iii) To claim indemnification under this Exhibit, Indemnitee shall
submit to the Members a written request for indemnification,
including therewith (or affirming that there will be made
available to the LLC) such documentation and information as is
reasonably available to Indemnitee and as the Members may
reasonably request to support such claims and enable the
Members to make or cause to be made the determinations
hereinafter provided for. If at the time of receipt of such
request, the LLC has in effect or is entitled to claim
reimbursement for such request under any policy of insurance
covering such claim, the LLC shall thereafter take proper
action to cause such insurers to accept coverage and
thereafter shall take all necessary action to cause such
insurers to pay such claim to or on behalf of Indemnitee.
(iv) Indemnitee and the LLC shall cooperate with each other and the
Person making the indemnification determination, including
providing upon reasonable advance request such information
that is not privileged or otherwise protected from disclosure
and which is reasonably necessary to such determination.
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<PAGE> 69
(v) Any "special legal counsel" selected to make any
indemnification determination required hereunder shall be a
law firm, or member of a law firm, experienced in matters of
corporation, partnership and LLC law and which neither
presently is, nor in the past five (5) years has been,
retained to represent the LLC, Indemnitee, an Affiliate of the
LLC or Indemnitee or any other party to the Proceeding giving
rise to the claim for indemnification, and shall not include
any Person who, under prevailing applicable standards of
professional conduct, would have a conflict of interest with
Indemnitee or the LLC or any other party to the Proceeding.
Any determination required herein, if Indemnitee has so
requested, shall be made by special legal counsel selected by
the Indemnitee and reasonably satisfactory to the Members.
(vi) An Indemnitee shall not be denied indemnification in whole or
in part under this Subsection (b) solely on the grounds that
it had an interest in the transaction with respect to which
the indemnification applies, if the transaction was fully
disclosed to the Members in advance and was otherwise
permitted to be carried out by the terms of the Agreement.
(vii) The indemnification provided in this Exhibit is solely for the
benefit of Indemnitees and shall not give rise to any right to
indemnification in favor of any other Persons.
(c) Advance Payment of Expenses. Expenses incurred by an Indemnitee in
defense or settlement of any claim that may be subject to a right of
indemnification hereunder may be advanced by the LLC prior to the final
disposition thereof (an "Advancement of Expense") upon receipt of a written
agreement by the Indemnitee to repay such amount to the extent that it shall be
determined ultimately that such Indemnitee is not entitled to be indemnified
hereunder.
(d) Right of Indemnitee to Commence Proceeding.
(i) If a claim under Subsection (a) of this Exhibit is not paid in
full by the LLC within sixty (60) days after a written claim
has been received by the LLC, except in the case of a claim
for an Advancement of Expenses, in which case the applicable
period shall be twenty (20) days, an Indemnitee may at any
time thereafter commence a Proceeding against the LLC pursuant
to the dispute resolution provisions set forth in the Dispute
Resolution Exhibit to recover the unpaid amount of the claim.
If successful in whole or in part in any such Proceeding, or
in a Proceeding brought by the LLC to recover any Advancement
of Expenses, the Indemnitee shall also be entitled to be paid
the expenses of prosecuting or defending such Proceeding.
(ii) In any Proceeding brought by an Indemnitee to enforce a right
to Indemnification hereunder (but not in a Proceeding brought
by Indemnitee to enforce a right to an Advancement of
Expenses) it shall be a defense that (and in any Proceeding by
the LLC to recover an Advancement of
E-3
<PAGE> 70
Expenses, the LLC shall be entitled to recover such expenses
upon a final adjudication that) the Indemnitee has not met the
requirements for indemnification hereunder; provided, however,
that in any such Proceeding, neither (A) the failure of the
Members to have made the determination prior to the
commencement of such Proceeding that indemnification of
Indemnitee is proper in the circumstances, (B) an actual
determination by the Members that Indemnitee has not met such
applicable requirements, nor (C) termination of any Proceeding
by any judgment, order, settlement, or plea therein shall, of
itself, create a presumption that Indemnitee has not met such
applicable legal requirements or, in the case of such a
Proceeding brought by Indemnitee, be a defense to such a
Proceeding.
(iii) In any Proceeding brought by Indemnitee to enforce a right to
indemnification or to an Advancement of Expenses hereunder, or
by the LLC to recover an Advancement of Expenses, the burden
of proving that Indemnitee is not entitled to be indemnified,
or to such Advancement or Expenses, under this Exhibit or
otherwise shall be on the LLC.
(iv) Without limiting the foregoing, any action commenced pursuant
to this Subsection (d) shall be conducted in all respect as a
de novo adjudication on the merits. Provided, however, if a
determination shall have been made, or deemed to have been
made pursuant to Subsection (b) above, that a Person is
entitled to indemnification, the LLC shall be bound thereby.
The LLC and all Members shall be precluded from asserting in
any action pursuant to this Subsection (d) that the procedures
and presumptions of this Exhibit are not valid, binding and
enforceable.
(e) Non-Exclusivity of Rights. The rights to indemnification and to the
Advancement of Expenses conferred in this Exhibit shall not be exclusive of any
other right which any Person may have or hereafter acquire under applicable law,
under any other agreement, pursuant to any vote of Members or otherwise,
provided that the Indemnitee shall not be entitled to recover more than once for
the same damage.
(f) Insurance. The LLC shall be authorized to maintain insurance, in
reasonable amounts and with responsible carriers, at the LLC's expense, to
insure any amounts indemnifiable hereunder as well as to protect the Indemnitees
or any employee or agent of the LLC or another enterprise against any expense,
liability or loss of the kind referred to in this Exhibit, whether or not the
LLC would have the power to indemnify such Person against such expense,
liability or loss under the applicable law.
(g) Contribution by LLC. The LLC hereby agrees that, in the event that
the indemnification provided for in this Exhibit is for any reason finally
judicially determined to be unavailable, the LLC shall contribute to the payment
of any and all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA or other excise taxes or penalties, and amounts paid in
settlement) in such proportion as is appropriate to reflect the relative fault
of the LLC and the Indemnitee with respect to such expenses, liability and loss.
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<PAGE> 71
(h) Other Indemnification Sources. Any Indemnitees entitled to
indemnification from the LLC hereunder shall first seek recovery under any
insurance policies by which such Indemnitee is covered and shall obtain the
written consent of the Members prior to entering into any compromise or
settlement that would result in an obligation of the LLC to indemnify such
Indemnitee. If the amounts in respect of which such indemnification is sought
arise out of the conduct of the business and affairs of the LLC and also of any
other Person for which the Person entitled to indemnification from the LLC
hereunder was then acting in a similar capacity, the amount of the
indemnification provided by the LLC shall be limited to the LLC's proportionate
share thereof as determined in good faith by the Members.
(i) Survival. The provisions of this Exhibit shall survive any
termination or dissolution of the LLC.
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E-5
<PAGE> 72
EXHIBIT F
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
DISPUTE RESOLUTION EXHIBIT
(a) Mandatory Arbitration. All disputes between or among any Members or
Manager, including without limitation any disputes for which application to the
Delaware Court of Chancery could otherwise be made pursuant to Act Section
18-110, arising out of or in connection with the execution, interpretation and
performance of this Agreement (including the validity, scope and enforceability
of this arbitration provision) shall be solely and finally settled by a board of
arbitrators consisting of either one arbitrator or three arbitrators, as set
forth below (the term "Arbitrators" shall refer to the board of arbitrators,
whether it consists of one or three members). The arbitration proceedings shall
be held in the Washington, D.C. metropolitan area, and except as otherwise may
be provided in this Exhibit, the arbitration proceedings shall be conducted in
accordance with the Commercial Arbitration Rules (the "AAA Rules") of the
American Arbitration Association (the "AAA").
(b) Arbitration Notice. If a Member or Members determine to submit a
dispute for arbitration pursuant to this Exhibit, such Member(s) shall furnish
the other Members with a dated, written statement (the "Arbitration Notice")
indicating (i) such Member's intent to commence arbitration proceedings, (ii)
the nature, with reasonable detail, of the dispute and (iii) the remedy or
remedies such Member will seek.
(c) Selection of Sole Arbitrator. Within ten (10) days of the date of
the Arbitration Notice, the Member or Members commencing the arbitration
(collectively, the "Petitioner") and the party with whom the Petitioner has its
dispute (collectively, the "Respondent") shall attempt to agree on and then
select one neutral arbitrator (the "Sole Arbitrator"). A "neutral" arbitrator
shall be a Person who would not be subject to disqualification under rule No. 19
of the AAA Rules.
(d) Arbitration Panel. If, within such ten (10) day period, the
Petitioner and Respondent are unable to agree upon a Sole Arbitrator, each of
them shall have five (5) business days (following the expiration of the ten (10)
day period) to select (and provide written notice of such selection to the other
Members and the LLC) a qualifying arbitrator. A "qualifying" arbitrator is a
Person who is not (i) an Affiliate or Family Member of either the Petitioner or
Respondent or (ii) counsel to any such Person at such time. If either the
Petitioner or Respondent fails to select a qualifying arbitrator or provide such
notice within the five (5) day period, the AAA shall have the right to make such
selection. (Such qualifying arbitrators hereafter may be referred to,
respectively, as the "First Arbitrator" and the "Second Arbitrator.") Within ten
(10) days following their selection, the First and Second Arbitrator shall
select (and provide written notice to the Members and the LLC of such selection)
a third arbitrator (the "Third Arbitrator") from a list of members of the AAA's
National Panel of
<PAGE> 73
Commercial Arbitrators. The Third Arbitrator must be "neutral" as that term is
defined above. Notwithstanding the foregoing, if a dispute involves more than
two Members, all proceedings shall be conducted before a Sole Arbitrator, who
shall be selected by the AAA if the Members are unable to agree upon such Sole
Arbitrator within the ten (10) day period mentioned above.
(e) Discovery Requests. At any time within forty (40) days after the
date of the Arbitration Notice, the Petitioner and Respondent can make discovery
requests of the other (including, but not limited to, requests for delivery of
documents, production of witnesses for testimony and delivery of interrogatory
responses). The recipient of a discovery request shall have ten (10) days after
the receipt of such request to object to any or all portions of such request and
make an application to the Arbitrators to limit the scope of such discovery
request, and shall respond to any portions of such request not so objected to
within twenty (20) days of the receipt of such request. All objections shall be
in writing and shall indicate the reasons for such objections. Within five (5)
business days after the end of the period for the submission by the requested
party of an application to limit the discovery request, the Arbitrators shall
grant or deny such discovery request, in whole or in part, to the extent the
Arbitrators determine such discovery is or is not, as the case may be,
reasonably necessary to enable the requesting party to obtain information
relevant to the dispute without unreasonably burdening the requested party. The
requested party shall comply with a discovery request granted by the Arbitrators
within ten (10) business days after such discovery request is granted, or within
such longer period as the Arbitrators may determine upon application of the
requested party for extension thereof for reasonable cause. Neither party shall
be permitted to make more than one application for discovery to the Arbitrators.
All depositions shall be taken in the city in which the Person being deposed
resides or has its principal place of business, unless otherwise agreed by the
parties. The Arbitrators are not authorized to subpoena documents or perform
independent investigations.
(f) Timing of Hearings. Hearings must commence no later than ninety
(90) days following the date of the Arbitration Notice and such hearings shall
be conducted for no more than five (5) business days.
(g) Format of Hearings. Each of the Petitioner and the Respondent shall
submit a brief, outlining such party's claim for relief or defense to any claim,
to the other and to the Arbitrators on or before the tenth (10th) day following
the date of the last hearing. Reply briefs must be exchanged and submitted to
the Arbitrators on or before the twentieth (20th) day following the date of the
last hearing. The final decision of the Arbitrators is due on or before the
thirtieth (30th) day following the date of the last hearing. The Arbitrators
shall choose the form of final decision that, in their judgment, is most
consistent with the terms of this Agreement and the intent of the Members, as
supported by evidence presented by the Petitioner and Respondent in the
arbitration proceeding or, if the subject matter of the dispute is not clearly
addressed in or determinable under this Agreement, that, in their opinion, would
be most fair to the Petitioner and Respondent under the arbitration. The
Arbitrators shall not be required to provide reasons for their decision.
(h) Fees and Expenses. The fees of the First and Second Arbitrators
shall be borne by the Petitioner and Respondent, respectively. All other
expenses of the arbitration shall be shared equally by the Petitioner and
Respondent in accordance with the AAA Rules.
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<PAGE> 74
(i) Arbitrators' Discretion. The foregoing time periods and procedural
steps may be modified or extended by the Arbitrators in their discretion to the
extent they deem necessary to prevent fundamental unfairness; provided that at
all times the Arbitrators shall be mindful of the Members' desire for the most
expeditious possible resolution of the Members' disputes; and provided, further,
that a final decision of the Arbitrators shall be rendered within 120 days of
the Arbitration Notice.
(j) Enforceability. To the extent permissible under applicable law, the
Members agree that the award of the Arbitrators shall be final and shall not be
subject to judicial review. Judgment on the arbitration award may be entered and
enforced in any court having jurisdiction over the parties or their assets. It
is the intent of the parties that the arbitration provisions hereof be enforced
to the fullest extent permitted by applicable law, including the Federal
Arbitration Act, 9 U.S.C. Section 2.
(k) Injunctive Relief. Nothing contained in this Exhibit shall prevent
a Member from seeking injunctive relief or require arbitration of any issue for
which injunctive relief is sought by either party hereto.
(l) Members to Include Manager. For purposes of this Exhibit only, any
reference to a Member or Members shall also be defined to include Manager.
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F-3
<PAGE> 75
EXHIBIT G
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
APPRAISAL EXHIBIT
(a) Appraisal Process. If the Member and the LLC are unable to agree,
in writing, on the fair market value of the Interest or the consideration to be
received in exchange for the Interest within the time limits set forth in
Article VII of the Agreement, at any time following the expiration of such time
limit either may invoke the process described in this Appraisal Exhibit (the
"Appraisal Process") by sending the notice selecting an appraiser as described
in subparagraph (i) below, in which case the determination of fair market value
in accordance with this Appraisal Exhibit shall be final and binding on all
parties to the Agreement. If the purchaser of the Interest is one or more of the
Members, all decisions relating to the Appraisal Process shall be made by the
LLC on behalf of the Members who have exercised their options to purchase;
neither the Member whose Interest being purchased nor the nonexercising Members
shall participate in any of the LLC's decisions relating to the Appraisal
Process.
(i) First Appraisal. The written notice invoking the Appraisal
Process shall state that the Appraisal Process is being
invoked and shall set forth the name and address of the
unrelated third party appraiser selected by the party invoking
the Appraisal Process. Any appraiser selected pursuant to this
Appraisal Exhibit shall be a Person qualified with respect to
determining the fair market value of the Interest or other
property that is in question. The party to the purchase and
sale transaction who did not invoke the Appraisal Process
shall have ten (10) days following the notice of the selection
of the first appraiser to select a second unrelated third
party appraiser by sending to the other party written notice
setting forth the name and address of the second appraiser.
If a second appraiser is not selected within the 10 day time
period, the appraiser selected by the party invoking the
Appraisal Process shall prepare his appraisal report and
submit it to the owner of the Interest and the LLC within
sixty (60) days following the notice of his selection as an
appraiser, in which case the Appraisal Process shall be
concluded and the fair market value of the property in
question shall be the amount set forth in the appraiser's
report.
(ii) Second Appraisal. If a second appraiser has been selected
pursuant to subparagraph (i) above, the two appraisers so
selected shall consult with each other in an effort to reach
an agreement as to the fair market value. If the two
appraisers shall agree in writing as to the fair market value
of
<PAGE> 76
the property in question within forty-five (45) days following
the appointment of the second appraiser, the fair market value
of such property shall be the amount to which the appraisers
have agreed, and the Appraisal Process shall be concluded.
In the event the two appraisers are unable to agree as to the
fair market value, the two appraisers shall prepare their
separate reports and submit them to the LLC and the owner of
the Interest within sixty (60) days following the appointment
of the second appraiser. If the higher fair market value
exceeds the lower fair market value by 10% or less of the
lower fair market value the Appraisal Process shall be
concluded and the fair market value of the property in
question shall be the average of the two fair market values as
set forth in the two appraisal reports. If the higher fair
market value exceeds the lower fair market value by more than
10% of the lower fair market value, the owner of the Interest
and the LLC shall further attempt to agree as to the fair
market value.
(iii) Third Appraisal. If the higher fair market value of the two
appraisals exceeds the lower fair market value by more than
10% of the lower fair market value and, as of the eleventh
(11th) day following the submission of both appraisal reports,
neither party has sent written notice calling for a third
appraiser, the Appraisal Process shall be concluded and the
fair market value of the property in question shall be the
average of the two fair market values as set forth in the two
appraisal reports. If, however, the higher fair market value
exceeds the lower fair market value by more than 10% of the
lower fair market value and, within ten (10) days following
the submission of the first two appraisers' reports, either
party sends written notice to the other calling for a third
appraiser, the two previously-selected appraisers shall
promptly (but in any event within thirty (30) days following
the submission of both appraisal reports) select a third
appraiser to determine the fair market value of the property
in question. The first two appraisers shall notify the LLC,
which shall in turn notify the owner of the Interest and all
Members, of the name and address of the third appraiser so
selected; provided, however, that if the LLC has not received
notice of the name and address of the third appraiser within
such thirty (30) day period, then the fair market value of the
property in question shall be the average of the two
appraisals that have been completed. Neither the previously
selected appraisers, the Member whose Interest is being
purchased, the LLC, the Members nor any Persons related to any
of them shall disclose to the third appraiser the appraisal
reports of the first two appraisers or the results of the
first two appraisals. Within thirty (30) days following his
appointment, the third appraiser shall submit to the owner of
the Interest and the LLC his appraisal report, in which case
the Appraisal Process shall be concluded and the fair market
value of the property in question shall be the average of the
two appraisals that are closest to each other.
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<PAGE> 77
(b) Costs of Appraisal Process.
(i) General Rules. Unless provided otherwise in clause (b)(ii)
below, the costs of the Appraisal Process shall be borne
equally by the Member whose Interest is being purchased and by
the Person(s) obligated to purchase the Interest. If one or
more of the Members exercised its option to purchase the
Interest, the portion of the costs of the Appraisal Process
that are not borne by the owner of the Interest shall be
divided among the exercising Members based upon their relative
shares of the Interest being purchased.
(ii) Exception. Notwithstanding subparagraph (i) above, in the
event a party calls for a third appraiser as provided above
and the fair market value of the property in question as
determined pursuant to the Appraisal Process is less favorable
to that party than if the fair market value was determined by
averaging the appraised fair market values as determined by
the first two appraisers, the entire costs of the Appraisal
Process shall be borne by the party calling for the third
appraiser.
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<PAGE> 78
EXHIBIT H
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
July 30, 1997, by and among Digital Television Services, LLC, a Delaware limited
liability company and DTS Capital, Inc., a Delaware corporation (the "Issuers"),
the parties listed on Schedule 1 attached hereto (each a "Guarantor" and,
collectively, the "Guarantors") and Donaldson, Lufkin & Jenrette Securities
Corporation, CIBC Wood Gundy Securities Corp. and J.P. Morgan Securities Inc.
(together, the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of July 25, 1997, among the Issuers, Guarantors and the
Initial Purchasers (the "Purchase Agreement") relating to the sale by the
Issuers to the Initial Purchasers of $155,000,000 aggregate principal amount of
their 12 1/2% Senior Subordinated Notes due 2007 (the "Notes"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers
have agreed to provide the registration rights set forth in this Agreement for
the equal benefit of the Initial Purchasers and their respective direct and
indirect transferees. The execution and delivery of this Agreement is a
condition to the Initial Purchasers' obligation to purchase the Notes under the
Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
Advice: See the last paragraph of Section 5.
Applicable Period: See Section 2(b).
Closing Date: The Closing Date as defined in the Purchase
Agreement.
Effectiveness Date: The 150th day after the Closing Date;
provided, however, that, with respect to the Initial Shelf Registration
Statement, (i) if the Filing Date in respect thereof is fewer than 60 days prior
to the 150th day after the Closing Date, then the Effectiveness Date in respect
thereof shall be the 60th day after such Filing Date and (ii) if the Filing Date
is after the filing of the Exchange Offer Registration Statement with the SEC,
then the Effectiveness Date in respect thereof shall be the 60th day after such
Filing Date.
Effectiveness Period: See Section 3.
<PAGE> 79
Event Date: See Section 4.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a).
Exchange Offer Registration Statement: See Section 2(a).
Exchange Securities: See Section 2(a).
Expiration Date: See Section 2(a).
Filing Date: The 120th day after the Closing Date; provided,
however, that, with respect to the Initial Shelf Registration Statement, (i) if
a Shelf Registration Event shall have occurred fewer than 30 days prior to the
120th day after the Closing Date, then the Filing Date in respect thereof shall
be the 30th day after such Shelf Registration Event and (ii) if a Shelf
Registration Event shall have occurred after the filing of the Exchange Offer
Registration Statement with the SEC, then the Filing Date in respect thereof
shall be the 45th day after such Shelf Registration Event.
Guarantors: The Guarantors defined in the preamble hereto and
any Person that becomes a guarantor after the date hereof pursuant to the terms
of the Indenture. See Section 10(d).
Holder: Any record holder of Registrable Securities.
Indemnified Person: See the third paragraph of Section 7.
Indemnifying Person: See the third paragraph of Section 7.
Indenture: The Indenture, dated as of July 30, 1997, between
the Issuers and Guarantors and The Bank of New York, as trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this
Agreement.
Initial Shelf Registration Statement: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date of original issuance of the Notes.
Issuers: See the introductory paragraph to this Agreement.
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<PAGE> 80
Manager: Any officer or member of the board of managers or
similar governing body of Digital Television Services, LLC.
NASD: See Section 5(t).
Notes: See the second introductory paragraph to this
Agreement.
Participant: See the first paragraph of Section 7.
Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, limited or general
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
Private Exchange: See Section 2(b).
Private Exchange Securities: See Section 2(b).
Prospectus: The prospectus 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.
Purchase Agreement: See the second introductory paragraph to
this Agreement.
Records: See Section 5(o).
Registrable Securities: The Notes upon original issuance
thereof and at all times subsequent thereto, each Exchange Security as to which
Section 2(c)(v) hereof is applicable upon original issuance and at all times
subsequent thereto and, if issued, the Private Exchange Securities, until in the
case of any such Notes, Exchange Securities or Private Exchange Securities, as
the case may be, (i) a Registration Statement (other than, with respect to any
Exchange Security as to which Section 2(c)(v) hereof is applicable, the Exchange
Offer Registration Statement) covering such Notes, Exchange Securities or
Private Exchange Securities has been declared effective by the SEC and such
Notes, Exchange Securities or Private Exchange Securities, as the case may be,
have been disposed of in accordance with such effective Registration Statement,
(ii) such Notes, Exchange Securities or Private Exchange Securities, as the case
may be, are sold in compliance with Rule 144, (iii) such Note has been exchanged
for an Exchange Note pursuant to the Exchange Offer and Section 2(c)(v) is not
applicable thereto, or (iv) such Notes, Exchange Securities or Private Exchange
Securities, as the case may be, cease to be outstanding.
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<PAGE> 81
Registration Statement: Any registration statement of the
Issuers and Guarantors (including, but not limited to, the Exchange Offer
Registration Statement) that covers any of the Registrable Securities pursuant
to the provisions of this Agreement, 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.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration Statement: See Section 3(b).
Shelf Registration Event: See Section 2(c).
Subsequent Shelf Registration Statement: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if applicable,
the trustee under any indenture governing the Exchange Securities and Private
Exchange Securities (if any).
Underwritten registration or underwritten offering: A
registration in which securities of the Issuers are sold to an underwriter for
reoffering to the public.
2. EXCHANGE OFFER
(a) The Issuers and Guarantors agree to file with the SEC on
or before the Filing Date an offer to exchange (the "Exchange Offer") any and
all of the Registrable Securities for
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<PAGE> 82
a like aggregate principal amount of senior subordinated debt securities of the
Issuers that are identical to the Notes (the "Exchange Securities") (and that
are entitled to the benefits of a trust indenture that is identical to the
Indenture (other than such changes as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification of such trust
indenture under the TIA) and that has been qualified under the TIA), except that
the Exchange Securities shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no restrictive
legend thereon. The Exchange Offer will be registered under the Securities Act
on the appropriate form (the "Exchange Offer Registration Statement") and will
comply with all applicable tender offer rules and regulations under the Exchange
Act. The Issuers and Guarantors agree to use their commercially reasonable best
efforts (i) to cause the Exchange Offer Registration Statement to become
effective and to commence the Exchange Offer on or prior to the Effectiveness
Date, (ii) to keep the Exchange Offer open for 30 days (or longer if required by
applicable law) (the last day of such period, the "Expiration Date") and (iii)
to exchange Exchange Securities for all Notes validly tendered and not withdrawn
pursuant to the Exchange Offer on or prior to the fifth day following the
Expiration Date.
Each Holder who participates in the Exchange Offer will be
deemed to represent that any Exchange Securities received by it will be acquired
in the ordinary course of its business, that at the time of the consummation of
the Exchange Offer such Holder will have no arrangement with any person to
participate in the distribution of the Exchange Securities in violation of the
provisions of the Securities Act, and that such Holder is not an affiliate of
the Issuers within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Securities that are Private
Exchange Securities, Exchange Securities to which Section 2(c)(v) is applicable
and Exchange Securities held by Participating Broker-Dealers, and no Issuer or
Guarantor shall have any further obligation to register Registrable Securities
(other than Private Exchange Securities and other than Exchange Securities as to
which Section 2(c)(v) hereof applies) pursuant to Section 3 of this Agreement.
No securities other than the Exchange Securities shall be included in the
Exchange Offer Registration Statement.
(b) The Issuers and Guarantors shall include within the
Prospectus contained in the Exchange Offer Registration Statement a section
entitled "Plan of Distribution," reasonably acceptable to the Initial
Purchasers, which shall contain a summary statement of the positions taken or
policies made by the Staff of the SEC (and publicly disseminated) with respect
to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Securities received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"). Such "Plan of Distribution" section shall also
allow the use of the prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Securities.
The Issuers and Guarantors shall use their commercially
reasonable best efforts to keep the Exchange Offer Registration Statement
effective and to amend and supplement the Prospectus
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contained therein in order to permit such Prospectus to be lawfully delivered by
all persons subject to the prospectus delivery requirements of the Securities
Act for at least 180 days following the consummation of the Exchange Offer (or
such shorter time as such persons must comply with such requirements in order to
resell the Exchange Securities) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, any Initial
Purchaser holds any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Issuers upon the request of such Initial Purchaser
shall, simultaneously with the delivery of the Exchange Securities in the
Exchange Offer, issue and deliver to such Initial Purchaser, in exchange (the
"Private Exchange") for the Notes held by such Initial Purchaser, a like
principal amount of debt securities of the Issuers that are identical to the
Exchange Securities (the "Private Exchange Securities") (and which are issued
pursuant to the same indenture as the Exchange Securities) (except for the
placement of a restrictive legend on such Private Exchange Securities). The
Private Exchange Securities shall bear the same CUSIP number as the Exchange
Securities. Interest on the Exchange Securities and Private Exchange Securities
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the Issue Date.
Any indenture under which the Exchange Securities or the
Private Exchange Securities will be issued shall provide that the holders of any
of the Exchange Securities and the Private Exchange Securities will vote and
consent together on all matters to which such holders are entitled to vote or
consent as one class and that none of the holders of the Exchange Securities and
the Private Exchange Securities will have the right to vote or consent as a
separate class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the Staff of the SEC, the Issuers reasonably
determine in good faith, after consultation with counsel, that they are not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not commenced
on or prior to the Effectiveness Date, (iii) the Exchange Offer is not, for any
reason, consummated on or prior to the 180th day after the Closing Date, (iv)
any Holder of Private Exchange Securities so requests, or (v) in the case of any
Holder that participates in the Exchange Offer, such Holder does not receive
Exchange Securities on the date of the exchange that may be sold without
restriction under state and federal securities laws (the occurrence of any such
event, a "Shelf Registration Event"), then, in the case of each of clauses (i)
to and including (v) of this sentence, the Issuers shall promptly deliver to the
Holders and the Trustee notice thereof (the "Shelf Notice") and the Issuers and
Guarantors shall thereafter file an Initial Shelf Registration Statement
pursuant to Section 3.
3. SHELF REGISTRATION
If a Shelf Registration Event has occurred (and whether or not
an Exchange Offer Registration Statement has been filed with the SEC or has
become effective, or the Exchange Offer has been consummated), then:
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(a) Initial Shelf Registration Statement. The Issuers and
Guarantors shall promptly prepare and file with the SEC a Registration Statement
for an offering to be made on a continuous basis pursuant to Rule 415 covering
all of the Registrable Securities (the "Initial Shelf Registration Statement").
The Issuers and Guarantors shall file with the SEC the Initial Shelf
Registration Statement on or prior to the Filing Date. The Initial Shelf
Registration Statement shall be on Form S-1 or another appropriate form if
available, permitting registration of such Registrable Securities for resale by
such Holders in the manner designated by them (including, without limitation, in
one or more underwritten offerings). The Issuers and Guarantors shall not permit
any securities other than the Registrable Securities to be included in the
Initial Shelf Registration Statement or any Subsequent Shelf Registration
Statement. The Issuers and Guarantors shall use their commercially reasonable
best efforts to cause the Initial Shelf Registration Statement to be declared
effective under the Securities Act on or prior to the Effectiveness Date, and to
keep the Initial Shelf Registration Statement continuously effective under the
Securities Act until the date that is 24 months from the Issue Date, or such
shorter period ending when (i) all Registrable Securities covered by the Initial
Shelf Registration Statement have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration Statement or (ii) a Subsequent
Shelf Registration Statement covering all of the Registrable Securities has been
declared effective under the Securities Act (such 24 month or shorter period,
the "Effectiveness Period").
(b) Subsequent Shelf Registration Statements. If the Initial
Shelf Registration Statement or any Subsequent Shelf Registration Statement
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Issuers and Guarantors shall use their commercially reasonable
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event the Issuers and Guarantors shall within
45 days of such cessation of effectiveness amend the Shelf Registration
Statement in a manner reasonably expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional "shelf" Registration
Statement pursuant to Rule 415 covering all of the Registrable Securities (a
"Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration
Statement is filed, the Issuers and Guarantors shall use their commercially
reasonable best efforts to cause the Subsequent Shelf Registration Statement to
be declared effective as soon as reasonably practicable after such filing and to
keep such Registration Statement continuously effective until the end of the
Effectiveness Period. As used herein the term "Shelf Registration Statement"
means the Initial Shelf Registration Statement and any Subsequent Shelf
Registration Statement.
(c) Supplements and Amendments. The Issuers and Guarantors
shall promptly supplement and amend the Shelf Registration Statement if required
by the rules, regulations or instructions applicable to the registration form
used for such Shelf Registration Statement, if required by the Securities Act,
or if reasonably requested by the Holders of a majority in aggregate principal
amount of the Registrable Securities covered by such Registration Statement or
by any underwriter of such Registrable Securities.
(d) Hold-Back Agreements.
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(i) Restrictions on Public Sale by Holders of Registrable
Securities. Each Holder of Registrable Securities whose Registrable
Securities are covered by a Shelf Registration Statement (which
Registrable Securities are not being sold in the underwritten offering
described below) agrees, if requested (pursuant to a timely written
notice) by the Issuers and Guarantors or by the managing underwriter or
underwriters in an underwritten offering, not to effect any public sale
or distribution of any securities within the class of securities
covered by such Shelf Registration Statement or any similar class of
securities of any Issuer or Guarantor, including a sale pursuant to
Rule 144 or Rule 144A (except as part of such underwritten offering),
during the period beginning 10 days prior to, and ending 60 days after,
the closing date of each underwritten offering made pursuant to each
Shelf Registration Statement, to the extent timely notified in writing
by the Issuers or by the managing underwriter or underwriters;
provided, however, that each holder of Registrable Securities shall be
subject to the hold-back restrictions of this Section 3(d)(i) only once
during the term of this Agreement.
The foregoing provisions shall not apply to any Holder of
Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided,
however, that any such Holder shall undertake, in its request to
participate in any such underwritten offering, not to effect any public
sale or distribution of the class of securities covered by such Shelf
Registration Statement (except as part of such underwritten offering)
during such period unless it has provided 45 days' prior written notice
of such sale or distribution to the Issuers or the managing underwriter
or underwriters, as the case may be.
(ii) Restrictions on the Issuers, Guarantors and Others. The
Issuers and Guarantors agree (A) not to effect any public or private
sale or distribution (including, without limitation, a sale pursuant to
Regulation D under the Securities Act) of any securities the same as or
similar to those covered by a Shelf Registration Statement or any
securities convertible into or exchangeable or exercisable for such
securities, during the 10 days prior to, and during the 60-day period
beginning on, the commencement of an underwritten public distribution
of Registrable Securities, where the managing underwriter or
underwriters so requests pursuant to timely written notice; (B) to
include in any agreements entered into by any Issuer or Guarantor on or
after the date of this Agreement (other than any underwriting agreement
relating to a public offering registered under the Securities Act)
pursuant to which any Issuer or Guarantor issues or agrees to issue
securities the same as or similar to the Notes a provision
substantially identical to Section 3(d)(i); and (C) not to grant or
agree to grant any "piggy-back registration" or other similar rights to
any holder of any Issuer or Guarantor or any of their respective
subsidiaries' securities issued on or after the date of this Agreement
with respect to any Registration Statement.
(e) Limitations, Conditions and Qualifications to Obligations
Under Registration Covenants. The obligations of the Issuers and Guarantors set
forth in this Section 3 are subject to each of the following limitations,
conditions and qualifications:
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(i) Subject to the next sentence of this paragraph, the
Issuers and Guarantors shall be entitled to postpone, for a reasonable
period of time, the filing or effectiveness of, or suspend the rights
of any Holders to make sales pursuant to, any Registration Statement
otherwise required to be prepared, filed and made and kept effective by
them hereunder; provided, however, that the duration of such
postponement or suspension may not extend beyond the earlier to occur
of (A) the day after the cessation of the circumstances described in
the next sentence of this paragraph on which such postponement or
suspension is based or (B) 90 days after the date of the determination
of the Board of Directors referred to in the next sentence. Such
postponement or suspension may be effected only if the Manager and
Board of Directors, as applicable, of the Issuers determine reasonably
and in good faith that the filing or effectiveness of, or sales
pursuant to, such Registration Statement would materially impede, delay
or interfere with any financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction
involving the Issuers or any of their affiliates or require disclosure
of material information that the Issuers have a bona fide business
purpose for preserving as confidential; provided, however, that the
Issuers shall be entitled to such postponement or suspension only once
during the term of this Agreement. If the Issuers so postpone the
filing of a Registration Statement they shall, as promptly as possible,
deliver a certificate signed by the chief executive officer of each of
the Issuers to the Holders as to such determination. The exercise by
the Issuers of their rights under this Section 3(e) shall not relieve
them of their obligation to pay Additional Interest pursuant to Section
4 if the Registration Statement is not filed by the applicable Filing
Date or declared effective by the applicable Effectiveness Date or
postponed or suspended beyond the period specified therein.
4. ADDITIONAL INTEREST
(a) The Issuers, Guarantors and the Initial Purchasers agree
that the Holders of Notes will suffer damages if the Issuers and Guarantors fail
to fulfill their obligations under Section 2 or Section 3 hereof (including by
virtue of their exercise of their rights under Section 3(d) hereof) and that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, the Issuers and Guarantors agree jointly and severally to pay, as
liquidated damages, additional interest on the Registrable Securities
("Additional Interest") under the circumstances and to the extent set forth
below (each of which shall be given independent effect):
(i) if either the Exchange Offer Registration Statement or the
Initial Shelf Registration Statement required to be filed under this
Agreement has not been filed on or prior to the Filing Date (unless,
with respect to the Exchange Offer Registration Statement, a Shelf
Registration Event described in clause (i) of Section 2(c) shall have
occurred prior to the Filing Date), Additional Interest shall accrue on
the Registrable Securities over and above the stated interest in an
amount equal to $0.05 per week (or any part thereof), per $1,000 of
principal amount (as of the first day of each such week) of the
Registrable Securities for the first 90 days immediately following such
date, such Additional Interest rate increasing by an additional $0.05
per week (or any part thereof)
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per $1,000 of principal amount (as of the first day of each such week)
of the Registrable Securities for each subsequent 90-day period;
(ii) if either the Exchange Offer Registration Statement or the
Initial Shelf Registration Statement required to be filed under this
Agreement is not declared effective by the SEC on or prior to the
Effectiveness Date (unless, with respect to the Exchange Offer
Registration Statement, a Shelf Registration Event described in clause
(i) of Section 2(c) above shall have occurred), Additional Interest
shall accrue on the Registrable Securities over and above the stated
interest in an amount equal to $0.05 per week (or any part thereof) per
$1,000 of principal amount (as of the first day of each such week) of
the Registrable Securities for the first 90 days immediately following
the day after such date, such Additional Interest rate increasing by an
additional $0.05 per week (or any part thereof) per $1,000 of principal
amount (as of the first day of each such week) of the Registrable
Securities for each subsequent 90-day period; and
(iii) if (A) the Issuers have not exchanged Exchange Securities for
all Registrable Securities validly tendered and not withdrawn in
accordance with the terms of the Exchange Offer on or prior to the
fifth day after the Expiration Date, or (B) the Exchange Offer
Registration Statement ceases to be effective at any time prior to the
Expiration Date, or (C) if applicable, any Shelf Registration Statement
has been declared effective and such Shelf Registration Statement
ceases to be effective at any time during the Effectiveness Period,
then Additional Interest shall accrue on the Registrable Securities
(over and above any interest otherwise payable on the Registrable
Securities) in an amount equal to $0.05 per week (or any part thereof)
per $1,000 of principal amount (as of the first day of each such week)
of the Registrable Securities for the first 90 days commencing on (x)
the sixth day after the Expiration Date, in the case of (A) above, or
(y) the day the Exchange Offer Registration Statement ceases to be
effective in the case of (B) above, or (z) the day such Shelf
Registration Statement ceases to be effective in the case of (C) above,
such Additional Interest rate increasing by an additional $0.05 per
week (or any part thereof) per $1,000 of principal amount (as of the
first day of each such week) of the Registrable Securities at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Registrable
Securities may not exceed at any one time in the aggregate $0.40 per week per
$1,000 of principal amount (as of the first day of each such week) of the
Registrable Securities; provided, further, that (1) upon the filing of the
Exchange Offer Registration Statement or a Shelf Registration Statement as
required hereunder (in the case of clause (i) of this Section 4(a)), (2) upon
the effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement as required hereunder (in the case of clause (ii) of this
Section 4(a)) or (3) upon the exchange of Exchange Securities for all
Registrable Securities validly tendered and not withdrawn (in the case of clause
(iii)(A) of this Section 4(a)), or upon the effectiveness of the Exchange Offer
Registration Statement that had ceased to remain effective (in the case of
clause (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf
Registration Statement that had ceased to remain effective (in the case of
clause (iii)(C) of this Section 4(a)), Additional Interest on the Registrable
Securities as a result of such clause (or the relevant subclause thereof), as
the case may be, shall cease to accrue (but any accrued amount shall be
payable).
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(b) The Issuers shall notify the Trustee within one business
day after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). The Issuers shall
jointly and severally pay the Additional Interest due on the Registrable
Securities by depositing with the Trustee, in trust, for the benefit of the
Holders thereof, on or before the applicable semi-annual interest payment date,
immediately available funds in sums sufficient to pay the Additional Interest
then due to Holders of Registrable Securities. Each obligation to pay Additional
Interest shall be deemed to accrue immediately following the occurrence of the
applicable Event Date. Any accrued Additional Interest amount shall be due and
payable on each interest payment date immediately after the applicable Event
Date to the record Holder of Registrable Securities entitled to receive the
interest payment to be made on such date as set forth in the Indenture. The
parties hereto agree that the Additional Interest provided for in this Section 4
constitutes a reasonable estimate of the damages that may be incurred by Holders
of Registrable Securities by reason of the failure of a Shelf Registration
Statement or Exchange Offer Registration Statement to be filed or declared
effective, or a Shelf Registration Statement to remain effective, as the case
may be, in accordance with this Section 4.
5. REGISTRATION PROCEDURES
In connection with the registration of any Registrable
Securities pursuant to Sections 2 or 3 hereof, the Issuers and Guarantors shall
use their commercially reasonable best efforts to effect such registrations to
permit the sale of such Registrable Securities in accordance with the intended
method or methods of disposition thereof, and pursuant thereto the Issuers and
Guarantors shall:
(a) prepare and file with the SEC on or before the Filing
Date, a Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and to use their commercially reasonable best efforts to cause
each such Registration Statement to become effective and remain effective as
provided herein, provided that, if such filing is pursuant to Section 3, before
filing any Registration Statement or Prospectus or any amendments or supplements
thereto, the Issuers shall furnish to and afford the Holders of the Registrable
Securities covered by such Registration Statement, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at least five
days prior to such filing); the Issuers and Guarantors shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto in
respect of which the Holders must be afforded a reasonable opportunity to review
prior to the filing of such document, if the Holders of a majority in aggregate
principal amount of the Registrable Securities covered by such Registration
Statement, their counsel, or the managing underwriters, if any, shall reasonably
object;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period, in
the case of a Shelf Registration Statement, or until the later of the Expiration
Date and the Applicable Period (if applicable), in the case of the Exchange
Offer Registration Statement; cause the related Prospectus to be supplemented by
any required
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Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to them with respect to
the disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus;
(c) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period that has notified the Issuers in writing
that it will be a Participating Broker-Dealer in the Exchange Offer, notify the
selling Holders of Registrable Securities, or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing underwriters,
if any, promptly (but in any event within five business days), and confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective
(including in such notice a written statement that any Holder may, upon request,
obtain, without charge, one conformed copy of such Registration Statement or
post-effective amendment including financial statements and schedules, documents
incorporated or deemed to be incorporated by reference and exhibits); (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that purpose;
(iii) if at any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Securities the
representations and warranties of the Issuers contained in any agreement
(including any underwriting agreement) contemplated by Section 5(n) below cease
to be true and correct; (iv) of the receipt by the Issuers of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Securities
or the Exchange Securities to be sold by any such Participating Broker-Dealer
for offer or sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; (v) of the happening of any event or any
information becoming known that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any 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
not misleading, and that in the case of the Prospectus, it will not contain any
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 provided,
however, that such notification need not specifically identify such event if
notification of the occurrence thereof would in the Issuers' reasonable
judgment, involve the disclosure of confidential non-public information; and
(vi) of the Issuers' reasonable determination that a post-effective amendment to
the Registration Statement would be appropriate;
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(d) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, use their commercially reasonable best
efforts to prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from qualification) of
any of the Registrable Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, use their commercially reasonable best efforts to obtain the
withdrawal of any such order at the earliest possible moment;
(e) if a Shelf Registration Statement is filed pursuant to
Section 3 and if requested by the managing underwriters, if any, or the Holders
of a majority in aggregate principal amount of the Registrable Securities being
sold in connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or such Holders or their respective counsel
reasonably request to be included therein; and (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
reasonably practicable after the Issuers have received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment;
(f) if a Shelf Registration Statement is filed pursuant to
Section 3, furnish to each selling Holder of Registrable Securities and upon
request to its counsel and each managing underwriter, if any, without charge,
one conformed copy of the Registration Statement or Statements and each
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated or deemed to be incorporated therein by reference and
all exhibits;
(g) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, deliver to each selling Holder of
Registrable Securities, or each such Participating Broker-Dealer, as the case
may be, their counsel, and the underwriters, if any, without charge, as many
copies of the Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request; and,
subject to the last paragraph of this Section 5, the Issuers and Guarantors
hereby consent to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Securities covered by or the sale by Participating Broker-Dealers of
the Exchange Securities pursuant to such Prospectus and any amendment or
supplement thereto, provided that such use complies with all applicable laws and
regulations;
(h) prior to any public offering of Registrable Securities or
any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-
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Dealer who seeks to sell Exchange Securities during the Applicable Period, use
their commercially reasonable best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any, and
their respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriters reasonably request in writing,
provided that where Exchange Securities held by Participating Broker-Dealers or
Registrable Securities are offered other than through an underwritten offering,
the Issuers and Guarantors shall cause their counsel to (i) perform Blue Sky
investigations and file registrations and qualifications required to be filed
pursuant to this Section 5(h); (ii) use their commercially reasonable best
efforts to keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective; and (iii) do any and all other acts or things necessary or advisable
to enable the disposition in such jurisdictions of the Exchange Securities held
by Participating Broker-Dealers or the Registrable Securities covered by the
applicable Registration Statement, provided further that no Issuer or Guarantor
shall in any case be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject, (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction or (D) conform its capitalization or the
composition of its assets to the securities or Blue Sky laws of any such
jurisdiction;
(i) if a Shelf Registration Statement is filed pursuant to
Section 3, cooperate with the selling Holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Securities to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or Holders may reasonably
request;
(j) use their commercially reasonable best efforts to cause
the Registrable Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof or the underwriters,
if any, to consummate the disposition of such Registrable Securities, except as
may be required solely as a consequence of the nature of such selling Holder's
business, in which case the Issuers and Guarantors will cooperate in all
reasonable respects with the filing of such Registration Statement and the
granting of such approvals;
(k) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly as practicable
prepare and (subject to Section 5(a) above) file with the SEC, solely at the
expense of the Issuers and Guarantors, a supplement or post-effective amendment
to the Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated
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therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder
or to the purchasers of the Exchange Securities to whom such Prospectus will be
delivered by a Participating Broker-Dealer, any such Prospectus will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(l) use their commercially reasonable best efforts to cause
the Registrable Securities covered by a Registration Statement or the Exchange
Securities, as the case may be, to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate principal
amount of Registrable Securities covered by such Registration Statement or the
Exchange Securities, as the case may be, or the managing underwriters, if any;
(m) prior to the effective date of the first Registration
Statement relating to the Registrable Securities, (i) provide the Trustee with
printed certificates for the Registrable Securities in a form eligible for
deposit with The Depository Trust Company; and (ii) provide a CUSIP number for
the Registrable Securities;
(n) in connection with an underwritten offering of Registrable
Securities pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings, provided such
agreement is reasonably acceptable to the Issuers and provided that the
underwriters are reasonably acceptable to the Issuers, 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 if reasonably requested, (i) make such
representations and warranties to the underwriters, with respect to the business
of the Issuers and their 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, and confirm the same if and when reasonably requested;
(ii) use their commercially reasonable best efforts to obtain opinions of
counsel to the Issuers and updates thereof in form and substance reasonably
satisfactory to the managing underwriters, addressed to the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by underwriters;
(iii) use their commercially reasonable best efforts to obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants of the
Issuers (and, if necessary, any other independent certified public accountants
of any subsidiary of any Issuer or of any business acquired by any Issuer or any
of their subsidiaries for which financial statements and financial data are, or
are required to be, included in the Registration Statement), addressed to each
of the underwriters, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by
underwriters; and (iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures comparable to those set
forth in Section 7 hereof (or such other provisions and procedures reasonably
acceptable to the Issuers and the Holders of a majority in aggregate principal
amount of Registrable Securities covered by such Registration Statement and the
managing underwriters or agents) with respect to all parties to be indemnified
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pursuant to said Section, all of which shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
(o) if a Shelf Registration Statement is filed pursuant to
Section 3, subject to the prior receipt by the Issuers of undertakings to use
commercially reasonable efforts to preserve the confidentiality of any
information disclosed by the Issuers pursuant hereto in form and substance
reasonably satisfactory to the Issuers, make available for inspection by any
selling Holder of such Registrable Securities being sold, any underwriter
participating in any such disposition of Registrable Securities, if any, and any
attorney, accountant or other agent retained by any such selling holder or
underwriter (collectively, the "Inspectors"), at the offices where normally
kept, during reasonable business hours, all relevant financial and other
records, pertinent corporate documents and properties of the Issuers and their
subsidiaries (collectively, the "Records") as shall be necessary to enable them
to exercise any applicable due diligence responsibilities, and cause the
officers, directors and employees of the Issuers and their subsidiaries to
supply all information in each case requested by any such Inspector in
connection with such Registration Statement; however, records that the Issuers
determine, in good faith, to be confidential and any Records that the Issuers
notify the Inspectors are confidential shall not be disclosed by the Inspectors
unless (i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement; (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction; (iii) the information in such Records has been made
generally available to the public; or (iv) release thereof is necessary or
advisable in connection with any action, suit or proceeding involving any Holder
or other Inspector;
(p) provide for an indenture trustee for the Registrable
Securities or the Exchange Securities, as the case may be, and cause the
Indenture or the trust indenture provided for in Section 2(a), as the case may
be, to be qualified under the TIA not later than the effective date of the
Exchange Offer or the first Registration Statement relating to the Registrable
Securities; and in connection therewith, cooperate with the trustee under any
such indenture and the holders of the Registrable Securities, to effect such
changes to such indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use their
commercially reasonable best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner;
(q) comply with all applicable rules and regulations of the
SEC to the extent and so long as they are applicable to the Exchange Offer
Registration Statement or the Shelf Registration Statement and make generally
available to their securityholders earning 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) no 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) (i) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm commitment or
commercially reasonable best efforts underwritten offering; and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Issuers after the effective date of a Registration
Statement, which statements shall cover said 12-month periods;
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(r) upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuers in customary form,
relating to the Exchange Securities or the Private Exchange Securities, as the
case may be, addressed to the Trustee for the benefit of all Holders of
Registrable Securities participating in the Exchange Offer or the Private
Exchange, as the case may be, and which includes an opinion that (i) the Issuers
have duly authorized, executed and delivered the Exchange Securities and Private
Exchange Securities and the related indenture; and (ii) each of the Exchange
Securities or the Private Exchange Securities, as the case may be, and related
indenture constitute legal, valid and binding obligations of the Issuers,
enforceable against the Issuers in accordance with their respective terms (with
customary exceptions);
(s) if an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to the
Issuers (or to such other Person as directed by the Issuers) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be,
mark, or caused to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be; in no event
shall such Registrable Securities be marked as paid or otherwise satisfied;
(t) cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD"); and
(u) use their commercially reasonable best efforts to take all
other steps necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Securities
or Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as the Issuers may, from time to time, reasonably request. The Issuers and
Guarantors may exclude from such registration the Registrable Securities of any
seller or Participating Broker-Dealer who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
Each Holder of Registrable Securities and each Participating
Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
that, upon receipt of any notice from the Issuers of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such
Holder will forthwith discontinue disposition of such Registrable Securities
covered by such Registration Statement or Prospectus or Exchange Securities to
be sold by such Participating Broker-Dealer, as the case may be, until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k), or until it is advised in writing (the "Advice")
by the Issuers that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto.
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6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers and Guarantors shall be borne
jointly and severally by the Issuers and Guarantors whether or not the Exchange
Offer Registration Statement or a Shelf 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) in
such jurisdictions (x) where the holders of Registrable Securities are located,
in the case of the Exchange Securities, or (y) as provided in Section 5(h), in
the case of Registrable Securities to be sold in a public offering or Exchange
Securities to be sold by a Participating Broker-Dealer during the Applicable
Period); (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities or Exchange Securities in a
form eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or, in respect of Registrable Securities or Exchange
Securities to be sold by any Participating Broker-Dealer during the Applicable
Period, by the Holders of a majority in aggregate principal amount of the
Registrable Securities included in any Registration Statement or of such
Exchange Securities, as the case may be); (iii) messenger, telephone and
delivery expenses incurred by the any Issuer or Guarantor; (iv) fees and
disbursements of counsel for any Issuer or Guarantor and reasonable fees and
disbursements of special counsel for the sellers of Registrable Securities but
only with respect to such counsel's review of the Registration Statement and
Prospectus, including, without limitation, any portions of the Registration
Statement and Prospectus relating to the Holders, and all documentation related
thereto, including any underwriting agreement and all related documentation
(subject to the provisions of Section 6(b)); (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(n)(iii)
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance); (vi) the
reasonable fees and expenses of any "qualified independent underwriter" or other
independent appraiser participating in an offering pursuant to Rule 2710 of the
Conduct Rules of the NASD; (vii) rating agency fees; (viii) Securities Act
liability insurance, if any Issuer or Guarantor desires such insurance; (ix)
fees and expenses of all other Persons retained by any Issuer or Guarantor; (x)
internal expenses of any Issuer or Guarantor (including, without limitation, all
salaries and expenses of officers and employees of any Issuer or Guarantor
performing legal or accounting duties); (xi) the expense of any annual audit of
any Issuer or Guarantor; (xii) the fees and expenses incurred by any Issuer or
Guarantor in connection with the listing of the Registrable Securities on any
securities exchange; and (xiii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other documents
necessary in order to comply with this Agreement. Anything contained herein to
the contrary notwithstanding, no Issuer or Guarantor shall have any obligation
whatsoever in respect of any underwriters' discounts or commissions, brokerage
commissions, dealers' selling concessions, transfer taxes or any other selling
expenses (other than those expressly enumerated in clauses (i) through (xiii)
above) incurred in connection with the underwriting, offering or sale of
Registrable Securities or Exchange Securities by or on behalf of any Person.
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(b) In connection with any Shelf Registration Statement
hereunder, the Issuers and Guarantors shall jointly and severally reimburse the
Holders of the Registrable Securities being registered in such registration for
the reasonable fees and disbursements of not more than one counsel (in addition
to appropriate local counsel) chosen by the Holders of a majority in aggregate
principal amount of the Registrable Securities to be included in such
Registration Statement and other reasonable out-of-pocket expenses of the
Holders of Registrable Securities incurred in connection with the registration
of the Registrable Securities.
7. INDEMNIFICATION
The Issuers and Guarantors agree to jointly and severally
indemnify and hold harmless each Holder of Registrable Securities and each
Participating Broker-Dealer selling Exchange Securities during the Applicable
Period, the officers and directors of each such person, and each person, if any,
who controls any such person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other expenses actually
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
or Prospectus (as amended or supplemented if the Issuers and Guarantors shall
have furnished any amendments or supplements thereto) or any preliminary
prospectus, 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, in the light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
such Participant furnished to the Issuers and Guarantors in writing by such
Participant (or, if such Participant is not a Holder or a Participating
Broker-Dealer, furnished in writing by the Holder or Participating Broker-Dealer
in respect of which such person is a Participant relating to such Participant)
expressly for use therein; provided that (i) the foregoing indemnity with
respect to any preliminary prospectus shall not inure to the benefit of any
Participant (or to the benefit of any officer or director of, or of any person
controlling, such Participant) from whom the person asserting any such losses,
claims, damages or liabilities purchased Registrable Securities to the extent
that such untrue statement or omission or alleged untrue statement or omission
made in such preliminary prospectus is eliminated or remedied in the related
Prospectus (as amended or supplemented if the Issuers and Guarantors shall have
furnished any amendments or supplements thereto) and a copy of the related
Prospectus (as so amended or supplemented) shall not have been furnished to such
person at or prior to the sale of such Registrable Securities or Exchange
Securities, as the case may be, to such person and (ii) the foregoing indemnity
with respect to any Prospectus shall not inure to the benefit of a Holder of
Registrable Securities or Participating Broker-Dealer to the extent that such
Holder or Participating Broker-Dealer uses such Prospectus three business days
after such time as the Issuers shall have advised such Holder or Participating
Broker-Dealer in writing of the happening of any event that makes any statement
of a material fact made in such Prospectus untrue or which requires the making
of any additions to or changes in such Prospectus in order that it 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 are made, not misleading.
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Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless each of the Issuers and Guarantors,
their respective managers, directors, and officers who sign the Registration
Statement and each person who controls any Issuer or Guarantor within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Issuers and Guarantors to
each Participant, but only with reference to information relating to such
Participant furnished to the Issuers and Guarantors in writing by such
Participant expressly for use in any Registration Statement or Prospectus, any
amendment or supplement thereto, or any preliminary prospectus. The liability of
any Participant under this paragraph shall in no event exceed the net proceeds
received by such Participant from sales of Registrable Securities giving rise to
such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the
reasonable fees and expenses incurred by such counsel related to such
proceeding, provided that the failure to so notify the Indemnifying Person shall
not relieve it of any obligation or liability which it may have hereunder or
otherwise (unless and only to the extent that such failure actually prejudices
the Indemnifying Person). In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but, other than in circumstances
involving a conflict among Indemnified Persons, the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have agreed to the
contrary; (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person; or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to an actual or
potential conflict of interest or because there may be legal defenses available
to an indemnified party that are different from or in addition to those
available to the indemnifying party. It is understood that, other than in
circumstances involving a conflict among Indemnified Persons, the Indemnifying
Person shall not, in connection with any proceeding or related proceeding in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed as they are incurred. Any such separate firm for
the Participants shall be designated in writing by Participants who sold a
majority in interest of Registrable Securities sold by all such Participants and
any such separate firm for any Issuer or Guarantor, their respective managers,
directors, and officers and such control persons of any Issuer or Guarantor
shall be designated in writing by such Issuer or Guarantor. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall
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have requested an Indemnifying Person to reimburse the Indemnified Person for
reasonable fees and expenses incurred by counsel as contemplated by the third
sentence of this paragraph, the Indemnifying Person 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 60 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person
shall not have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement; provided, however, that the Indemnifying
Person shall not be liable for any settlement effected without its consent
pursuant to this sentence if the Indemnifying Party is contesting, in good
faith, the request for reimbursement. No Indemnifying Person shall, without the
prior written consent of the Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party, unless such settlement includes an unconditional
written release of such Indemnified Person in form and substance satisfactory to
the Indemnified Persons from all liability on claims that are the subject matter
of such proceeding.
If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the initial
offering of the Notes or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but also
the relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by the
Issuers and Guarantors on the one hand and the Participants on the other shall
be deemed to be in the same proportion as the total proceeds from the initial
offering (net of discounts and commissions but before deducting expenses) of the
Notes received by the Issuers bears to the total proceeds received by such
Participant from the sale of Registrable Securities. The relative fault of the
parties 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 any Issuer
or Guarantor, on the one hand, or such Participant or such other Indemnified
Person, as the case may be, on the other, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and any other equitable considerations appropriate in the
circumstances.
The parties shall agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants 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 preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by
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such Indemnified Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, in no event
shall a Participant be required to contribute any amount in excess of the amount
by which net proceeds received by such Participant from sales of Registrable
Securities exceeds the amount of any damages that such Participant 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 indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. RULE 144 AND RULE 144A
Each Issuer and Guarantor covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
and, if at any time such Issuer or Guarantor is not required to file such
reports, it will, upon the request of any Holder of Registrable Securities, make
publicly available other information so long as necessary to permit sales
pursuant to Rule 144 and Rule 144A under the Securities Act. Each Issuer and
Guarantor further covenants that it will take such further action as any Holder
of Registrable Securities may reasonably request, to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 and Rule 144A under the Securities Act.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Holders of a majority in aggregate
principal amount of such Registrable Securities included in such offering and
reasonably acceptable to the Issuers.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements (however the terms applicable to each Holder shall be identical in
all respects) and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements applicable to all Holders.
10. MISCELLANEOUS
(a) Remedies. In the event of a breach by any Issuer or
Guarantor of any of its obligations under this Agreement, each Holder of
Registrable Securities, in addition to being entitled to exercise all rights
provided herein, in the Indenture or, in the case of the Initial
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Purchasers, in the Purchase Agreement or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. Each Issuer and Guarantor agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Each Issuer and Guarantor has
not, as of the date hereof, entered into and shall not, after the date of this
Agreement, enter into any agreement with respect to any of its securities that
is inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof. Each Issuer
and Guarantor has not entered into and will not enter into any agreement with
respect to any of its securities which will grant to any Person "piggy-back"
rights with respect to a Registration Statement.
(c) Adjustments Affecting Registrable Securities. Each Issuer
and Guarantor shall not, directly or indirectly, take any action with respect to
the Registrable Securities as a class that would adversely affect the ability of
the Holders of Registrable Securities to include such Registrable Securities in
a registration undertaken pursuant to this Agreement.
(d) Guarantors. So long as any Registrable Securities remain
outstanding, each Issuer and Guarantor shall cause each of its subsidiaries that
becomes a guarantor of the Notes under the Indenture to execute and deliver a
counterpart to this Agreement which subjects such subsidiary to the provisions
of this agreement as a guarantor (all such subsidiaries, the "Guarantors"). Each
of the Guarantors agrees to join the Issuers in all of their undertakings
hereunder to effect the Exchange Offer for the Exchange Securities (which will
be guaranteed by each of the Guarantors with terms identical to such Guarantors'
guaranty of the Notes) and the filing of any Shelf Registration Statement
required hereunder (including, without limitation, the undertakings in Section 5
hereof).
(e) Amendments and Waivers. Except as provided in paragraph
(c) above, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of (A) the
Holders of not less than a majority in aggregate principal amount of the then
outstanding Registrable Securities and (B) in circumstances that would adversely
affect the Participating Broker-Dealers, the Participating Broker-Dealers
holding not less than a majority in aggregate principal amount of the Exchange
Securities held by all Participating Broker-Dealers; provided, however, that
Section 7 and this Section 10(e) may not be amended, modified or supplemented
without the prior written consent of each Holder and each Participating
Broker-Dealer (including any person who was a Holder or Participating
Broker-Dealer of Registrable Securities or Exchange Securities, as the case may
be, disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of
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Registrable Securities may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Securities being sold by such
Holders pursuant to such Registration Statement.
(f) Notices. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most
current address given by the Trustee to the Issuers; and
(ii) if to the Issuers, at Digital Television Services, LLC,
Building C-200, 880 Holcomb Bridge Road, Roswell, Georgia 30076,
Attention: Chief Financial Officer.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day courier; and when receipt is
acknowledged by the addressee's telecopier machine, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the trustee
under the Indenture at the address specified in such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Securities.
(h) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or
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<PAGE> 102
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement, is intended by the parties as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(m) Securities Held by the Issuers and Guarantors or their
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities held by any Issuer or Guarantor or its respective affiliates (as such
term is defined in Rule 405 under the Securities Act) shall be deemed to be not
outstanding for purposes of determining whether such consent or approval was
given by the Holders of such required percentage.
[Signature Pages Follow]
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<PAGE> 103
Please confirm that the foregoing correctly sets forth the
agreement between the Issuers and the Guarantors and the Initial Purchasers.
Very truly yours,
DIGITAL TELEVISION SERVICES, LLC
DIGITAL TELEVISION SERVICES OF
CALIFORNIA, LLC
DIGITAL TELEVISION SERVICES OF
COLORADO, LLC
DIGITAL TELEVISION SERVICES OF
GEORGIA, LLC
DIGITAL TELEVISION SERVICES OF
KANSAS, LLC
DIGITAL TELEVISION SERVICES OF
KENTUCKY, LLC
DIGITAL TELEVISION SERVICES OF NEW
MEXICO, LLC
DIGITAL TELEVISION SERVICES OF NEW
YORK I, LLC
DIGITAL TELEVISION SERVICES OF SOUTH
CAROLINA I, LLC
DIGITAL TELEVISION SERVICES OF
VERMONT, LLC
By: DTS Management, LLC
their manager
By: __________________________
Name:
Title:
DTS MANAGEMENT, LLC
By: _______________________________
Name:
Title:
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<PAGE> 104
SPACENET, INC.
By: _______________________________
Name:
Title:
DTS CAPITAL, INC.
By: _______________________________
Name:
Title:
Accepted and Agreed to as of
the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:___________________________________
Name:
Title:
CIBC WOOD GUNDY SECURITIES CORP.
By:___________________________________
Name:
Title:
J.P. MORGAN SECURITIES INC.
By:___________________________________
Name:
Title:
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<PAGE> 105
Schedule 1
Digital Television Services of New Mexico, LLC
Digital Television Services of Colorado, LLC
Digital Television Services of New York I, LLC
Digital Television Services of South Carolina I, LLC
Digital Television Services of Kentucky, LLC
Digital Television Services of Kansas, LLC
Digital Television Services of Vermont, LLC
Digital Television Services of Georgia, LLC
Digital Television Services of California, LLC
Spacenet, Inc.
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<PAGE> 106
EXHIBIT I
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
CERTIFICATE OF DESIGNATIONS
OF
SERIES A PAYMENT-IN-KIND PREFERRED STOCK
OF
DIGITAL TELEVISION SERVICES, INC.
(Pursuant to Section 151 of the General
Corporation Law of the State of Delaware)
Digital Television Services, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation (the "Board of Directors"):
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors by the Certificate of Incorporation of the
Corporation (as amended from time to time, the "Certificate of Incorporation"),
there hereby is created, out of the 10,000,000 shares of preferred stock, par
value $.01 per share, of the Corporation authorized in Article FOURTH of the
Certificate of Incorporation (the "Preferred Stock"), a series of Preferred
Stock consisting of 5,000,000 shares, which series shall have the following
powers, designations, preferences and relative, participating, optional and
other rights, and the following qualifications, limitations and restrictions (in
addition to the powers, designations, preferences and relative, participating,
optional and other rights, and the qualifications, limitations and restrictions,
stated in the Certificate of Incorporation as applicable to the Preferred
Stock):
"SECTION 1. DESIGNATION. The shares of such series created hereby shall
be designated as the "Series A Payment-in-Kind Preferred Stock" (referred to
herein as the "PIK Preferred Stock"), and the authorized number of shares
constituting such series shall be 5,000,000. The par value of the PIK Preferred
Stock shall be $.01 per share. The PIK Preferred Stock shall not be subject to
any sinking fund or mandatory redemption provision.
SECTION 2. PRIORITY. The PIK Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up or dissolution, whether
voluntary or involuntary, whether now or hereafter issued rank (i) on a parity
with any other series of Preferred Stock established hereafter by the Board of
Directors the terms of which shall specifically provide that such series shall
rank on a parity with the PIK Preferred Stock with respect to dividend rights
and rights on liquidation, winding up or dissolution (all of such series of
Preferred Stock to which the PIK Preferred Stock ranks on a parity, the "Parity
Securities"), (ii) junior to any series of Preferred
<PAGE> 107
Stock established hereafter by the Board of Directors the terms of which shall
specifically provide that such series shall rank senior to the PIK Preferred
Stock with respect to dividend rights and rights on liquidation, winding up or
dissolution (all of such series of Preferred Stock to which the PIK Preferred
Stock ranks junior, the "Senior Securities") and (iii) senior to the common
stock, par value $.01 per share (the "Common Stock") of the Corporation, and any
series of Preferred Stock established hereafter by the Board of Directors the
terms of which shall specifically provide that such series shall rank junior to
the PIK Preferred Stock with respect to dividend rights and rights on
liquidation, winding up or dissolution (all of such series of Preferred Stock to
which the PIK Preferred Stock ranks senior, the "Junior Securities").
SECTION 3. DIVIDENDS.
The holders of the PIK Preferred Stock shall be entitled to receive
when, as and if declared by the Corporation's Board of Directors, out of funds
legally available therefor, cumulative dividends payable on the shares of the
PIK Preferred Stock for each quarterly dividend period (a "Quarterly Dividend
Period"), which Quarterly Dividend Periods shall commence on March 15, June 15,
September 15 and December 15 of each year and shall end on and include the day
next preceding the first day of the next Quarterly Dividend Period, at a rate of
8% per annum, compounded annually, in respect of the Liquidation Preference (as
defined in Section 5(a). All such dividends shall be payable on March 15, June
15, September 15 and December 15 of each year (each, a "Dividend Payment Date"),
commencing __________ 15, ________. Such dividends shall be paid to the holders
of record at the close of business on the date specified by the Board of
Directors at the time such dividend is declared, which date shall not be more
than 50 or less than 10 days prior to the applicable Dividend Payment Date.
The Corporation may, at its option, pay a Permitted Portion (as defined
in Section 8) such dividends through the issuance of such number of additional
shares of the PIK Preferred Stock with a Liquidation Preference equal to the
aggregate dollar value of dividends to be paid on such Dividend Payment Date.
Dividends accrue from the date of issuance, shall accrue on a daily basis
without regard to the occurrence of a Dividend Payment Date or the declaration
of any dividend, and will accumulate until paid in cash or additional shares of
the PIK Preferred Stock. No fractional shares of PIK Preferred Stock shall be
issued, so that the number of shares to be paid as a dividend pursuant to this
Section 3 shall be rounded to the nearest whole number of shares. All dividends
paid in additional shares of PIK Preferred Stock shall be deemed issued on the
applicable Dividend Payment Date, and will thereupon be duly authorized, validly
issued, fully paid and nonassessable and free and clear of all liens and
charges.
SECTION 4. PIK PREFERRED STOCK DIRECTORS. The holders of the
outstanding shares of PIK Preferred Stock, voting as a class, shall be entitled
to elect three members of the Board of Directors (the "PIK Preferred Stock
Directors"). Each PIK Preferred Stock Director shall hold office until the next
annual meeting of stockholders and until his successor is elected and qualified
or until his earlier resignation or removal. A PIK Preferred Stock Director may
be removed by, and shall not be removed otherwise than by, a vote or consent of
the holders of a majority of the outstanding shares of PIK Preferred Stock who
are entitled to vote in the PIK Preferred Stock Director's election, voting as a
class. Any vacancy in the office of a PIK Preferred Stock Director shall be
filled by a vote of the holders of a majority of the outstanding shares of the
PIK Preferred Stock who are entitled to vote in the election of such PIK
Preferred
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Stock Director. Holders of shares of the PIK Preferred Stock shall not, as such
stockholders, be entitled to vote on the election or removal of directors other
than PIK Preferred Stock Directors.
SECTION 5. LIQUIDATION RIGHTS.
(a) PRIORITY. Upon any liquidation, winding up or dissolution,
whether voluntary or involuntary, after payment or provision for payment of all
of the debts and other liabilities of the Corporation, each holder of
outstanding shares of PIK Preferred Stock shall be entitled to receive, in cash,
out of the remaining net assets of the Corporation, $[NOTE 1] per share of PIK
Preferred Stock, plus an amount, in cash, equal to any accrued but unpaid
dividends on each such share up to the date fixed for distribution (the
"Liquidation Preference"), before any distribution shall be made to the holders
of shares of any Junior Securities. If, upon any liquidation of the Corporation,
the assets distributable among the holders of shares of PIK Preferred Stock are
insufficient to permit payment in full to the holders of shares of the PIK
Preferred Stock, any Parity Securities and any Senior Securities, then the
entire assets of the Corporation thus distributable shall be distributed among
the holders of the PIK Preferred Stock, any Parity Securities and any Senior
Securities in order of relative priority as to distribution in liquidation and,
as to classes and series ranking pari passu with one another in that regard, in
proportion to the respective amounts that would be payable per share if such
assets were sufficient to permit payment in full.
(b) ADDITIONAL DISTRIBUTIONS. If assets remain in the
Corporation after payment of the full preferential amount provided for herein to
the holders of the PIK Preferred Stock, any Parity Securities and any Senior
Securities or after funds necessary for such payment have been set aside in
trust for the holders thereof, then all such remaining assets shall be
distributed first, to the holders of the Common Stock, until such holders have
received the Liquidation Preference per share, and then to the holders of the
PIK Preferred Stock (on an as-if converted to Common Stock basis on the
conversion date), any Parity Securities, any Senior Securities, any Junior
Securities and the Common Stock on an equal per share basis.
SECTION 6. CONVERSION INTO COMMON STOCK.
(a) CONVERSION. Upon the closing of a Qualified IPO, each
share of PIK Preferred Stock shall be converted automatically upon such closing
into Common Stock at an initial conversion ratio of one share of PIK Preferred
Stock for one share of Common Stock, subject to adjustment as described in
Section 6(e). The Corporation shall not issue fractions of shares of Common
Stock upon conversion of the PIK Preferred Stock. If any fraction of a share of
Common Stock would be issuable upon conversion of the PIK Preferred Stock, then
the Corporation shall, in lieu thereof, pay to the Person entitled thereto an
amount in cash equal to
- ----------
Note 1: Prior to the filing of this Certificate of Designations with the
Secretary of State of the State of Delaware, the Manager shall insert
here the number calculated pursuant to clause (B) of the definition of
"Preferred Stock Conversion Amount" set forth in Exhibit C to the LLC
Agreement.
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<PAGE> 109
the initial issuance price of a share of Common Stock pursuant to such Qualified
IPO of such fraction of a share of Common Stock, calculated to the nearest
one-hundredth of a share, to be computed on the date that the conversion occurs.
(b) PROCEDURES. The holders of PIK Preferred Stock whose
shares are converted as provided in Section 6(a) shall deliver the certificate
or certificates therefor to the principal office of the Corporation together
with written notice or acknowledgement of conversion in form reasonably
satisfactory to the Corporation and (if so required by the Corporation or any
conversion agent) accompanied by instruments of transfer in form reasonably
satisfactory to the Corporation or to such conversion agent, duly executed by
the registered holder or his duly authorized attorney, as well as transfer
taxes, stamps or funds therefor, or evidence of payment thereof, if required by
Section 6(c). The automatic conversion of any outstanding shares of PIK
Preferred Stock into Common Stock by reason of a Qualified IPO shall be deemed
to have occurred upon the closing of the Qualified IPO. The Persons entitled to
receive shares of Common Stock issuable upon conversion shall be treated for all
purposes as the record holders of such shares at and from the time that
conversion is deemed to have occurred.
(c) TAXES. If a share or shares of the PIK Preferred Stock are
converted, then the Corporation shall pay any documentary, stamp or similar
issue or transfer tax due on the issue of the Common Stock upon conversion, but
the holder shall pay to the Corporation the amount of any tax that is due (or
shall establish to the satisfaction of the Corporation payment thereof) if the
shares are to be issued in a name other than the name of such holder.
(d) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available, out of its authorized but unissued shares of Common
Stock, enough shares of Common Stock to issue all shares of Common Stock
issuable upon conversion of the PIK Preferred Stock. All shares of Common Stock
that may be issued upon conversion of shares of PIK Preferred Stock shall be,
when so issued, validly issued, fully paid and nonassessable. In order that the
Corporation may issue shares of Common Stock upon conversion of shares of PIK
Preferred Stock, the Corporation will endeavor to comply with all applicable
federal and state securities laws.
(e) ADJUSTMENTS TO CONVERSION RATE. The conversion rate in
effect at any time shall be subject to adjustment from time to time as follows:
(i) ADJUSTMENTS FOR STOCK SPLITS, STOCK DIVIDENDS,
ETC. If the Corporation (1) pays a dividend in shares of the Common
Stock to holders of the Common Stock, (2) makes distributions in shares
of Common Stock to holders of the Common Stock, (3) subdivides the
outstanding shares of Common Stock into a greater number of shares of
Common Stock or (4) combines the outstanding shares of Common Stock
into a smaller number of shares of Common Stock, then, and in any such
case, the conversion rate in effect immediately prior to such action
shall be adjusted so that the holder of any shares of PIK Preferred
Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock that such holder would
have owned immediately following such action had such shares of PIK
Preferred Stock been converted immediately prior thereto. An adjustment
made pursuant to this Section
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<PAGE> 110
6(e)(i) shall become effective on the record date in the case of a
dividend or distribution and on the effective date in the case of a
subdivision or combination.
(ii) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. If the
Corporation distributes pro rata to all holders of the Common Stock
shares of any class of capital stock (excluding the Common Stock), or
options, rights or warrants to acquire any class of capital stock
(including the Common Stock), or other assets of the Corporation
(excluding capital stock of the Corporation held in its treasury) and
does not make an equivalent distribution with respect to the PIK
Preferred Stock, then, and in any such case, the number of shares of
Common Stock into which each share of the PIK Preferred Stock shall be
convertible shall be adjusted so that the same shall equal the number
determined by multiplying the number of shares of Common Stock into
which such share of the PIK Preferred Stock was convertible immediately
prior to the record date of such distribution by a fraction of which
(x) the numerator shall be the Fair Market Value per share of the
Common Stock on the record date mentioned below and (y) the denominator
shall be such Fair Market Value less the then-Fair Market Value per
share of Common Stock of the securities or assets so distributed. Such
adjustment shall become effective on the record date for determination
of the holders of Common Stock entitled to receive the distribution.
Notwithstanding the foregoing, if the Corporation distributes rights or
warrants pro rata to holders of the Common Stock (the "Rights"), then
the Corporation may, in lieu of making any adjustment pursuant to this
Section 6(e)(ii), make proper provision so that each holder of a share
of PIK Preferred Stock that is converted into Common Stock after the
record date for such distribution and prior to the expiration or
redemption of the Rights shall be entitled to receive upon such
conversion, in addition to the Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of Rights to be
determined as follows: (i) if such conversion occurs on or prior to the
date for the distribution to the holders of Rights of separate
certificates evidencing such Rights ("the Distribution Date"), the same
number of Rights to which a holder of a number of shares of the Common
Stock equal to the number of Conversion Shares is entitled at the time
of such conversion in accordance with the terms and provisions of and
applicable to the Rights; and, (ii) if such conversion occurs after the
Distribution Date, the same number of Rights to which a holder of the
number of shares of the Common Stock into which a share of the PIK
Preferred Stock so converted was convertible immediately prior to the
Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the
Rights.
(iii) WEIGHTED AVERAGE PRICE PROTECTION. Subject to
the last sentence of this Section 6(e)(iii), if the Corporation shall,
in events other than as provided for in Sections 6(e)(i) and 6(e)(ii),
issue Common Stock or rights or warrants entitling the holders thereof
to subscribe for or to purchase shares of Common Stock at a price per
share (the "Exercise Price") less than $22.50 (adjusted for the events
described in Sections 6(e)(i), 6(e)(ii) and 6(e)(iii)), then, and in
any such case, the number of shares of Common Stock into which each
share of the PIK Preferred Stock shall be convertible shall be adjusted
to equal the number of shares of Common Stock into which such share of
PIK Preferred Stock was convertible immediately prior to the date of
such issuance multiplied by a fraction of which (x) the numerator shall
be the number of shares of Common Stock Deemed Outstanding at the close
of business on the day immediately
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<PAGE> 111
prior to such issuance plus the total number of shares of Common Stock
(or Common Stock underlying such rights or warrants) so offered for
subscription or purchase and (y) the denominator shall be the number of
shares of Common Stock Deemed Outstanding at the close of business on
the day immediately prior to such issuance plus the number of shares of
Common Stock that the aggregate of the Exercise Price for the shares of
Common Stock (or Common Stock underlying such rights or warrants) so
offered for subscription or purchase could purchase at $22.50 per share
(adjusted for the events set forth in Sections 6(e)(i), 6(e)(ii) and
6(e)(iii)), such adjustment to become effective immediately after the
opening of business on the day following the date fixed for such
determination. For the purpose of this Section 6(e)(iii), the number of
shares of Common Stock Deemed Outstanding at any time shall not include
shares held in the treasury of the Corporation but shall include shares
underlying outstanding options and warrants and shares issuable upon
the conversion of the PIK Preferred Stock into shares of Common Stock.
Notwithstanding the foregoing, in no event shall any adjustment to the
conversion ratio be made pursuant to this Section 6(e)(iii) in respect
of (i) any issuance of options, rights or warrants in exchange for
outstanding shares of Common Stock if such options, rights or warrants
entitle the holders thereof to subscribe for no more than the number of
shares of Common Stock exchanged therefor (subject to antidilution
provisions similar to those contained herein), (ii) any issuance of
Common Stock upon conversion of the PIK Preferred Stock, (iii) any
issuance of Common Stock, rights or warrants, in each case pursuant to
the Employee Stock Plan or (iv) any issuance of Common Stock (or
options, rights or warrants to purchase Common Stock) in connection
with a Qualified Financing.
(iv) DEFERRAL OF ISSUANCE. In any case in which this
Section 6 shall require that an adjustment be made on or immediately
following a record date, the Corporation may elect to defer (but only
until five Business Days following the mailing of the notice described
in Section 6(i)) issuing to the holder of any share of the PIK
Preferred Stock converted after such record date the shares of Common
Stock into which such PIK Preferred Stock shall have been converted,
and in lieu of the shares the issuance of which is so deferred the
Corporation shall issue or cause its transfer agent to issue due bills
or other appropriate evidence of the right to receive such shares.
(f) COMPUTATIONS. All calculations under this Section 6 shall
be made to the nearest one-hundredth of a share.
(g) SHARES OTHER THAN COMMON SHARES. If, as result of any
adjustment made pursuant to Section 6(e), the holder of any share of PIK
Preferred Stock thereafter surrendered for conversion shall become entitled to
receive any shares of capital stock of the Corporation other than shares of
Common Stock, then the number of such other shares so receivable upon conversion
of any shares of the PIK Preferred Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section 6.
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<PAGE> 112
(h) OTHER INCREASES IN CONVERSION RATE. The Corporation may
make such increases in the conversion rate, in addition to those required by
Sections 6(e)(i), 6(e)(ii) and 6(e)(iii), as it considers advisable in order
that any event treated for federal income tax purposes as a dividend of stock or
stock rights shall not be taxable to recipients thereof.
(i) NOTICE OF CONVERSION RATE CHANGE. Whenever the conversion
rate is adjusted, the Corporation shall promptly mail to all holders of record
of shares of the PIK Preferred Stock a notice of the adjustment.
(j) VOLUNTARY CONVERSION PRIOR TO CERTAIN EVENTS. If the
Corporation consolidates or merges with, or transfers all or substantially all
of its assets to, another corporation, and stockholders of the Corporation must
approve the transaction, then a holder of shares of the PIK Preferred Stock may
convert some or all of such shares into shares of Common Stock simultaneously
with the record date for, or the effective date of, the transaction so as to
receive the rights, warrants, securities or assets that a holder of shares of
the Common Stock on that date may receive. In furtherance thereof, the
Corporation shall mail to holders of shares of the PIK Preferred Stock a notice
stating the proposed record date or effective date, as the case may be. The
Corporation shall mail the notice at least 10 days before such date.
(k) EQUIVALENT CONVERSION. If any of the following occurs,
namely: (i) any reclassification of, or change in, outstanding shares of capital
stock of the class issuable upon conversion of the PIK Preferred Stock (other
than a change in name, or par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or combination), or
(ii) any consolidation or merger to which the Corporation is a party and which
does not result in any reclassification of, or change in (other than a change in
name, or par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), outstanding shares
of such capital stock, then the Corporation or the successor corporation, as the
case may be, shall, as a condition precedent to such reclassification, change,
consolidation or merger, provide in its certificate of incorporation or other
charter document that each share of the PIK Preferred Stock shall be convertible
into the number and class of shares of capital stock issuable upon conversion of
such share of PIK Preferred Stock immediately prior to such reclassification,
change, consolidation or merger. Such certificate of incorporation or other
charter document shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
6. If this Section 6(k) applies, then Section 6(e)(i) does not apply. If, in the
case of any such reclassification, change, consolidation or merger, the stock or
other securities and property (including cash) receivable thereupon by a holder
of the capital stock issuable upon conversion of the PIK Preferred Stock
includes shares of capital stock or other securities and property of a
corporation other than the successor corporation in such reclassification,
change, consolidation or merger, then the certificate of incorporation or other
charter document of such other corporation shall contain such additional
provisions to protect the interests of the holders of shares of the PIK
Preferred Stock as the Board of Directions shall reasonably consider necessary
by reason of the foregoing, which provisions shall be subject to approval by the
affirmative vote or consent of holders of at least two-thirds of the shares of
the then-outstanding PIK Preferred Stock. The provisions of this Section 6(k)
shall similarly apply to successive reclassifications, changes, consolidations,
mergers.
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SECTION 7. DISSOLUTION OF THE CORPORATION.
(a) TRIGGERS. The Corporation shall dissolve at any time after
the February [7], 2003, if at such time at least 25% of the shares of PIK
Preferred Stock outstanding on February [7], 1997 remain outstanding and holders
of at least a majority of PIK Preferred Stock then outstanding vote to dissolve
the Corporation and provide notice of such vote to the Corporation; provided,
however, that in the event that such a vote and resulting dissolution of the
Corporation would result in an event of default or an incipient default under
any then existing indebtedness of the Corporation or any Subsidiary with an
outstanding balance of $10 million or more, then such majority vote shall not
cause the dissolution of the Corporation, but rather shall constitute notice by
the holders of the PIK Preferred Stock to the Board of Directors that such
holders desire that the Board of Directors promptly arrange the sale of the
Corporation (including its Subsidiaries) or a sale of all or substantially all
of its assets.
(b) WINDING UP OR SALE. Upon dissolution of the Corporation
the Board of Directors shall wind up the Corporation's affairs; but the Delaware
Court of Chancery, upon cause shown, may wind up the Corporation's affairs upon
application of any 10% Stockholder, his legal representative or assignee, and in
connection therewith, may appoint a liquidating trustee. The Persons charged
with winding up the Corporation shall settle and close the Corporation's
business, and dispose of and convey the Corporation's noncash assets as promptly
as reasonably possible following dissolution as is consistent with obtaining the
fair market value for the Corporation's assets.
If the holders of the PIK Preferred Stock have given notice under
Section 7(a) (regardless of whether such notice has caused the dissolution of
the Corporation), and if the Corporation has not entered into a definitive
agreement for the sale or other disposition of substantially all of its equity
interests or assets on or prior to the date that is six (6) months after the
date of such notice, or if the Corporation has not closed the sale or other
disposition of substantially all of its equity interests or assets on or prior
to the date that is nine (9) months after the date of such notice, then at any
time after either of such dates the holders of the PIK Preferred Stock acting by
a vote of the holders of a majority such PIK Preferred Stock may (i) increase
the size of the Board of Directors by four (4) individuals who shall each have a
single vote, and (ii) elect by majority vote four (4) individuals to serve as
members of the Board of Directors with the result that the four (4) individuals
thus elected, together with the three (3) PIK Preferred Stock Directors, shall
have a majority of the votes on the Board of Directors.
SECTION 8. OTHER DEFINITIONS.
"Affiliate" means, with respect to any specified Person, any
other Person that directly or indirectly controls, or is under common control
with, or is owned or controlled by, the specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, either
(x) the beneficial ownership of 50% or more of the equity securities issued by
such Person or (y) the power to direct the management and policies of the
specified Person through the ownership of voting securities or other equity
interests, by contract or otherwise, (ii) the terms "controlling," "control
with" and "controlled by," etc., shall have meanings correlative to the
foregoing, and (iii) the officers, directors, stockholders, employees and
partners of such Person shall be deemed to be Affiliates of such Person.
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"Business Day" means any day other than a Saturday, Sunday or
other day on which banks are authorized or required to close by law or executive
order in Washington, D.C.
"Change of Control" means (i) the merger, consolidation or
other business combination of the Corporation or any of its Subsidiaries with or
into, or the merger of, another Person (other than the Corporation or a
Subsidiary of the Corporation) with or into the Corporation with the effect
that, immediately after such transaction, the stockholders of the Corporation
immediately prior to such transaction hold less than a majority in interest of
the total voting power entitled to vote in the election of directors, managers
or trustees of the Person surviving such transaction or less than 50% of the
equity interests in such Person, or (ii) the acquisition by any Person or
related group of Persons, other than a Permitted Transferee, by way of merger,
sale, transfer, consolidation or other business combination or acquisition, of
(x) all or substantially all of the assets, property or business of the
Corporation, (y) more than fifty percent of the total voting power entitled to
vote in the election of directors, managers or trustees of the Corporation or
such other Person as survives the transaction, or (z) more than 50% of the
equity interests in the Corporation or such other Person as survives the
transaction.
"Columbia" shall mean Columbia DBS Investors, L.P., a Delaware
limited partnership, or its successors or assigns.
"Deemed Outstanding" means the total number of outstanding
shares of Common Stock of the Corporation plus the total number of shares of
Common Stock of the Corporation into which all other outstanding securities of
the Corporation are exercisable or convertible.
"Employee Stock Plan" means the arrangements, terms and
procedures that the Corporation may establish from time to time for the issuance
of up to 180,000 shares of Common Stock (or such larger number of shares as may
be approved by (i) the "Compensation Committee" of the Board of Directors, or if
no such committee exists, by the Board of Directors and (ii) the holders of at
least 70% of the shares of PIK Preferred Stock) to employees or independent
contractors of the Corporation or any Subsidiary at prices equal to the market
value thereof as of the date of issuance and pursuant to such terms and
conditions (including vesting) as the Board of Directors shall determine.
"Fair Market Value" means: (a) with respect to any security,
(i) if such security is listed on any national securities exchange or authorized
for quotation by any national securities association, the last sale price of
such security in such market (or the quoted closing bid price if there shall
have been no sale), or (ii) if there is no such closing bid price or such
security is not so listed or authorized for quotation, the value of such
security as determined in good faith by a registered broker-dealer selected by
the Board of Directors; and (b) with respect to any other asset, the value of
such asset as determined in good faith by an appraiser selected by the Board of
Directors and approved by the holders of a majority of the PIK Preferred Stock,
which approval shall not be unreasonably withheld.
"Fleet" shall mean collectively, the group consisting of the
following entities, or their successors: Fleet Venture Resources, Inc., Fleet
Equity Partners VI, LP, Chisholm Partners III, LP, and Kennedy Plaza Partners.
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<PAGE> 115
"IPO" shall mean an offering of equity securities of the
Corporation or any successor entity pursuant to a registration statement filed
in accordance with the Securities Act of 1933, as amended.
"Permitted Portion" shall mean the percentage of the dividends
payable on each share of PIK Preferred Stock that may be paid through the
issuance of additional shares of the PIK Preferred Stock, which percentage shall
equal the lesser of (i) 50%, or (ii) (A) 100% less (B) the Combined Effective
Marginal Tax Rate. For this purpose, the Combined Effective Marginal Tax Rate
shall mean the highest single effective rate (expressed as a percentage) of
United States federal, state and local income taxation applicable to holders of
5% or more of the PIK Preferred Stock whose principal residence or commercial
domicile is within the United States determined as of each record date for the
payment of dividends, giving effect to any limitations on the deductibility of
state and local income taxes in computing United States federal taxable income,
and assuming that such holders are individuals and subject to the highest United
Stated federal and highest state and local marginal income tax rates then
applicable in the jurisdictions in which they have their principal residence or
commercial domicile. The determination of the Combined Effective Marginal Tax
Rate shall be made by the Corporation.
"Permitted Transferee" shall mean (i) in the case of Whitney,
(a) Whitney's parent company (Whitney Equity Partners, L.P.) ("Whitney Parent")
and (b) Whitney Parent's and Whitney's Affiliates' partners, retired partners,
stockholders and retired stockholders, the estates and family members of any
such partners, retired partners, stockholders and retired stockholders and of
their spouses, and any trusts for the benefit of any of the foregoing Persons,
(ii) in the case of each entity comprising the collective definition of "Fleet",
the Affiliates, partners, retired partners, stockholders and retired
stockholders of such entity and its respective Affiliates, the estates and
family members of any such partners, retired partners, stockholders and retired
stockholders and of their spouses, and any trusts for the benefit of any of the
foregoing Persons, (iii) in the case of Columbia, (a) Columbia's general partner
(Columbia Capital Corporation) ("CCC") and (b) CCC's and Columbia's Affiliates'
partners, retired partners, stockholders and retired stockholders, the estates
and family members of any such partners, retired partners, stockholders and
retired stockholders and of their spouses, and any trusts for the benefit of or
any partnership or limited liability company all of the equity interests of
which are owned by any of the foregoing Persons, and (iv) in the case of any
other Stockholder, any Related Party or Affiliate of such Stockholder; provided,
however, that in each case such Person shall agree in writing with the parties
hereto to be bound by and to comply with all applicable provisions of this
Agreement.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Qualified Financing" means the issuance of $50 million or
more of indebtedness by the Corporation or any Subsidiary on one or more
occasions together with the issuance of capital stock of the Corporation (or
options, rights or warrants to acquire capital stock) in the Corporation in the
same transaction constituting in the aggregate with respect to all such
issuances up to 5% of the capital stock of the Corporation on a fully-diluted
basis.
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<PAGE> 116
"Qualified IPO" shall mean an underwritten IPO resulting in
gross proceeds to the Corporation or its successor, before fees and expenses, of
at least $25,000,000 and for a per share price, which shall be determined by
dividing the Total Equity Value of the Corporation by the total number of shares
of capital stock outstanding, equal to at least $33.75 per share if the IPO is
consummated on or before July 31, 1998; $39.37 per share if the IPO is
consummated after July 31, 1998 but on or before July 31, 1999; $[42.19] per
share if the IPO is consummated after July 31, 1999 but on or before July 31,
2000; and $45.00 per share if the IPO is consummated at any time after July 31,
2000.
"Subsidiary" shall mean any entity more than 50% of the equity
interests of which are owned directly or indirectly by the Corporation or more
than 50% of the total voting power entitled to vote in the election of
directors, managers, general partners or trustees of which is held directly or
indirectly by the Corporation.
"Total Equity Value" shall mean, as of any day of
determination, the enterprise value (without duplication) of the Corporation
(including the fair market value of its equity, but excluding the fair market
value of its debt), as determined by an independent banking firm of national
standing with experience in such valuations (which firm may be an underwriter of
the Qualified IPO) and evidenced by a written opinion in customary form,
directed to the Board of Directors of the Corporation; provided that for
purposes of any such determination, the enterprise value of the Corporation
shall be calculated as if all of the shares of the Corporation were registered
and publicly held with no restrictions on resale, and as if the Corporation had
no controlling stockholder. For purposes of any such determination, such banking
firm's written opinion may state that such fair market value is no less than a
specified amount.
"Whitney" shall mean WEP Intermediate Corp., a Delaware
corporation, or its successors or assigns.
[SIGNATURES FOLLOW ON THE NEXT PAGE]
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<PAGE> 117
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed by its authorized officers, this ________ day of
___________, _____.
DIGITAL TELEVISION SERVICES, INC.
By: _________________________________
Name:
Title:
Attest:
By: ___________________________
Name:
Title:
I-12
<PAGE> 118
EXHIBIT J
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
CERTIFICATE OF MERGER -- PREFERRED STOCK CORPORATE CONVERSION
CERTIFICATE OF MERGER
OF
DIGITAL TELEVISION SERVICES, LLC
INTO
WEP INTERMEDIATE CORP.
The undersigned corporation, organized and existing under and by virtue of the
General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and jurisdiction of organization of each of the
constituent entities of the merger is as follows:
NAME JURISDICTION OF ORGANIZATION
---- ----------------------------
WEP Intermediate Corp. Delaware
Digital Television Services, LLC Delaware
SECOND: That a plan and agreement of merger among the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent entities in accordance with the requirements of Section
18-209 of the Limited Liability Company Act of the State of Delaware and
Sections 264(c) and 251 of the General Corporation Law of the State of Delaware.
THIRD: That pursuant to Sections 264(e) and 251(e) of the General
Corporation Law of the State of Delaware, the certificate of incorporation of
the surviving corporation shall be substantially in the form of Exhibit M to the
Amended and Restated Limited Liability Agreement of Digital Television Services,
LLC (the "Limited Liability Company Agreement").
FOURTH: That the name of the surviving corporation of the merger is
Digital Television Services, Inc.
<PAGE> 119
FIFTH: That the executed plan and agreement of merger is contained in
the Limited Liability Company Agreement. The merger effected by this Certificate
of Merger is a "Preferred Stock Corporate Conversion" as defined in the Limited
Liability Company Agreement. The Limited Liability Company Agreement is on file
at the principal place of business of the surviving corporation. The address of
the principal place of business of the surviving corporation is Building C-200,
880 Holcomb Bridge Road, Roswell, GA 30076.
SIXTH: That a copy of the plan and agreement of merger will be
furnished by the surviving corporation, on request and without cost to any
member or stockholder or of any other person holding any interest in any
constituent entity.
IN WITNESS WHEREOF, WEP Intermediate Corp. has caused this Certificate
to be signed by Attorney-in-Fact, its authorized officer, this ______ day
of _______________, _________ .
WEP INTERMEDIATE CORP.
By: DTS Management, LLC,
as Attorney-in-Fact
By:
----------------------------
Title:
J-2
<PAGE> 120
EXHIBIT K
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
CERTIFICATE OF MERGER -- COMMON STOCK CORPORATE CONVERSION
CERTIFICATE OF MERGER
OF
DIGITAL TELEVISION SERVICES, LLC
INTO
WEP INTERMEDIATE CORP.
The undersigned corporation, organized and existing under and by virtue of the
General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and jurisdiction of organization of each of the
constituent entities of the merger is as follows:
NAME JURISDICTION OF ORGANIZATION
---- ----------------------------
WEP Intermediate Corp. Delaware
Digital Television Services, LLC Delaware
SECOND: That a plan and agreement of merger among the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent entities in accordance with the requirements of Section
18-209 of the Limited Liability Company Act of the State of Delaware and
Sections 264(c) and 251 of the General Corporation Law of the State of Delaware.
THIRD: That pursuant to Sections 264(e) and 251(e) of the General
Corporation Law of the State of Delaware, the certificate of incorporation of
the surviving corporation shall be substantially in the form of Exhibit M to the
Amended and Restated Limited Liability Agreement of Digital Television Services,
LLC (the "Limited Liability Company Agreement").
FOURTH: That the name of the surviving corporation of the merger is
Digital Television Services, Inc.
<PAGE> 121
FIFTH: That the executed plan and agreement of merger is contained in
the Limited Liability Company Agreement. The merger effected by this Certificate
of Merger is a "Common Stock Corporate Conversion" as defined in the Limited
Liability Company Agreement. The Limited Liability Company Agreement is on file
at the principal place of business of the surviving corporation. The address of
the principal place of business of the surviving corporation is Building C-200,
880 Holcomb Bridge Road, Roswell, GA 30076.
SIXTH: That a copy of the plan and agreement of merger will be
furnished by the surviving corporation, on request and without cost to any
member or stockholder or of any other person holding any interest in any
constituent entity.
IN WITNESS WHEREOF, WEP Intermediate Corp. has caused this Certificate
to be signed by Attorney-in-Fact, its authorized officer, this ______ day of
_____________, ______.
WEP INTERMEDIATE CORP.
By: DTS Management, LLC,
as Attorney-in-Fact
By:
-------------------------
Title:
K-2
<PAGE> 122
EXHIBIT L
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is made as of this _____
day of ___________, _____ by and among Digital Television Services, Inc., a
Delaware corporation (the "Company"), and the stockholders (the "Stockholders")
listed on the signature pages hereto.
WHEREAS, the Company was formerly a Delaware limited liability company
known as Digital Television Services, LLC (the "LLC") and the Stockholders were
all of the members of the LLC; and
WHEREAS, in accordance with the Limited Liability Company Agreement of
the LLC (the "LLC Agreement"), the LLC has been converted into the Company
pursuant to a Preferred Stock Corporate Conversion (as defined in the LLC
Agreement); and
WHEREAS, the LLC Agreement requires the Stockholders to enter into this
Stockholders Agreement in order to set forth certain agreements with respect to
the management of the Company, the transfer of the securities of the Company now
owned or hereafter acquired by each of the Stockholders and certain other
matters;
NOW, THEREFORE, in consideration of the premised and the mutual
promises herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
"Affiliate" means, with respect to any specified Person, any other
Person that directly or indirectly controls, or is under common control with, or
is owned or controlled by, the specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, either
(x) the beneficial ownership of 50% or more of the equity securities issued by
such Person or (y) the power to direct the management and policies of the
specified Person through the ownership of voting securities or other equity
interests, by contract or otherwise, (ii) the terms "controlling," "control
with" and "controlled by," etc., shall have meanings correlative to the
foregoing, and (iii) the officers, directors, stockholders, employees and
partners of such Person shall be deemed to be Affiliates of such Person.
<PAGE> 123
"Board of Directors" shall mean the board of directors of the Company.
"Certificate of Designations" means the Certificate of Designations of
the PIK Preferred Stock as filed with the Secretary of State of the State of
Delaware, as amended from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor federal revenue law.
"Columbia" shall mean Columbia DBS Investors, L.P., a Delaware limited
partnership, or its successors or assigns.
"Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Company.
"Employee Stock Plan" shall mean the arrangements, terms and procedures
that the Company may establish from time to time for the issuance of up to
180,000 shares of Common Stock (or such larger number of shares as may be
approved by (i) the "Compensation Committee" of the Board of Directors, or if no
such committee exists, the Board of Directors and (ii) the holders of at least
70% of the shares of PIK Preferred Stock) to employees or independent
contractors of the Company or any Subsidiary at prices equal to the market value
thereof as of the date of issuance and pursuant to such terms and conditions
(including vesting) as the Board of Directors shall determine.
"Fiscal Year" shall mean the calendar year.
"Fleet" shall mean collectively, the group consisting of the following
entities, or their successors: Fleet Venture Resources, Inc., Fleet Equity
Partners VI, LP, Chisholm Partners III, LP, and Kennedy Plaza Partners.
"Interim Financing" shall mean the issuance by the Company of up to
$25,000,000 of indebtedness prior to any Qualified Financing or IPO the proceeds
of which are used to fund the Company's acquisition of NRTC System Nos. 0422,
1071, 0120, 0073, and 0164 located in Georgia and Alabama.
"NRTC System" shall mean any one of the geographical areas with in the
United States of America specifically designated by the National Rural
Telecommunications Cooperative, or its successor, (the "NRTC") within which the
NRTC has granted to any Person rights to distribute direct broadcast satellite
services.
"Permitted Reimbursements" shall mean the reimbursement by the Company
or any of its Subsidiaries to Columbia Capital Corporation, Whitney or Fleet, or
any of their Affiliates of (i) the costs with respect to any employee of any
such entity who is requested by the Chief Executive Officer of the Company to
provide services to the Company or any Subsidiary in connection with the ongoing
business and affairs (including financing) of the Company or any Subsidiary,
other than services as a member of the Board of Directors or similar services
associated with monitoring the investment by Columbia, Whitney, Fleet or their
Affiliates in the
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Company, which engagement and reimbursement amount is approved by the Board of
Directors (with at least one designee of Whitney or Fleet approving the
engagement and the amount, and (ii) the costs not to exceed $5,000 per year
actually incurred by Whitney for corporate franchise tax, fees due to any Person
serving as its registered agent, and similar amounts necessary to maintain its
corporate status and good standing and to prepare and file its tax returns and
its annual and periodic financial statements.
"Permitted Transferee" shall mean (i) in the case of Whitney, (a)
Whitney's parent company (Whitney Equity Partners, L.P.) ("Whitney Parent") and
(b) Whitney Parent's and Whitney's Affiliates' partners, retired partners,
stockholders and retired stockholders, the estates and family members of any
such partners, retired partners, stockholders and retired stockholders and of
their spouses, and any trusts for the benefit of any of the foregoing Persons,
(ii) in the case of each entity comprising the collective definition of "Fleet",
the Affiliates, partners, retired partners, stockholders and retired
stockholders of such entity and its respective Affiliates, the estates and
family members of any such partners, retired partners, stockholders and retired
stockholders and of their spouses, and any trusts for the benefit of any of the
foregoing Persons, (iii) in the case of Columbia, (a) Columbia's general partner
(Columbia Capital Corporation) ("CCC") and (b) CCC's and Columbia's Affiliates'
partners, retired partners, stockholders and retired stockholders, the estates
and family members of any such partners, retired partners, stockholders and
retired stockholders and of their spouses, and any trusts for the benefit of or
any partnership or limited liability company all of the equity interests of
which are owned by any of the foregoing Persons, and (iv) in the case of any
other Stockholder, any Related Party or Affiliate of such Stockholder; provided,
however, that in each case such Person shall agree in writing with the parties
hereto to be bound by and to comply with all applicable provisions of this
Agreement.
"PIK Preferred Stock" shall mean the Series A Payment-in-Kind Preferred
Stock, par value $.01 per share, of the Company.
"Preferred Stockholders" shall mean the record holders of the PIK
Preferred Stock and a "Preferred Stockholder" shall mean any one of them.
"Prime Rate" as of a particular date shall mean the prime rate of
interest as published on that date in the Wall Street Journal, and generally
defined therein as "the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks." If the Wall Street Journal is not published on a
date for which the Prime Rate must be determined, the Prime Rate shall be the
prime rate published in the Wall Street Journal on the nearest-preceding date on
which the Wall Street Journal was published.
"Qualified Financing" means the issuance of $50 million or more of
indebtedness by the Company or any Subsidiary on one or more occasions together
with the issuance of capital stock of the Company (or options, rights or
warrants to acquire capital stock) in the Company in the same transaction
constituting in the aggregate with respect to all such issuances up to 5% of the
capital stock of the Company on a fully-diluted basis.
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"Registration Rights Agreement" shall mean that certain registration
rights agreement dated ________, ________ by and among the LLC and the members
of the LLC on the date of such agreement.
"Related Party" shall mean (a) with respect to any individual, such
individual's spouse, any descendants (whether natural, adopted or in the process
of adoption), any sibling, a spouse of any descendant or sibling, any ancestor,
any trust 90% or more of the beneficial interests of which are owned by such
individuals or any organization described in Code Section 501(c)(3), and any
corporation, association, partnership or limited liability company 90% of the
equity interests of which are owned by those above-described individuals, trusts
or organizations and (b) with respect to any trust, the owners of the beneficial
interests of such trust.
"Stock" shall mean the Common Stock and the PIK Preferred Stock.
"Subsidiary" shall mean any entity more than 50% of the equity
interests of which are owned directly or indirectly by the Company or more than
50% of the total voting power entitled to vote in the election of directors,
managers, general partners or trustees of which is held directly or indirectly
by the Company.
"10% Stockholder" shall mean any Stockholder that holds at least 10% of
all outstanding capital stock of the Company, and in all events the term "10%
Stockholder" shall include Columbia, Whitney, and each entity that is part of
the group of entities collectively defined as "Fleet" herein.
"Transfer" shall mean any sale, assignment, transfer, conveyance,
pledge, hypothecation, or other disposition, voluntarily or involuntarily, by
operation of law, with or without consideration, or otherwise (including,
without limitation, by way of intestacy, will, gift, bankruptcy, receivership,
levy, execution, charging order or other similar sale or seizure by legal
process) of all or any portion of any asset.
"Transfer Notice" shall mean written notice given to the Company and
all Stockholders of all the details of any proposed Transfer of an Interest
including the name of the proposed transferee, the date of the proposed
Transfer, the portion of the Stockholder's Stock to be transferred, the price or
other consideration, if any, to be received, and a complete description of all
noncash consideration to be received.
"Whitney" shall mean WEP Intermediate Corp., a Delaware corporation, or
its successors or assigns.
ARTICLE II
CONDUCT OF BUSINESS
SECTION 2.1. SCOPE OF ARTICLE. The provisions of this Article II shall
apply to all Stock held by any Stockholder, whether or not held or acquired by
such Stockholder on or
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after the date of this Agreement or at or after any time such Stockholder first
became subject to this Agreement.
SECTION 2.2. INFORMATION TO BE PROVIDED. Within ninety (90) days after
the end of each Fiscal Year, each Stockholder shall be furnished with annual
financial statements containing a balance sheet, income statement, and statement
of changes in working capital as of or for the Fiscal Year then ending which
financial statements shall be prepared in accordance with generally accepted
accounting principles and shall be audited by Arthur Andersen & Co. or such
other firm of independent certified public accountants as may be selected by the
Board of Directors and reasonably satisfactory to the holders of at least 70% of
the PIK Preferred Stock. The Company shall also provide to each of the Preferred
Stockholders and such other Stockholders as the Board of Directors may determine
(i) an annual operating budget and capital expenditure budget for each Fiscal
Year (which shall be delivered prior to February 15 of each such Fiscal Year);
(ii) unaudited quarterly financial statements within 45 days of the completion
of each calendar quarter of the Fiscal Year; and (iii) unaudited monthly
financial statements containing a balance sheet, a statement of income, and a
statement of changes in working capital and showing variances to the annual
operating budget and capital expenditure budget within 30 days after the last
day of each month.
SECTION 2.3. SPECIAL VOTING RIGHTS OF THE PIK PREFERRED STOCK.
(a) Class Vote Required. For so long as any shares of PIK Preferred
Stock are outstanding, without the vote of the holders of at least seventy
percent (70%) of the PIK Preferred Stock, the Company shall not take any action
that:
(i) Alters or changes the rights, preferences or privileges with
respect to the PIK Preferred Stock.
(ii) Creates, by reclassification or otherwise, any new class or
series of capital stock having rights, preferences or
privileges senior or pari passu to the PIK Preferred Stock.
(iii) Results in any merger, reorganization, Change of Control or
any transaction or a series of related transactions in which
all or substantially all of the assets, properties, or
businesses of the Company and its Subsidiaries taken as a
whole are sold or otherwise transferred to Persons other than
the Company or any of its Subsidiaries, unless such
transaction would result in cash proceeds to the holders of
the PIK Preferred Stock with respect to the PIK Preferred
Stock of an amount per share equal to or greater than the
Liquidation Preference.
(iv) Results in an IPO that is not a Qualified IPO.
(v) Results in the redemption or repurchase of any capital stock
of the Company, whether in the form of cash or promissory
notes, or otherwise (except in connection with the redemption
or acquisition of capital stock of the Company held by
employees, managers, or consultants of the
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Company or any Subsidiary, or Permitted Transferees of such
Persons, in connection with or in furtherance of the
termination of such relationship).
(vi) Results in the issuance of any equity interest in the Company
or in any Subsidiary, or rights to acquire such equity
interests, other than under the Employee Stock Plan or in
connection with a Qualified Financing.
(vii) Results in any distribution with respect to any equity
interests in the Company (other than as permitted in clause
(v) above).
(viii) Results in any contract, agreement, loan, transaction or other
relationship with the Company or any Subsidiary and any of
Columbia, Columbia DBS, Inc., Columbia Capital Corporation,
Whitney or Fleet, or with an Affiliate of any of them
(excluding for this purpose any Subsidiary) provided that the
foregoing shall not prohibit any payment of Permitted
Reimbursements.
(ix) Results in a change in the size or composition of the Board of
Directors.
(x) Results in an increase in the number of shares of Common Stock
authorized to be issued under the Employee Stock Plan.
(xi) Results in the Company engaged in any business other than the
distribution of, or the indirect holding of rights to
distribute, DirecTv broadcast satellite services, programming
and products or results in the Company exceeding the scope of
the purpose for which the Company was formed.
(xii) Results in any Subsidiary that is not a juridical corporation
electing on IRS Form 8832 or otherwise electing to be treated
as a corporation for federal tax purposes.
(b) Special PIK Preferred A Vote. For so long as the any shares of PIK
Preferred Stock are outstanding, without the vote of at least fifty percent
(50%) of the PIK Preferred Stock neither the Company nor any Subsidiary shall
enter into or consummate an acquisition of any NRTC System (other than those
NRTC Systems under contract on the date hereof or referred to in the definition
of Interim Financing) if the acquisition price per household is greater than
$120 or the aggregate purchase price exceeds $25,000,000; provided, however,
that this Section 2.2(b) shall expire on February [7], 1999.
ARTICLE III
PARTICIPATION RIGHTS
SECTION 3.1. PARTICIPATION RIGHTS. Except in the case of issuance of
shares of capital stock of the Company (i) pursuant to the Employee Stock Plan,
(ii) in connection with
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a Qualified Financing or (iii) in exchange for capital contributions consisting
of property other than cash, prior to issuing any additional shares of capital
stock of the Company all Stockholders shall have been offered the right to
purchase their proportionate share of such additional shares of capital stock on
the same terms and subject to the same conditions as the proposed issuance to
others, which rights to purchase shall be offered to such Stockholder in the
ratio that their aggregate number of shares of Stock bear to the aggregate
number of shares of Stock. Any shares of capital stock not initially subscribed
for by those Stockholders holding Stock shall be reoffered to those Stockholders
electing initially to purchase their proportionate share hereunder in proportion
to the relative number of shares of Stock held by those Stockholders initially
electing to purchase their proportionate share. The Company shall determine the
timing and such other procedures as may be necessary and appropriate to enable
the Stockholders to exercise their rights hereunder, provided that in any event
such Stockholders shall be given no less than five (5) business days prior
notice before being required to commit to purchase the shares of capital stock
subject to the Participation Rights hereunder.
ARTICLE IV
TRANSFERS OF STOCK
SECTION 4.1. SCOPE OF ARTICLE. The provisions of this Article IV shall
apply to all Stock, whether or not held or acquired by a Stockholder at or after
the date of this Agreement or at or after any time such Stockholder first became
subject to this Agreement. Every Transfer shall be subject to all of the terms,
conditions, restrictions, and obligations of this Agreement. Any attempted
Transfer which does not comply with the provisions of this Article shall be void
and the Company shall not recognize the attempted purchaser, assignee, or
transferee for any purpose whatsoever, and the Stockholder attempting such
Transfer shall have breached this Agreement for which the Company and the
non-breaching Stockholders shall have all remedies available for breach of
contract.
SECTION 4.2. CONDITIONS PRECEDENT TO TRANSFER OF STOCK. A Stockholder
may Transfer all or any shares of Stock held by such Stockholder if all the
following conditions are satisfied:
(a) Prior Notice. At least ten (10) days prior to any proposed Transfer
of Stock otherwise permitted pursuant to this Section, the Stockholder proposing
to Transfer all or any shares of Stock held by such Stockholder gives a Transfer
Notice.
(b) Expenses. The transferor agrees to reimburse the Company for any
expenses reasonably incurred by the Company in connection with the consummation
of the Transfer.
(c) Transfer Documents; Effective Time of Transfer. Such Stockholder
and its purchaser, transferee or assignee shall execute, acknowledge, and
deliver to the Company such instruments of transfer and assignment with respect
to such transaction as are in form and substance reasonably satisfactory to the
Company, including, without limitation, the written agreement of the purchaser,
transferee or assignee to assume and be bound by all of the obligations of the
transferor under this Agreement.
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(d) Securities Law Compliance. Either (i) the Transfer is to the heirs,
devisees or legatees of a deceased Stockholder; (ii) the Stock to be Transferred
is registered under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "1933 Act"), and any applicable state securities
laws; or (iii) the Company determines that the Transfer qualifies for an
exemption from the registration requirements of the 1933 Act and any applicable
state securities laws. Except as specifically provided in the Registration
Rights Agreement, the Company has no obligation or intention to register any of
the Stock for resale under any federal or state securities laws or to take any
action which would make available any exemption from the registration
requirements of such laws.
(e) Opinion of Counsel. In its discretion, the Company may require as a
condition precedent to any Transfer of Stock delivery to the Company, at the
proposed transferor Stockholder's expense, of an opinion of counsel satisfactory
(both as to the counsel and substance of the opinion) to the Company that the
proposed Transfer will satisfy all or certain of the conditions set forth in
Section 4.2(d).
(f) Other Agreements. The Transfer complies with the provision of any
employment agreement or other agreement between the Stockholder and the Company
or any Subsidiary.
(g) Right of First Refusal. If the proposed Transfer is an Optional
Purchase Event, the Transferring Stockholder shall have complied with the
provisions contained in this Article.
(h) Right of Co-Sale. In the event that the proposed Transfer is to a
Person that is not a Permitted Transferee of the transferring Stockholder, then
all nontransferring Stockholders shall have the right to participate in such
Transfer based upon the relative number of shares of Stock held by each such
Stockholder as set forth in Section 4.4 below.
SECTION 4.3. RIGHT OF FIRST REFUSAL.
(a) Grant of Option. Upon the occurrence of an Optional Purchase Event
with respect to a Stockholder, the Company, followed by all of the other 10%
Stockholders, shall have successive options to purchase all, but not less than
all, of the shares of Stock proposed to be sold, assigned or transferred by such
Stockholder (the "Offered Stock") pursuant to the terms and conditions set forth
in this Agreement.
Upon the occurrence of an Optional Purchase Event, the Stockholder with
respect to whom the Optional Purchase Event has occurred shall immediately give
written notice to the Company and to all 10% Stockholders, which notice shall
describe the Optional Purchase Event (unless the Optional Purchase Event is the
giving of a Transfer Notice, in which case the Transfer Notice shall suffice).
If the Stockholder with respect to whom the Optional Purchase Event has occurred
does not provide such notice and another Stockholder knows of the occurrence of
such Optional Purchase Event, such Stockholder may send written notice of the
Optional Purchase Event to the Company, and if the Company determines that
Optional Purchase Event has occurred, the Company shall provide to all 10%
Stockholders the Transfer Notice.
(b) Optional Purchase Events. For purposes of this Agreement, the term
"Optional Purchase Event" shall mean any of the following events with respect to
a stockholder:
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(i) The delivery of a Transfer Notice by the Stockholder unless
such Transfer is to a Permitted Transferee.
(ii) In the case of any Stockholder that is an individual, the
entry by any court of an order or adjudication that the
current or former spouse of the Stockholder has acquired any
rights in any shares of the Stockholder's Stock as a result of
divorce, equitable distribution or community property
partition proceedings pursuant to the laws of any state or
jurisdiction.
(iii) In the case of any Stockholder who initially received such
Stock from the Company (or an equity interest in a predecessor
of the Company) when such Stockholder was an officer,
director, employee, manager or independent contractor of any
member of the Group, such Stockholder is no longer an officer,
director, employee, manager or an independent contractor of
the Company or any Subsidiary.
(iv) In the case of Whitney, Columbia, or any other Stockholder
substantially all of the assets of which consist of such
Stockholder's Stock, any Transfer of more than ten percent
(10%) of its capital stock or other equity interests, or the
sale or issuance of any capital stock or equity interest in
such Stockholder unless such Transfer, sale or issuance, is to
a then current owner of such Stockholder or a Permitted
Transferee of such Stockholder.
(v) In the case of any estate or trust, any Transfer to any
beneficiary of such estate or trust who is not a Related Party
to the estate's decedent or to the grantor of the trust.
(vi) In the case of Columbia and Columbia DBS, Inc., if any Person
or group of Persons who are Affiliates, other than those
Persons who are shareholders of Columbia Capital Company,
Columbia DBS, Inc., or partners of Columbia on the date hereof
or Affiliates or Related Parties to such Persons, shall become
the owner of more than 50% of the equity interests of Columbia
or be entitled to direct the business and affairs of Columbia.
(c) Proposed Transfer for Consideration. If the Optional Purchase Event
is the delivery of a Transfer Notice and the Transfer is for cash, indebtedness,
property or other consideration, then the Company's and the 10% Stockholders'
successive options shall be to purchase the Offered Stock for the fair market
value of the consideration proposed to be received in the Transfer or payable at
the closing described below, and pursuant to all of the other terms and
conditions of the proposed Transfer. The Stockholder desiring to Transfer the
Offered Stock and the Company (acting on behalf of all Persons who exercise
their option to purchase hereunder) shall attempt to agree, in writing, on the
fair market value of any noncash consideration to be received in the proposed
transfer. If the Stockholder and the Company are
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unable to agree on the fair market value of the noncash consideration within
thirty (30) days following the exercise of the options to purchase granted in
this Section, either the Stockholder or the Company may by notice to the other
commence the Appraisal Process.
(d) Other Optional Purchase Events. If the Optional Purchase Event is
not a proposed Transfer for consideration, then the successive options shall be
for a purchase price equal to (i) the fair market value of the Offered Stock as
of the last day of the calendar month immediately prior to the occurrence of the
Optional Purchase Event (the "Valuation Date"), plus (ii) interest at the Prime
Rate on the amount determined under clause (i) from the Valuation Date to the
closing date, compounded monthly, reduced by (iii) any dividends or other
distributions with respect to the Offered Stock from the Valuation Date through
the closing (including dividends with respect to the PIK Preferred Stock
consisting of additional shares of PIK Preferred Stock). For purposes of
determining the purchase price, the fair market value of a share of Stock shall
equal the amount that would be received by the owner of such share of Stock if
all of the assets of the Company were sold for cash equal to their fair market
value, the Company paid all of its liabilities and liquidated, all as of the
Valuation Date. The selling Stockholder and the Company (acting on behalf of all
Persons who have options to purchase hereunder) shall attempt in good faith to
agree on the fair market value of the Offered Stock. If they are unable to
agree, in writing, on the fair market value of the Offered Stock within thirty
(30) days following the exercise of the options to purchase granted in this
Section, either the selling Stockholder or the Company may by notice to the
other commence the Appraisal Process.
(e) Exercise of Option by the Company. The Company shall provide
written notice of exercise of the option to the Stockholder with respect to whom
an Optional Purchase Event has occurred and to all 10% Stockholders within
thirty (30) days following the Transfer Notice or the other written notice to
all 10% Stockholders of the occurrence of the Optional Purchase Event,
specifying whether or not the Company is exercising its option to purchase the
Offered Stock pursuant to this Section. A failure by the Company to give notice
within such period shall be deemed to be a notice of nonexercise.
(f) Exercise of Option by 10% Stockholders. In the event the Company
does not exercise its option, then each of the 10% Stockholders shall have the
option to (i) purchase the Offered Stock pursuant to this Section 4.3 on the
same terms as the Company in proportion to the relative number of shares of
Stock held by all the 10% Stockholders; (ii) exercise the rights of co-sale
specified in Section 4.4 below; or (iii) neither purchase any of such Offered
Stock nor exercise rights of co-sale. In order to exercise its option pursuant
to this Section, a 10% Stockholder shall provide written notice of exercise of
the option to the Stockholder with respect to whom an Optional Purchase Event
has occurred, to the Company and to all other 10% Stockholders within thirty
(30) days following the Company's nonexercise. If any 10% Stockholder elects not
to exercise their option, then those 10% Stockholders that do exercise their
option shall have the option, for an additional fifteen (15) days following the
end of the option period for all 10% Stockholders, to acquire the Offered Stock
that could have been acquired by the nonexercising 10% Stockholders in
proportion to the relative number of shares of Stock held by the exercising 10%
Stockholders.
Any party with an option to purchase Stock pursuant to this Article may
waive its option at any time by notice of such waiver to the Company.
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(g) Waiver; Failure to Exercise Options. With respect to an Optional
Purchase Event that is the giving of a Transfer Notice, if Persons with options
under this Section shall fail to exercise their options to purchase the Offered
Stock within the applicable periods, or in the event the purchaser(s) shall fail
to tender the required consideration at the closing referred to below, then
subject to the rights of co-sale described in Section 4.4 below, the
transferring Stockholder may transfer the Offered Stock to the Person, and upon
the terms and price, specified in the notice of the proposed transfer, but only
if such transfer is consummated within ninety (90) days after the expiration or
withdrawal of the last option, or the failure to tender the consideration if
applicable. If the Offered Stock is not so transferred within the applicable
period, the Offered Stock shall again become subject to all of the terms and
conditions of the Agreement and may not thereafter be transferred except in the
manner and on the terms herein provided. In the event the Company or any 10%
Stockholder exercises an option hereunder, but fails to tender the required
consideration at the closing, the transferring Stockholder shall have all rights
and remedies against the Company or the exercising 10% Stockholders, as the case
may be, available for breach of contract, including the remedy of specific
performance.
(h) Closing of Purchase of Stock; Payment of Purchase Price; Security.
The closing of the purchase of any Offered Stock by the Company or any of the
10% Stockholders pursuant to this Section shall occur at the offices of the
Company within thirty (30) days after the earlier of (a) the written agreement
of the parties on the fair market value of the Offered Stock or the
consideration to be received therefor, as the case may be, or (b) the conclusion
of the Appraisal Process. At the closing, the selling Stockholder shall deliver
to the purchaser(s) of the Offered Stock certificates evidencing the Offered
Stock, and the purchaser(s) shall deliver the purchase price as provided below
to the such Stockholder. The selling Stockholder and the purchaser(s) each shall
execute and deliver such other documents as may reasonably be requested by the
other.
The purchase price shall be delivered at closing as follows:
(i) If the purchase of the Offered Stock is as a result of a
proposed Transfer to a third party for consideration, the
purchase price determined under this Agreement shall be
payable on the same basis as the purchase price was to have
been paid by the third party.
(ii) If the purchase of the Offered Stock is as a result of any
other Optional Purchase Event the purchase price shall be
payable in cash or same day funds.
SECTION 4.4. RIGHT OF CO-SALE.
(a) Right of Co-Sale. In the event of a proposed Transfer of Stock to a
Person who is not a Permitted Transferee, to the extent the Stock proposed to be
transferred is not purchased by the Company pursuant to its right of first
refusal described in Section 4.3, each other Stockholder shall have the right to
participate in the Transfer in the manner set forth in this Section 4.4. Each
such nontransferring Stockholder may Transfer to the proposed transferee
identified in the Transfer Notice a pro rata share (defined below) of such
non-transferring Stockholders Stock, by giving written notice to the Company and
to the transferring Stockholder within the thirty (30) day period specified in
Section 4.3(f), which notice shall state that the
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Stockholder elects to exercise its rights of co-sale under this Section 4.4. A
notice of exercise of a Stockholder's right of first refusal under Section
4.3(f) and a notice of exercise of a Stockholder's rights of co-sale hereunder
shall be mutually exclusive and the first such notice given shall be binding and
irrevocable. Each nontransferring Stockholder shall be deemed to have waived its
right of co-sale hereunder either if it fails to give notice within the
prescribed time period or if such Stockholder gives notice exercising its right
of first refusal pursuant to Section 4.3(f). A nontransferring Stockholder's pro
rata share for this purpose shall equal that number of shares of the
nontransferring Stockholder's Stock represented by the number obtained by
multiplying the number of shares of Stock that are the subject of the proposed
Transfer by a fraction, the numerator of which is the number of shares of Stock
then held by such nontransferring Stockholder, and the denominator of which is
the number of shares of Stock then held by all persons entitled to this right of
co-sale plus the number of shares of Stock proposed to be Transferred by the
transferring Stockholder. Insofar as possible this right of co-sale shall apply
to Stock of the same class or classes as the Stock subject to the Transfer
Notice. If any Stockholder desiring to exercise its rights of co-sale hereunder
does not have a sufficient number of Stock of the same class as the Stock
subject to the Transfer Notice, such Stockholder may substitute Stock of another
class so long as such class ranks senior in liquidation to the class of Stock
subject to the Transfer Notice.
(b) Consummation of Co-Sale. Each nontransferring Stockholder, in
exercising its right of co-sale hereunder, may participate in the Transfer by
delivering to the transferring Stockholder at the closing of the Transfer of the
transferring Stockholder's Stock to the transferee (the "Closing") one or more
certificates duly endorsed representing the shares of Stock to be transferred by
such nontransferring Stockholder. At the Closing, such certificates will be
delivered to the purchaser (whether such purchaser is the proposed transferee
set forth in the Transfer Notice or those Stockholders who have exercised their
rights of first refusal under Section 4.3) and the transferring Stockholder will
remit, or will cause to be remitted, to the nontransferring Stockholder at the
Closing that portion of the proceeds of the Transfer to which such
nontransferring Stockholder would otherwise be entitled by reason of such
nontransferring Stockholder's participation in such Transfer pursuant to these
rights of co-sale.
SECTION 4.5. APPRAISAL PROCESS.
(a) If a Stockholder and the Company are unable to agree, in writing,
on the fair market value of any shares of Stock or the consideration to be
received in exchange for any shares of Stock within the time limits set forth in
Article IV, at any time following the expiration of such time limit either may
invoke the process described in this Section (the "Appraisal Process") by
sending the notice selecting an appraiser as described in subparagraph (i)
below, in which case the determination of fair market value shall be final and
binding on all parties to this Agreement.
(i) First Appraisal. The written notice invoking the Appraisal Process
shall state that the Appraisal Process is being invoked and shall set forth the
name and address of the unrelated third party appraiser selected by the party
invoking the Appraisal Process. Any appraiser selected pursuant to this Section
shall be a Person qualified with respect to determining the fair market value of
the shares of Stock or other property that is in question. The party to the
purchase and sale transaction who did not invoke the Appraisal Process shall
have ten (10) days
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following the notice of the selection of the first appraiser to select a second
unrelated third party appraiser by sending to the other party written notice
setting forth the name and address of the second appraiser.
If a second appraiser is not selected within the 10 day time period,
the appraiser selected by the party invoking the Appraisal Process shall prepare
his appraisal report and submit it to the owner of the shares of Stock and the
Company within sixty (60) days following the notice of his selection as an
appraiser, in which case the Appraisal Process shall be concluded and the fair
market value of the property in question shall be the amount set forth in the
appraiser's report.
(ii) Second Appraisal. If a second appraiser has been selected pursuant
to subparagraph (i) above, the two appraisers so selected shall consult with
each other in an effort to reach an agreement as to the fair market value. If
the two appraisers shall agree in writing as to the fair market value of the
property in question within forty-five (45) days following the appointment of
the second appraiser, the fair market value of such property shall be the amount
to which the appraisers have agreed, and the Appraisal Process shall be
concluded.
In the event the two appraisers are unable to agree as to the fair
market value, the two appraisers shall prepare their separate reports and submit
them to the Company and the owner of the shares of Stock within sixty (60) days
following the appointment of the second appraiser. If the higher fair market
value exceeds the lower fair market value by 10% or less of the lower fair
market value the Appraisal Process shall be concluded and the fair market value
of the property in question shall be the average of the two fair market values
as set forth in the two appraisal reports. If the higher fair market value
exceeds the lower fair market value by more than 10% of the lower fair market
value, the owner of the shares of Stock and the Company shall further attempt to
agree as to the fair market value.
(iii) Third Appraisal. If the higher fair market value of the two
appraisals exceeds the lower fair market value by more than 10% of the lower
fair market value and, as of the eleventh (11th) day following the submission of
both appraisal reports, neither party has sent written notice calling for a
third appraiser, the Appraisal Process shall be concluded and the fair market
value of the property in question shall be the average of the two fair market
values as set forth in the two appraisal reports. If, however, the higher fair
market value exceeds the lower fair market value by more than 10% of the lower
fair market value and, within ten (10) days following the submission of the
first two appraisers' reports, either party sends written notice to the other
calling for a third appraiser, the two previously-selected appraisers shall
promptly (but in any event within thirty (30) days following the submission of
both appraisal reports) select a third appraiser to determine the fair market
value of the property in question. The first two appraisers shall notify the
Company, which shall in turn notify the owner of the shares of Stock and all
other Stockholders, of the name and address of the third appraiser so selected;
provided, however, that if the Company has not received notice of the name and
address of the third appraiser within such thirty (30) day period, then the fair
market value of the property in question shall be the average of the two
appraisals that have been completed. Neither the previously selected appraisers,
the Stockholder whose shares of Stock are being purchased, the Company, the
Stockholders nor any Persons related to any of them shall disclose to the third
appraiser the appraisal reports of the first two appraisers or the results of
the first
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two appraisals. Within thirty (30) days following his appointment, the third
appraiser shall submit to the owner of the shares of Stock and the Company his
appraisal report, in which case the Appraisal Process shall be concluded and the
fair market value of the property in question shall be the average of the two
appraisals that are closest to each other.
(b) Costs of Appraisal Process.
(i) General Rules. Unless provided otherwise in clause (b)(ii) below,
the costs of the Appraisal Process shall be borne equally by the Stockholder
whose shares of Stock are being purchased and by the Person(s) obligated to
purchase such shares of Stock. If one or more of the Stockholders exercised its
option to purchase such shares of Stock, the portion of the costs of the
Appraisal Process that are not borne by the owner of such shares of Stock shall
be divided among the exercising Stockholders based upon the relative number of
shares of Stock being purchased.
(ii) Exception. Notwithstanding subparagraph (i) above, in the event a
party calls for a third appraiser as provided above and the fair market value of
the property in question as determined pursuant to the Appraisal Process is less
favorable to that party than if the fair market value was determined by
averaging the appraised fair market values as determined by the first two
appraisers, the entire costs of the Appraisal Process shall be borne by the
party calling for the third appraiser.
ARTICLE V
BOARD OF DIRECTORS
SECTION 5.1. SIZE AND COMPOSITION OF BOARD OF DIRECTORS. (a) Each of
the Stockholders agrees that the number of members of the Board of Directors
shall be seven (7) and that such Stockholder shall not take or permit to be
taken any action which would change such number. Each Stockholder agrees to vote
or otherwise cause the election of the following individuals as directors:
(i) Two (2) individuals designated in writing by Whitney (which
shall be two of the three PIK Preferred Stock Directors
provided for in the Certificate of Designations).
(ii) One (1) individual designated in writing by Fleet (which shall
be one of the three PIK Preferred Stock Directors provided for
in the Certificate of Designations).
(iii) The chief executive officer of the Company, as may be elected
from time to time by the Board of Directors, which individual
is currently Douglas S. Holladay, Jr.
(iv) Those two (2) individuals elected by a vote of the holders of
Common Stock with each such holder being entitled to cast that
number of votes equal to the number of such shares of Common
Stock held by such holder, which vote shall be taken
separately with respect to each of the two (2) seats without
cumulative voting. The two (2) individuals designated pursuant
to this clause (iv) shall also be
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designated by the Stockholders as entitled to two (2) votes
each on all matters before the Board of Directors.
(v) One (1) individual elected by a vote of the holders of the
Common Stock, with each such holder being entitled to cast
that number of votes equal to the number of such shares of
Common Stock held by such holder.
The individual designees to the Board of Directors, effective on the
date hereof, are listed on Exhibit A attached hereto. Such Persons shall
continue to serve until their death or resignation, or until their successor is
designated as provided herein.
(b) Upon the affirmative vote of Columbia, Whitney and Fleet, the size
of the Board of Directors shall be increased from seven (7) to nine (9). The two
additional seats shall be filled by individuals approved by Columbia, Whitney,
and Fleet, and elected by holders of a majority of the Common Stock, and who are
not otherwise a Related Party to or Affiliated with any of Columbia, Whitney,
Fleet or the Company. In the event of such an increase in the size of the Board
of Directors, the two (2) individuals designated pursuant to clause (iv) above
and the two (2) new designated individuals shall be entitled to one vote each.
(c) The Board of Directors shall meet not less often than once per
quarter. In the event that the Board of Directors create an "Executive
Committee," a "Compensation Committee," an "Audit Committee," or committees with
similar functions such committees shall have at least one member designated by
each of Columbia, Whitney and Fleet.
(d) At such time as there are no longer any shares of PIK Preferred
Stock outstanding, the following shall be the composition of the Board of
Directors: (i) the size of the Board of Directors shall be the same as that
immediately to such time, (ii) each member of the Board of Directors shall have
one vote on all matters and (iii) all directors shall be elected by the holders
of the Common Stock.
SECTION 5.2 INSURANCE. The Company shall obtain "directors and
officers" insurance or comparable insurance coverage of a minimum of $5,000,000
for the members of the Board of Directors as soon as reasonably possible after
the date hereof, and in any event prior to the closing of any Qualified
Financing. The Company shall obtain within sixty (60) days of the date hereof,
and thereafter maintain in force so long as requested to do so by Whitney,
Fleet, or Columbia, key man insurance on the life of Douglas S. Holladay, Jr. in
an amount of coverage not less than $10,000,000 and on the life of Donald A.
Doering in an amount of coverage not less than $3,000,000, provided, however,
that such individuals are insurable at commercially reasonable rates.
SECTION 5.3 WHITNEY AND FLEET REPRESENTATIVES. The Persons that
collectively constitute Fleet and any Permitted Transferee or other Person
permitted under this Agreement to acquire any portion of Fleet's Class Units
shall designate one such Person to have and exercise all of the rights of Fleet
under this Agreement, which designation shall be made by notice to the Company
signed by each Fleet entity and each such Permitted Transferee or other Person;
provided, however, that until Fleet shall otherwise notify the Company to the
contrary,
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Chisholm Partners III, LP shall have and exercise all of the rights of Fleet
under this Agreement.
In the event that Whitney shall transfer all or any of its PIK
Preferred Stock to any Permitted Transferee or other Person permitted under this
Agreement to acquire any of Whitney's PIK Preferred Stock, Whitney and such
Persons shall designate one such Person to have and exercise all of the rights
of Whitney under this Agreement, which designation shall be made by notice to
the Company signed by each such Person. Until such designation is made, Whitney
shall have and exercise all of the rights of Whitney under this Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. NOTICES. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be delivered personally to the Person or to an officer or
manager of the Person to whom the same is directed, or sent by regular,
registered, or certified United States mail, or by facsimile transmission or by
private mail or courier service, addressed as follows: if to the Company, to the
principal office address of the Company, or to such other address as may be
specified from time to time by notice to the Stockholders; if to a Stockholder,
to the address set forth in the records of the Company, or to such other address
as the Stockholder may specify from time to time by notice to the Company. Any
such notice shall be deemed to be delivered, given, and received for all
purposes (i) as of the date of actual receipt if delivered personally or if sent
by regular mail, facsimile transmission or by private mail or courier service,
or (ii) four (4) business days after the date on which the same was deposited in
a regularly-maintained receptacle for the deposit of United States mail, if sent
by registered or certified United States mail, postage and charges prepaid,
return receipt requested.
SECTION 6.2. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Stockholders, and their respective
heirs, legatees, legal representatives, successors, transferees, and assigns.
SECTION 6.3. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Stockholder. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
The parties acknowledge that each party to this Agreement has shared equally in
the drafting and construction of this Agreement and, accordingly, no court
construing this Agreement shall construe it more strictly against one party
hereto than the other.
SECTION 6.4. ENTIRE AGREEMENT; AMENDMENTS. This Agreement may only be
amended by an agreement in writing signed by the Company and by (i) Preferred
Stockholders holding of record 70% or more of the then outstanding PIK Preferred
Stock and (ii) Stockholders holding of records two-thirds (2/3) or more of the
then outstanding Common Stock. Any such amendment shall be binding on the
Company and all Stockholders.
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SECTION 6.5. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 6.6. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 6.7. ADDITIONAL DOCUMENTS. Each Stockholder, upon the request
of the Company, agrees to perform all further acts and execute, acknowledge, and
deliver any documents that may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
SECTION 6.8. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 6.9. TERMINATION. Notwithstanding any other provision herein
contained to the contrary, this Agreement shall be terminated and shall cease to
have any force and effect upon the consummation of a Qualified IPO (as defined
in the Certificate of Designations of the PIK Preferred Stock).
SECTION 6.10. GOVERNING LAW; CONSENT TO JURISDICTION; DISPUTE
RESOLUTION.
(a) The laws of the State of Delaware shall govern the validity of this
Agreement and the construction and interpretation of its terms. All disputes
between or among any Stockholders arising out of or in any way connected with
the execution, interpretation and performance of this Agreement (including the
validity, scope and enforceability of the dispute resolution provisions
contained herein) shall be solely and finally settled in accordance with this
Section 6.10. Each Stockholder hereby irrevocably consents to the personal
jurisdiction of the courts of the Commonwealth of Virginia with respect to
matters arising out of or related to the enforcement of the provisions of this
Section 6.10 and with respect to matters, if any, related to this Agreement not
required to be resolved pursuant to this Section 6.10.
(b) Mandatory Arbitration. All disputes between or among any
Stockholders arising out of or in connection with the execution, interpretation
and performance of this Agreement (including the validity, scope and
enforceability of this arbitration provision) shall be solely and finally
settled by a board of arbitrators consisting of either one arbitrator or three
arbitrators, as set forth below (the term "Arbitrators" shall refer to the board
of arbitrators, whether it consists of one or three members). The arbitration
proceedings shall be held in the Washington, D.C. metropolitan area, and except
as otherwise may be provided in this Section, the arbitration proceedings shall
be conducted in accordance with the Commercial Arbitration Rules (the "AAA
Rules") of the American Arbitration Association (the "AAA").
(c) Arbitration Notice. If a Stockholder or Stockholders determine to
submit a dispute for arbitration pursuant to this Section, such Stockholder(s)
shall furnish the other Stockholders with a dated, written statement (the
"Arbitration Notice") indicating (i) such
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Stockholder's intent to commence arbitration proceedings, (ii) the nature, with
reasonable detail, of the dispute and (iii) the remedy or remedies such
Stockholder will seek.
(d) Selection of Sole Arbitrator. Within ten (10) days of the date of
the Arbitration Notice, the Stockholder or Stockholders commencing the
arbitration (collectively, the "Petitioner") and the party with whom the
Petitioner has its dispute (collectively, the "Respondent") shall attempt to
agree on and then select one neutral arbitrator (the "Sole Arbitrator"). A
"neutral" arbitrator shall be a Person who would not be subject to
disqualification under rule No. 19 of the AAA Rules.
(e) Arbitration Panel. If, within such ten (10) day period, the
Petitioner and Respondent are unable to agree upon a Sole Arbitrator, each of
them shall have five (5) business days (following the expiration of the ten (10)
day period) to select (and provide written notice of such selection to the other
Stockholders and the Company) a qualifying arbitrator. A "qualifying" arbitrator
is a Person who is not (i) an Affiliate or Related Person of either the
Petitioner or Respondent or (ii) counsel to any such Person at such time. If
either the Petitioner or Respondent fails to select a qualifying arbitrator or
provide such notice within the five (5) day period, the AAA shall have the right
to make such selection. (Such qualifying arbitrators hereafter may be referred
to, respectively, as the "First Arbitrator" and the "Second Arbitrator.") Within
ten (10) days following their selection, the First and Second Arbitrator shall
select (and provide written notice to the Stockholders and the Company of such
selection) a third arbitrator (the "Third Arbitrator") from a list of members of
the AAA's National Panel of Commercial Arbitrators. The Third Arbitrator must be
"neutral" as that term is defined above. Notwithstanding the foregoing, if a
dispute involves more than two Stockholders, all proceedings shall be conducted
before a Sole Arbitrator, who shall be selected by the AAA if the Stockholders
are unable to agree upon such Sole Arbitrator within the ten (10) day period
mentioned above.
(f) Discovery Requests. At any time within forty (40) days after the
date of the Arbitration Notice, the Petitioner and Respondent can make discovery
requests of the other (including, but not limited to, requests for delivery of
documents, production of witnesses for testimony and delivery of interrogatory
responses). The recipient of a discovery request shall have ten (10) days after
the receipt of such request to object to any or all portions of such request and
make an application to the Arbitrators to limit the scope of such discovery
request, and shall respond to any portions of such request not so objected to
within twenty (20) days of the receipt of such request. All objections shall be
in writing and shall indicate the reasons for such objections. Within five (5)
business days after the end of the period for the submission by the requested
party of an application to limit the discovery request, the Arbitrators shall
grant or deny such discovery request, in whole or in part, to the extent the
Arbitrators determine such discovery is or is not, as the case may be,
reasonably necessary to enable the requesting party to obtain information
relevant to the dispute without unreasonably burdening the requested party. The
requested party shall comply with a discovery request granted by the Arbitrators
within ten (10) business days after such discovery request is granted, or within
such longer period as the Arbitrators may determine upon application of the
requested party for extension thereof for reasonable cause. Neither party shall
be permitted to make more than one application for discovery to the Arbitrators.
All depositions shall be taken in the city in which the Person being
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<PAGE> 140
deposed resides or has its principal place of business, unless otherwise agreed
by the parties. The Arbitrators are not authorized to subpoena documents or
perform independent investigations.
(g) Timing of Hearings. Hearings must commence no later than ninety
(90) days following the date of the Arbitration Notice and such hearings shall
be conducted for no more than five (5) business days.
(h) Format of Hearings. Each of the Petitioner and the Respondent shall
submit a brief, outlining such party's claim for relief or defense to any claim,
to the other and to the Arbitrators on or before the tenth (10th) day following
the date of the last hearing. Reply briefs must be exchanged and submitted to
the Arbitrators on or before the twentieth (20th) day following the date of the
last hearing. The final decision of the Arbitrators is due on or before the
thirtieth (30th) day following the date of the last hearing. The Arbitrators
shall choose the form of final decision that, in their judgment, is most
consistent with the terms of this Agreement and the intent of the Stockholders,
as supported by evidence presented by the Petitioner and Respondent in the
arbitration proceeding or, if the subject matter of the dispute is not clearly
addressed in or determinable under this Agreement, that, in their opinion, would
be most fair to the Petitioner and Respondent under the arbitration. The
Arbitrators shall not be required to provide reasons for their decision.
(i) Fees and Expenses. The fees of the First and Second Arbitrators
shall be borne by the Petitioner and Respondent, respectively. All other
expenses of the arbitration shall be shared equally by the Petitioner and
Respondent in accordance with the AAA Rules.
(j) Arbitrators' Discretion. The foregoing time periods and procedural
steps may be modified or extended by the Arbitrators in their discretion to the
extent they deem necessary to prevent fundamental unfairness; provided that at
all times the Arbitrators shall be mindful of the Stockholders' desire for the
most expeditious possible resolution of the Stockholders' disputes; and
provided, further, that a final decision of the Arbitrators shall be rendered
within 120 days of the Arbitration Notice.
(k) Enforceability. To the extent permissible under applicable law, the
Stockholders agree that the award of the Arbitrators shall be final and shall
not be subject to judicial review. Judgment on the arbitration award may be
entered and enforced in any court having jurisdiction over the parties or their
assets. It is the intent of the parties that the arbitration provisions hereof
be enforced to the fullest extent permitted by applicable law, including the
Federal Arbitration Act, 9 U.S.C. Section 2.
(l) Injunctive Relief. Nothing contained in this Section shall prevent
a Stockholder from seeking injunctive relief or require arbitration of any issue
for which injunctive relief is sought by either party hereto.
SECTION 6.11. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This
Agreement may be executed in any number of counterparts with the same effect as
if the Company and all of the Stockholders had signed the same document. Such
executions may be transmitted to the Company and/or the other Stockholders by
facsimile and such facsimile execution shall have the full force and effect of
an original signature. All fully executed counterparts, whether original
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executions or facsimile executions or a combination, shall be construed together
and shall constitute one and the same agreement.
SECTION 6.12. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
[SIGNATURES FOLLOW ON THE NEXT PAGE]
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<PAGE> 142
Execution Page to the Stockholders Agreement
IN WITNESS WHEREOF, the Company and Stockholders have executed this
Agreement on the following execution pages, to be effective as of the date first
set forth above.
THE COMPANY:
DIGITAL TELEVISION SERVICES, INC.
A DELAWARE CORPORATION
By: ___________________________
Title: ___________________________
STOCKHOLDERS:
COLUMBIA DBS, INC.,
A VIRGINIA CORPORATION
COLUMBIA DBS INVESTORS, L.P.,
A DELAWARE LIMITED PARTNERSHIP
WEP INTERMEDIATE CORP.,
A DELAWARE CORPORATION
FLEET VENTURE RESOURCES INC.
A
FLEET EQUITY PARTNERS VI, LP,
A
CHISHOLM PARTNERS III, LP,
A
KENNEDY PLAZA PARTNERS,
A
DOUGLAS S. HOLLADAY, JR.
DONALD A. DOERING
WILLIAM J. DORRAN
By: DTS Management, LLC,
a Delaware limited liability company,
their Attorney-in-Fact
By: ______________________
Title: ______________________
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<PAGE> 143
EXHIBIT A
TO THE
STOCKHOLDERS AGREEMENT
OF
DIGITAL TELEVISION SERVICES, INC.
DESIGNEES TO BOARD OF DIRECTORS
As of February 7, 1997, pursuant to and in accordance with Section 5.1(a),
clause
(i) Whitney has designated the following two (2) individuals:
-------------------------------------
-------------------------------------
(ii) Fleet has designated the following individual:
-------------------------------------
(iii) The Chief Executive Officer of the Company is:
Douglas S. Holladay, Jr.
(iv) The holders of the Common Stock have designated the following two
(2) individuals (who each shall have two (2) votes on the board of managers):
--------------------------------------
--------------------------------------
(v) The holders of the Common Stock have designated the following
individual:
--------------------------------------
to serve on the Board of Directors.
<PAGE> 144
EXHIBIT M
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
CERTIFICATE OF INCORPORATION
UPON QUALIFIED CORPORATE CONVERSION
FIRST: The name of this corporation is Digital Television Services,
Inc. (hereinafter referred to as the "Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle, 19801, and its registered agent at such address is THE CORPORATION TRUST
COMPANY.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which the Corporation may be organized under the General
Corporation Law of the State of Delaware.
The purpose specified in the foregoing paragraph shall in no way be
limited or restricted by the reference to, or inference from, the terms of any
provision in this Certificate of Incorporation.
The Corporation shall possess and may exercise all powers and
privileges necessary or convenient to effect the foregoing purpose, including
the general powers now or hereafter conferred by the laws of the State of
Delaware upon corporations formed under the General Corporation Law of the State
of Delaware.
FOURTH: The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is ______________ ( ___________ )
shares, of which _________ ( _______ ) shares shall be designated common stock,
par value $.01 per share (the "Common Stock"), and _________ ( __________ )
shares shall be designated preferred stock, par value $.01 per share (the
"Preferred Stock").
The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article FOURTH, to provide for the issuance of
the shares of Preferred Stock in series, and by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
<PAGE> 145
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that
series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the Common Stock with respect to the same
dividend period.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation the assets available for distribution to holders
of shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of Preferred
Stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
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<PAGE> 146
FIFTH: The name and mailing address of the sole incorporator is as
follows:
NAME MAILING ADDRESS
---- ---------------
Catherine L. Amspacher Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center
Suite 3350
100 North Tryon Street
Charlotte, NC 28202-4000
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders of the Corporation
shall not be subject to the payment of the corporate debts to any extent
whatsoever.
EIGHTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the directors and
stockholders:
(1) The number of directors of the Corporation shall be seven, of
which two shall be entitled to two votes with respect to any matter and five
shall be entitled to one vote with respect to any matter. Election of directors
need not be by written ballot unless the bylaws of the Corporation so provide.
(2) The Board of Directors shall have power without the assent or
vote of the stockholders:
(a) To make, alter, amend, change, add to or repeal the bylaws
of the Corporation; to determine the use and disposition of any surplus
or net profits; and to fix the times for the declaration and payment of
dividends; and
(b) To determine from time to time whether, and to what
extent, and at what time and places, and under what conditions and
regulation, the accounts and books of the Corporation (other than the
stock ledger), or any of them, shall be open to the inspection of the
stockholders.
(3) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and to do all such acts and things as may be exercised
or done by the Corporation; subject, nevertheless, to the provisions of the
General Corporation Law of Delaware, of this Certificate of Incorporation, and
to any bylaws from time to time adopted by the stockholders; provided, however,
that no bylaw so adopted shall invalidate any prior act of the directors which
would have been valid if such bylaw had not been made.
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<PAGE> 147
NINTH: The Corporation shall, to the fullest extent permitted by the
provisions of the General Corporation Law of Delaware, as now or hereafter in
effect, indemnify all persons whom it may indemnify under such provisions. The
indemnification provided by this Section shall not limit or exclude any rights,
indemnities or limitations of liability to which any person may be entitled,
whether as a matter of law, under the bylaws of the Corporation, by agreement,
vote of the stockholders or disinterested directors of the Corporation or
others. The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware as the same
may be amended or supplemented. Except as specifically required by the Delaware
General Corporation Law as the same exists or may hereafter be amended, no
director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of his or her fiduciary duty as a
director. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by statute, and all rights and powers
conferred upon stockholders, directors, and officers herein are granted subject
to this reservation.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this Certificate of Incorporation, hereby
declaring and certifying that this is my act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand the _______ day of
______________, ______.
--------------------------------
Catherine L. Amspacher
Sole Incorporator
M-4
<PAGE> 148
EXHIBIT N
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
CERTIFICATE OF LIMITED LIABILITY COMPANY INTEREST
Pursuant to Section 18-702(c) of the
Delaware Limited Liability Company Act and
Section 7.1 of the Limited Liability Company Agreement ("Agreement") of
Digital Television Services, LLC
CERTIFICATE CAPITAL CLASS
NUMBER CONTRIBUTION OF UNIT UNITS
$
- ---------------- ----------- ------------ ---------------
DIGITAL TELEVISION SERVICES, LLC
a Delaware limited liability company
This Certifies that ______________________________ is the
registered owner of an Interest in the Company, which Interest is represented by
Capital Contributions to the Company in the aggregate amount of $___________
and denominated as ________ Class ___ Units, with all the rights, limitations,
preferences, obligations, and restrictions attendant thereto as set forth in
the Limited Liability Company Agreement of Digital Television Services, LLC.
The Interest in DIGITAL TELEVISION SERVICES, LLC represented by
this Certificate is transferable only on the books of the Company
by the holder hereof in person or by Attorney upon surrender of
this Certificate properly endorsed.
THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE '33 ACT),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE '33 ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE '33 ACT AND SUCH LAWS.
IN WITNESS WHEREOF, the said Company has caused this Certificate
to be signed by duly authorized officers of its Manager
this _______________ day of __________________________ A.D. 19____
- ---------------------------------- -------------------------------
President Vice-President
DTS Management, LLC DTS Management, LLC
<PAGE> 149
[Reverse of CERTIFICATE OF LIMITED LIABILITY COMPANY INTEREST
of DIGITAL TELEVISION SERVICES, LLC]
IN ADDITION TO THE
RESTRICTIONS SPECIFIED
IN THE LEGEND APPEARING ON THE FACE
OF THIS CERTIFICATE, THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT IN ALL RESPECTS
TO THE LIMITED LIABILITY COMPANY AGREEMENT OF DIGITAL
TELEVISION SERVICES, LLC, INCLUDING RESTRICTIONS ON TRANSFER,
AND PURSUANT TO SUCH AGREEMENT EACH OWNER OF AN INTEREST HAS AGREED
TO GRANT A SECURITY INTEREST IN, COLLATERALLY ASSIGN, PLEDGE, OR HYPOTHECATE
ITS INTEREST REPRESENTED BY THIS CERTIFICATE FOR ANY AND ALL DEBTS OF THE
COMPANY OR CERTAIN RELATED ENTITIES IF, AS, AND WHEN CALLED UPON TO DO
SO BY THE MANAGER OF THE COMPANY, SUBJECT TO SATISFACTION OF CERTAIN
SPECIFIED CONDITIONS, AND THE HOLDER HEREOF CONSTITUTES THE MANAGER,
WITH RIGHTS OF SUBSTITUTION AND RESUBSTITUTION, ITS TRUE AND LAWFUL
ATTORNEY-IN-FACT TO SIGN, EXECUTE, CERTIFY, AND ACKNOWLEDGE ANY
AND ALL INSTRUMENTS AND DOCUMENTS AS MAY BE NECESSARY
FOR THESE PURPOSES, ALL AS DEFINITIVELY
DESCRIBED IN SAID AGREEMENT.
FOR VALUE RECEIVED ___________________________________________ hereby
sell, assign, and transfer unto ________________________________________________
(name)
________________________________________________________________________________
(address)
______________________ Units of Interest represented by the within Certificate,
and do hereby irrevocably constitute and appoint _______________________________
Attorney to transfer the said Units on the books of the within-named LLC with
full power of substitution and resubstitution in the premises.
-------------------------------------------------
[Print name of owner as it appears on the
face of this Certificate]
-------------------------------------------------
[Authorized Signature]
-------------------------------------------------
[Title]
Dated:
------------------------------------------
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<PAGE> 150
EXHIBIT O
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
OPERATING AGREEMENT OF DTS MANAGEMENT, LLC
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
<PAGE> 151
TABLE OF CONTENTS
OF THE
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
RECITALS.......................................................................1
ARTICLE I - FORMATION..........................................................1
SECTION 1.1. Formation; Assignment.................................1
SECTION 1.2. Name..................................................2
SECTION 1.3. Purposes..............................................2
SECTION 1.4. Registered Agent; Registered Office...................2
SECTION 1.5. Commencement and Term.................................2
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities.......................................2
SECTION 1.7. Title to Assets; Transactions.........................3
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................3
SECTION 2.1. Capital Contributions.................................3
SECTION 2.2. Liability of Members ................................3
ARTICLE III - DISTRIBUTIONS....................................................3
SECTION 3.1. Distributions.........................................3
ARTICLE IV - MANAGEMENT........................................................4
SECTION 4.1. Management............................................4
SECTION 4.2. Limitation of Liability; Indemnification..............4
ARTICLE V - TRANSFER OF INTERESTS..............................................4
SECTION 5.1. Transfer of Interests.................................4
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS.............5
SECTION 6.1. Dissolution Triggers..................................5
SECTION 6.2. Winding Up............................................5
SECTION 6.3. Liquidating Distributions.............................5
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ARTICLE VII - BOOKS AND RECORDS................................................5
SECTION 7.1. Books and Records.....................................5
ARTICLE VIII - MISCELLANEOUS...................................................5
SECTION 8.1. Binding Effect........................................5
SECTION 8.2. Construction..........................................5
SECTION 8.3. Entire Agreement; No Oral Operating Agreements........6
SECTION 8.4. Headings..............................................6
SECTION 8.5. Severability..........................................6
SECTION 8.6. Variation of Pronouns.................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction................6
SECTION 8.8. Counterpart Execution; Facsimile Execution............6
SECTION 8.9. Time of the Essence...................................6
SECTION 8.10. Exhibits..............................................6
EXHIBIT A: Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
O-ii
<PAGE> 153
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
THIS AMENDED AND RESTATED OPERATING AGREEMENT is made and entered into
as of 10:00 A.M. Eastern Time, February 7, 1997, (the "Effective Time") by and
between Digital Television Services, LLC, a Delaware limited liability company
(formerly Columbia DBS Holdings, LLC (successor by conversion to DBS Holdings,
L.P., a Delaware limited partnership)) ("Holdings"), and Columbia Capital
Corporation, a Virginia corporation ("Columbia"). Unless otherwise indicated,
capitalized words and phrases in this Amended and Restated Operating Agreement
(the "Agreement") shall have the meanings set forth in the Glossary of Terms
attached hereto as Exhibit B.
RECITALS
B. DTS Management, LLC (the "LLC") was formed on June 21, 1996, upon
the filing of the Articles of Organization with the Secretary of State of
Georgia.
B. The LLC has had two members from its formation until the effective
date of this Agreement, specifically, Columbia with a 1% Interest and Holdings
with a 99% Interest.
C. The LLC is the sole manager of Holdings and Holdings is consummating
a series of transactions, including the admission of additional Members and the
amendment and restatement of Holdings' limited liability company agreement.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree that the operating agreement of the LLC shall be amended
and restated to read as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; ASSIGNMENT.
The LLC was formed on June 21, 1996, and shall be continued pursuant to
the terms hereof.
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Columbia
hereby assigns and transfers all of its right, title and interest in and to its
1% member Interest in the LLC to Holdings, as a capital contribution with
respect to its interest in Holdings without any further issuance of equity
interests in Holdings, and shall be deemed to have withdrawn as a Member of the
LLC, all effective 10:01 A.M. Eastern Time, February 7, 1997, which assignment
and transfer shall be
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<PAGE> 154
in all respects subject to the security interest granted under Section 3 of the
Guarantee and Collateral Agreement (the "Security Interest"), with the effect
that as of 10:01 A.M. Eastern Time, February 7, 1997, Holdings shall hold 100%
of the Interests in the LLC, and thus become the sole member of the LLC, with
its entire Interest subject to the Security Interest. Columbia hereby represents
and warrants to the LLC and to Holdings that with the exception of the Security
Interest, its Interest in the LLC assigned hereby is free and clear of all
liens, claims and encumbrances of any nature whatsoever. Columbia shall cause or
take all necessary further action as may be requested by the LLC or by Holdings
to confirm and ensure the complete assignment of its Interest as provided
herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Articles of Organization, as amended, attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to provide
management and administrative services to various entities operating direct
satellite broadcast businesses, including Holdings, (ii) to serve as an
intermediate holding company owning interests in entities operating direct
satellite broadcast businesses, (iii) to own, hold, maintain, encumber, lease,
sell, transfer or otherwise dispose of all property or assets or interests in
property or assets as may be necessary, appropriate or convenient to accomplish
the activities described in clauses (i) and (ii) above, (iv) to incur
indebtedness or obligations in furtherance of the activities described in
clauses (i), (ii) and (iii) above, and (v) to conduct such other activities as
may be necessary or incidental to the foregoing, all on the terms and conditions
and subject to the limitations set forth in this Agreement.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be Douglas S. Holladay, Jr. and the LLC's registered office shall be
880 Holcomb Bridge Rd., Bldg. C-200, Roswell, GA 30076. The LLC's registered
agent or registered office may be changed as provided in Act Section 14-11-209,
or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the time and date appearing in the Articles of Organization and shall continue
until it is dissolved, its affairs are wound up and final liquidating
distributions are made pursuant to this Agreement but in any event, not later
than December 31, 2036.
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes
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<PAGE> 155
(provided that the LLC has not elected on Form 8832 to be treated as a
corporation). In all events, however, the LLC shall keep books and records
separate from those of its Member and its Subsidiaries and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member and of its Subsidiaries.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member or any
Subsidiary. The LLC shall enter into and engage in all transactions in its own
name and not in the name of its Member or any Subsidiary. In furtherance
thereof, the LLC shall evidence its execution of instruments as follows:
DTS Management, LLC,
a Georgia limited liability company
By:__________________________________
Title: Manager [or other authorized person]
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member and the
Managers shall determine; provided, however, that any such additional Capital
Contributions shall be evidenced in writing and recorded in the books and
records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Georgia, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the Managers shall determine.
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ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by a board of
managers, which board of managers shall consist of such individuals and shall be
governed in all respects by the Parent LLC Agreement. Except as provided in the
Parent LLC Agreement, the LLC's board of managers shall have complete authority
and exclusive control over the business and affairs of the LLC; provided,
however, in no event shall the board of managers or the Member take any action
or cause the LLC to take any action inconsistent with the relative rights,
privileges and obligations of the members of Holdings as reflected in the Parent
LLC Agreement.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager or
Member shall be liable, responsible, or accountable in damages or otherwise to
the LLC or to any Member or assignee of a Member for any loss, damage, cost,
liability, or expense incurred by reason of or caused by any act or omission
performed or omitted by such manager or Member, whether alleged to be based upon
or arising from errors in judgment, negligence, or breach of duty (including
alleged breach of any duty of care or duty of loyalty or other fiduciary duty),
except for (i) acts or omissions the manager or Member knew at the time of the
acts or omissions were clearly in conflict with the interest of the LLC, or (ii)
any transaction from which the manager or Member derived an improper personal
benefit, (iii) a willful breach of this Agreement, or (iv) gross negligence,
recklessness, willful misconduct, or knowing violation of law. Without limiting
the foregoing, no manager or Member shall in any event be liable for (A) the
failure to take any action not specifically required to be taken by the manager
or Member under the terms of this Agreement, (B) any action or omission taken or
suffered by any other manager or Member, or (C) any mistake, misconduct,
negligence, dishonesty or bad faith on the part of any employee or other agent
of the LLC appointed in good faith by such manager or Member. The provisions
regarding the indemnification of certain Persons are set forth in the
Indemnification Exhibit attached hereto as Exhibit C.
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC
Agreement, the Member may transfer its Interest at such time, in such amount and
pursuant to such terms, in whole or in part, as the Member shall in its sole
discretion determine.
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ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the delivery for filing with the Secretary of State of a
Statement of Commencement of Winding Up of the LLC pursuant to Act Section
14-11-606.
(b) The entry of a decree of judicial dissolution under Act Section
14-11-603(a).
SECTION 6.2. WINDING UP. Upon dissolution of the LLC the same Persons
who are entitled to wind up the Member under the Parent LLC Agreement shall wind
up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the Member in liquidation as provided in the Act, by the
Persons charged with winding up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member and of its Subsidiaries. The
LLC shall prepare financial statements at least annually, which shall include at
least a balance sheet and income statement prepared in accordance with GAAP,
which financial statements need not be audited, except in connection with any
audit that the Member or the LLC's ultimate parent entity may obtain.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against
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any Member. No provision of this Agreement is to be interpreted as a penalty
upon, or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL OPERATING AGREEMENTS. This
Agreement, together with the Parent LLC Agreement, constitutes the entire
agreement with respect to the affairs of the LLC and the conduct of its
business, and supersede all prior agreements and understandings, whether oral or
written. The LLC shall have no oral operating agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Georgia shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Member hereby irrevocably consents to the personal jurisdiction of the courts of
the State of Georgia with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
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IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
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<PAGE> 160
EXECUTION PAGE
TO THE
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
INITIAL AND CONTINUING MEMBER:
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC
Its: Manager
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: Vice President
INITIAL AND WITHDRAWING MEMBER:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
COLUMBIA CAPITAL CORPORATION,
A VIRGINIA CORPORATION
By: ___________________________
Name: Neil P. Byrne
Title: Vice President
<PAGE> 161
EXHIBIT A
CERTIFICATE OF FORMATION
OF
COLUMBIA DBS HOLDINGS, LLC
The undersigned, desiring to form a limited liability company pursuant
to Sections 18-214(b)(2) and 18-201 of the Delaware Limited Liability Company
Act, 6 Delaware Code, Chapter 18, do hereby certify as follows:
I.
The name of the limited liability company is COLUMBIA DBS HOLDINGS,
LLC.
II.
The address of the registered office of the LLC in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of
New Castle. The name of the LLC's registered agent for service of process in the
State of Delaware at such address is The Corporation Trust Company.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Formation of Columbia DBS Holdings, LLC as of November ___, 1996.
Member:
COLUMBIA DBS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Member:
COLUMBIA DBS INVESTORS, L.P.
By: Columbia Capital Corporation,
its general partner
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
A-1
<PAGE> 162
CERTIFICATE OF CONVERSION TO LIMITED LIABILITY COMPANY
OF
DBS HOLDINGS, L.P.
TO
COLUMBIA DBS HOLDINGS, LLC
The undersigned, desiring to convert DBS HOLDINGS, L.P., a Delaware
limited partnership, to COLUMBIA DBS HOLDINGS, LLC, a Delaware limited liability
company, pursuant to Section 18-214 of the Delaware Limited Liability Company
Act, 6 Delaware Code, Chapter 18, do hereby certify as follows:
I.
The date on which and jurisdiction where the entity that is converting
to a limited liability company was first formed was January 30, 1996 in the
State of Delaware.
II.
The name of the entity that is converting to a limited liability
company immediately prior to the filing of this Certificate of Conversion is DBS
HOLDINGS, L.P.
III.
The name of the limited liability company as set forth in its
certificate of formation filed in accordance with Section 18-214(b) of the
Delaware Limited Liability Company Act is COLUMBIA DBS HOLDINGS, LLC.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Conversion of DBS Holdings, L.P. to Columbia DBS Holdings, LLC as of November
___, 1996.
General Partner:
COLUMBIA DBS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Limited Partner:
COLUMBIA DBS INVESTORS, L.P.
By: Columbia Capital Corporation,
its general partner
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
A-2
<PAGE> 163
EXHIBIT B
TO THE
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
GLOSSARY OF TERMS
"Act" shall mean the Georgia Limited Liability Company Act, as in
effect in Georgia and set forth at Section 14-11-100 et. seq. (or any
corresponding provision of succeeding law).
"Agreement" shall mean this Amended and Restated Operating Agreement as
amended from time to time and, as the context shall require, includes the Parent
LLC Agreement.
"Articles of Organization" shall mean the articles of organization
required to be filed by the LLC pursuant to the Act together with any amendments
thereto.
"Capital Contribution" shall mean with respect to the Member, the
amount of money and any property (other than money) contributed to the LLC with
respect to the Interest of such Member.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor federal revenue law.
"Effective Time" shall have the meaning set forth in the paragraph
immediately preceding the Recitals.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time, including without
limitation, those principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entities as approved
by a significant segment of the accounting profession.
"Guarantee and Collateral Agreement" shall mean that certain Guarantee
and Collateral Agreement made by Columbia DBS Holdings, LLC as a Grantor,
Columbia DBS Management, LLC, certain Subsidiaries of Columbia DBS Holdings,
LLC, as Guarantors and Grantors, and Columbia DBS, Inc., Columbia Capital
Corporation, Columbia DBS Investors, L.P. and certain individuals, as Investors
and Pledgors in favor of Canadian Imperial Bank of Commerce, as Administrative
Agent dated as of November 27, 1996.
"Holdings" shall mean Digital Television Services, LLC, a Delaware
limited liability company, formerly Columbia DBS Holdings, LLC, a Delaware
limited liability company, successor by conversion to DBS Holdings, L.P., a
Delaware limited partnership.
<PAGE> 164
"Interest" shall mean all of the rights, privileges, preferences and
obligations of the Member or assignee with respect to the LLC created under this
Agreement or under the Act.
"LLC" shall mean the limited liability company formed pursuant to this
Agreement.
"Managers" shall refer collectively to those individuals who constitute
the board of managers of the LLC which individuals are designated as members of
the LLC's board of managers pursuant to the provisions of that certain Amended
and Restated Limited Liability Company Agreement of Digital Television Services,
LLC, a Delaware limited liability company.
"Member" shall mean (i) at any time prior to 10:01 A.M., February 7,
1997, Holdings and Columbia, and (ii) at any time on or thereafter, Holdings.
"Parent LLC Agreement" shall mean the Amended and Restated Limited
Liability Company Agreement of Holdings dated February 10, 1997, as amended
thereafter from time to time as provided therein.
"Person" shall mean any natural person, partnership, trust, estate,
association, limited liability company, corporation, custodian, nominee,
governmental instrumentality or agency, body politic or any other entity in its
own or any representative capacity.
"Subsidiaries" shall mean Digital Television Services of Alabama, LLC,
Digital Television Services of California, LLC, Digital Television Services of
Colorado, LLC, Digital Television Services of Georgia, LLC, Digital Television
Services of Kansas, LLC, Digital Television Services of Kentucky, LLC, Digital
Television Services of New Mexico, LLC, Digital Television Services of New York
I, LLC, Digital Television Services of New York II, LLC, Digital Television
Services of South Carolina I, LLC, Digital Television Services of South Carolina
II, LLC, Digital Television Services of Vermont, LLC, Spacenet, Inc., or any
other Person all of the equity interests of which are owned directly or
indirectly by the LLC.
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EXHIBIT C
TO THE
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
INDEMNIFICATION EXHIBIT
(a) Rights to Indemnification.
(i) Pursuant to Act Section 14-11-306, and to the full
extent otherwise permitted by law, the LLC shall
indemnify and save harmless its Member, the members
of the board of managers of the LLC, its Member's
members, and all members, partners, shareholders,
directors, officers, trustees, employees and agents
of any of those Persons ("Representatives"),
(collectively, the "Indemnitees") from and against
any and all claims, liabilities, damages, losses,
costs and expenses (including amounts paid in
satisfaction of judgments, compromises and
settlements, as fines and penalties and legal or
other costs and expenses of investigating or
defending against any claim or alleged claim) of any
nature whatsoever, known or unknown, liquidated or
unliquidated, that are incurred by any Indemnitee and
arise out of or in connection with the business of
the LLC or the performance by such Indemnitee of any
of the Person's responsibilities under this
Agreement. The rights created by this Exhibit shall
continue as to an Indemnitee who has ceased to be a
Member, or a Representative and shall inure to the
benefit of such Indemnitee's heirs, executors,
administrators, legal representatives, successors and
assigns.
(ii) Without limiting any other provisions of this
Exhibit, the LLC shall pay or reimburse, and
indemnify and hold harmless each Indemnitee against,
expenses incurred by such Indemnitee in connection
with his appearances as a witness or other
participation in a Proceeding involving or affecting
the LLC at a time when the Indemnitee is not a named
defendant or respondent in the Proceeding. For the
purposes of this Exhibit, a "Proceeding" shall mean
any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an
action, suit or proceeding, and any inquiry or
investigation that could lead to such an action, suit
or proceeding.
(iii) Notwithstanding any other provision of this Exhibit
any indemnification hereunder shall be provided out
of and to the extent of LLC assets only, and no
Member of the LLC shall have personal liability on
account thereof.
<PAGE> 166
(b) Indemnification Procedures.
(i) Any Person seeking indemnification pursuant to this
Exhibit (including any Advancement of Expenses as
provided in Subsection (c) of this Exhibit) shall be
subject to the procedures of this Subsection (b) for
indemnification.
(ii) Any indemnification of any Representative under this
Exhibit, unless ordered by a court or arbitration
panel, shall be made by the LLC only as authorized in
the specific case and only upon a determination by
the LLC's Member (or by special legal counsel
pursuant to Subsection (v) below if so requested by
an Indemnitee) that (1) the Indemnitee acted in good
faith, (2) the Indemnitee reasonably believed that
its conduct was in the best interests of the LLC or
at least not opposed to the best interests of the
LLC, and in the case of a criminal Proceeding, had no
cause to believe that its conduct was criminal, and
(3) Indemnitee's conduct did not constitute gross
negligence, recklessness, or intentional misconduct,
fraud, or a knowing violation or breach of this
Agreement. The termination of any Proceeding by
judgment, order, settlement, conviction or on a plea
of nolo contendere or its equivalent shall not alone
determine that Indemnitee did not meet the
requirements set forth in the preceding sentence.
(iii) To claim indemnification under this Exhibit, a
Representative shall submit to the Member a written
request for indemnification, including therewith (or
affirming that there will be made available to the
LLC) such documentation and information as is
reasonably available to Indemnitee and as the Member
may reasonably request to support such claims and
enable the Member to make or cause to be made the
determinations hereinafter provided for. If at the
time of receipt of such request, the LLC has in
effect or is entitled to claim reimbursement for such
request under any policy of insurance covering such
claim, the LLC shall thereafter take proper action to
cause such insurers to accept coverage and thereafter
shall take all necessary action to cause such
insurers to pay such claim to or on behalf of
Indemnitee.
(iv) Indemnitee and the LLC shall cooperate with each
other and the Person making the indemnification
determination, including providing upon reasonable
advance request such information that is not
privileged or otherwise protected from disclosure and
which is reasonably necessary to such determination.
(v) Any "special legal counsel" selected to make any
indemnification determination required hereunder
shall be a law firm, or member of a law firm,
experienced in matters of corporation, partnership
and LLC law and which neither presently is, nor in
the past five (5) years has been, retained to
represent the LLC, the Indemnitee or any other party
to the Proceeding
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giving rise to the claim for indemnification, and
shall not include any Person who, under prevailing
applicable standards of professional conduct, would
have a conflict of interest with Indemnitee or the
LLC or any other party to the Proceeding. Any
determination required herein, if Indemnitee has so
requested, shall be made by special legal counsel
selected by the Indemnitee and reasonably
satisfactory to the Member.
(vi) An Indemnitee shall not be denied indemnification in
whole or in part under this Subsection (b) solely on
the grounds that it had an interest in the
transaction with respect to which the indemnification
applies, if the transaction was fully disclosed to
the Member in advance and was otherwise permitted to
be carried out by the terms of the Agreement.
(vii) The indemnification provided in this Exhibit is
solely for the benefit of Indemnitees and shall not
give rise to any right to indemnification in favor of
any other Persons.
(c) Advance Payment of Expenses. Expenses incurred by an
Indemnitee in defense or settlement of any claim that may be subject to a right
of indemnification hereunder may be advanced by the LLC prior to the final
disposition thereof (an "Advancement of Expense") upon receipt of a written
agreement by the Indemnitee to repay such amount to the extent that it shall be
determined ultimately that such Indemnitee is not entitled to be indemnified
hereunder.
(d) Right of Indemnitee to Commence Proceeding.
(i) If a claim under Subsection (a) of this Exhibit is
not paid in full by the LLC within sixty (60) days
after a written claim has been received by the LLC,
except in the case of a claim for an Advancement of
Expenses, in which case the applicable period shall
be twenty (20) days, an Indemnitee may at any time
thereafter commence a Proceeding against the LLC in
the State Courts of Georgia. If successful in whole
or in part in any such Proceeding, or in a Proceeding
brought by the LLC to recover any Advancement of
Expenses, the Indemnitee shall also be entitled to be
paid the expenses of prosecuting or defending such
Proceeding.
(ii) In any Proceeding brought by an Indemnitee to enforce
a right to Indemnification hereunder (but not in a
Proceeding brought by Indemnitee to enforce a right
to an Advancement of Expenses) it shall be a defense
that (and in any Proceeding by the LLC to recover an
Advancement of Expenses, the LLC shall be entitled to
recover such expenses upon a final adjudication that)
the Indemnitee has not met the requirements for
indemnification hereunder; provided, however, that in
any such Proceeding, neither (A) the failure of the
Member to have made the determination prior to the
commencement of such Proceeding that indemnification
of Indemnitee is proper in the circumstances, (B) an
actual determination by the Member that Indemnitee
has not met such applicable requirements, nor (C)
termination of any Proceeding by any judgment,
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<PAGE> 168
order, settlement, or plea therein shall, of itself,
create a presumption that Indemnitee has not met such
applicable legal requirements or, in the case of such
a Proceeding brought by Indemnitee, be a defense to
such a Proceeding.
(iii) In any Proceeding brought by Indemnitee to enforce a
right to indemnification or to an Advancement of
Expenses hereunder, or by the LLC to recover an
Advancement of Expenses, the burden of proving that
Indemnitee is not entitled to be indemnified, or to
such Advancement or Expenses, under this Exhibit or
otherwise shall be on the LLC.
(iv) Without limiting the foregoing, any action commenced
pursuant to this Subsection (d) shall be conducted in
all respects as a de novo adjudication on the merits;
provided, however, if a determination shall have been
made, or deemed to have been made pursuant to
Subsection (b) above, that a Person is entitled to
indemnification, the LLC shall be bound thereby. The
LLC and all Members shall be precluded from asserting
in any action pursuant to this Subsection (d) that
the procedures and presumptions of this Exhibit are
not valid, binding and enforceable.
(e) Non-Exclusivity of Rights. The rights to indemnification and
to the Advancement of Expenses conferred in this Exhibit shall not be exclusive
of any other right which any Person may have or hereafter acquire under
applicable law, under any other agreement, pursuant to any determination by the
Member or otherwise, provided that the Indemnitee shall not be entitled to
recover more than once for the same damage.
(f) Insurance. The LLC shall be authorized to maintain insurance,
in reasonable amounts and with responsible carriers, at the LLC's expense, to
insure any amounts indemnifiable hereunder as well as to protect the
Indemnitees or any employee or agent of the LLC or another enterprise against
any expense, liability or loss of the kind referred to in this Exhibit, whether
or not the LLC would have the power to indemnify such Person against such
expense, liability or loss under the applicable law.
(g) Contribution by LLC. The LLC hereby agrees that, in the event
that the indemnification provided for in this Exhibit is for any reason finally
judicially determined to be unavailable, the LLC shall contribute to the
payment of any and all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA or other excise taxes or penalties, and amounts paid in
settlement) in such proportion as is appropriate to reflect the relative fault
of the LLC and the Indemnitee with respect to such expenses, liability and
loss.
(h) Other Indemnification Sources. Any Indemnitees entitled to
indemnification from the LLC hereunder shall first seek recovery under any
insurance policies by which such Indemnitee is covered and shall obtain the
written consent of the Member prior to entering into any compromise or
settlement that would result in an obligation of the LLC to indemnify such
Indemnitee. If the amounts in respect of which such indemnification is sought
arise out of the conduct of the business and affairs of the LLC and also of any
other Person for which the Person entitled to indemnification from the LLC
hereunder was then acting in a similar capacity,
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<PAGE> 169
the amount of the indemnification provided by the LLC shall be limited to the
LLC's proportionate share thereof as determined in good faith by the Member.
(i) Survival. The provisions of this Exhibit shall survive the
dissolution of the LLC.
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<PAGE> 170
EXHIBIT P
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
DESIGNEES TO MANAGEMENT'S BOARD OF MANAGERS
As of February 10, 1997, pursuant to and in accordance with Agreement Section
5.1(a), clause
(i) Whitney has designated the following two (2) individuals:
William Laverack, Jr.
Michael C. Brooks
(ii) Chisholm has designated the following individual:
Riordon B. Smith
(iii) The Chief Executive Officer of DTS Management, LLC is:
Douglas S. Holladay, Jr.
(iv) The holders of Class B Units have designated the following two (2)
individuals (each of whom shall have two (2) votes on the board of managers
subject to the provisions of Subsection 5.1(a)):
Harry F. Hopper III
James B. Murray, Jr.
(v) The holders of the Class B, C, and D Units have designated the
following individual:
David P. Mixer
to serve on the board of managers of DTS Management, LLC, Manager of the LLC.
<PAGE> 1
EXHIBIT 3.1(e)
AMENDMENT TO THE LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
BY
WRITTEN CONSENT
This Amendment to the Limited Liability Company Agreement of Digital Television
Services, LLC by Written Consent (the "Amendment") is entered into effective
February 10, 1997, pursuant to sections 6.1, 6.2, 11.9 and 11.14 of the Limited
Liability Company Agreement (the "LLC Agreement") of Digital Television
Services, LLC, a Delaware limited liability company ("DTS").
R E C I T A L S:
A. The Members of DTS entered into the LLC Agreement effective February
10, 1997. Unless otherwise provided in this Amendment, capitalized terms have
the same meaning as set forth in the LLC Agreement.
B. Section 11.14 of the LLC Agreement provides that the Members of DTS
"shall complete and DTS, Columbia A, Columbia B, Whitney and Fleet shall initial
final forms of Exhibits I, J, K, L and M within 30 days of February 10, 1997,
with the understanding that a Preferred Stock Corporate Conversion and the forms
of documents to implement it, shall insofar as possible, mirror the relative
terms, rights, privileges and obligations of the parties reflected in this
Agreement."
C. The Undersigned Members desire to finalize the exhibits specified in
Recital B. above.
D. The undersigned Members also desire to amend the LLC Agreement to
provide that the Class D Units shall not be entitled to vote on any matter
(which is specifically permitted pursuant to Section 18-215(d) of the Act).
E. Section 11.4 of the Agreement provides that the Agreement may be
amended by one or more written amendments approved by the Manager, the vote of
the Members, and such class those may be required in the Agreement. Section 11.4
further provides that any written amendment that received such a vote need not
be signed by all the Members to be effective, but shall be effective in
accordance with its terms and shall be binding upon all Members.
F. Section 6.2 of the LLC Agreement provides that any action permitted
or required to be taken by the Members, including any amendment to the
Agreement, may be taken or ratified by written consent setting forth a specific
action to be taken and sent to all Members and signed within 30 days of being
sent by that number of Members in order to take the specified action.
<PAGE> 2
AMENDMENT TO THE LIMITED LIABILITY COMPANY AGREEMENT OF
DIGITAL TELEVISION SERVICES, LLC BY WRITTEN CONSENT
PAGE 2
Now, therefore, it is agreed that the Agreement shall be amended as
follows:
1. FINAL FORMS OF EXHIBITS I, J, K, L, AND M. The final forms of
Exhibits I (Draft Certificate of Designations of Preferred Stock), J (Draft
Certificate of Merger -- Preferred Stock Corporate Conversion), K (Draft
Certificate of Merger -- Common Stock Corporate Conversion), L (Draft
Stockholders Agreement) and M (Draft Certificate of Incorporation and Bylaws
upon Qualified Corporate Conversion), each of which is attached hereto, be and
they hereby are approved as exhibits to the Agreement.
2. AMENDMENTS TO REMOVE VOTING RIGHTS OF CLASS D UNITS.
a. Section 2.5(d) is amended to add the following sentence at
the end thereof:
"Any provision in this Agreement to the contrary notwithstanding, the
Class D Units shall have no voting rights with respect to any matter, including
Amendments to this Agreement."
b. Section 5.1(a)(v) shall be amended to read as follows:
"One (1) individual elected by a vote of the holders of the Class B and
Class C Units, voting together as a single class, with each such holder being
entitled to cast that number of votes equal to the number of such Units held by
such holder."
c. The second sentence of the third paragraph in Section
5.1(a) is amended to read as follows:
"The two (2) additional seats shall be filled by individuals approved
by Columbia A, Whitney and Chisholm, and elected by holders of a majority of the
Class A, Class B and Class C Units voting together as a single class, and who
are not otherwise Affiliates of any of the Columbia Entities, Whitney or Fleet."
d. The last sentence of Section 5.3(a) is amended to read as
follows:
"The exercise of the Members' direct authority hereunder shall be by a
vote of those Members holding a majority of the Class A, B and C Units, voting
together as a single class, and such class vote as may be required in any
instance, and shall be pursuant to the procedures set forth in Article VI below,
except in those cases in which other procedures are expressly set forth."
e. The last sentence of Section 6.1(a) shall be amended to
read as follows:
"Except as otherwise provided in this Agreement, the vote, consent,
approval or ratification of Members holding a majority of the Class A, Class B
and Class C Units, voting together as a single class, shall be required in order
to constitute Member action. The holders of the Class D Units shall have no
voting rights on any matter."
<PAGE> 3
AMENDMENT TO THE LIMITED LIABILITY COMPANY AGREEMENT OF
DIGITAL TELEVISION SERVICES, LLC BY WRITTEN CONSENT
PAGE 3
f. The second sentence of the definition of "Interest"
appearing in Exhibit C to the Agreement is amended to read as follows:
"With respect to any provision of this Agreement requiring the vote,
approval, consent or similar action by the Members or a group of Members with
respect to any matter, unless otherwise specified, reference to a majority (or
specified percentage) in Interest of the Members or group thereof means those
Members holding Class A, Class B and Class C Units constituting a majority (or
specified percentage) of all Class A, B and C Units held by such Members or
group of Members determined as of the date of such vote, approval, consent or
action unless an earlier record date has been established for determining the
Members entitled to participate in such action, in which case a determination
shall be made as of the earlier record date."
3. EFFECTIVENESS. The amendments to the Agreement set forth herein
shall become effective as if such amendments were included in the Agreement as
originally executed as of February 10, 1997, upon the execution of this
Amendment by Members of DTS holding the majority of outstanding Units.
4. COUNTERPARTS; FACSIMILE EXECUTION. This Amendment may be executed in
any one or more counterparts, each of which shall be deemed an original, and all
of which taken together shall constitute one and the same instrument. Receipt by
DTS or its counsel of a facsimile transmission of an execution of this Amendment
may be treated by DTS as an original execution.
5. NO OTHER MODIFICATIONS. Except as modified by this Amendment and the
exhibits hereto, the terms and conditions of the Agreement shall not be modified
and together with modifications set forth in this Amendment shall remain in full
force and effect.
IN WITNESS WHEREOF, the undersigned members have caused this Agreement to be
executed to be effective as described in Section 3 above.
________________ COLUMBIA DBS, INC.,
Date Executed A VIRGINIA CORPORATION
By: ___________________________
Name: Neil P. Byrne
Title: Vice President
<PAGE> 4
AMENDMENT TO THE LIMITED LIABILITY COMPANY AGREEMENT OF
DIGITAL TELEVISION SERVICES, LLC BY WRITTEN CONSENT
PAGE 4
________________ COLUMBIA DBS CLASS A INVESTORS, LLC,
Date Executed A DELAWARE LIMITED LIABILITY COMPANY
By: __________________________
Name: __________________________
Title: Member
________________ COLUMBIA DBS INVESTORS, L.P.,
Date Executed A DELAWARE LIMITED PARTNERSHIP
By: Columbia Capital Corporation,
a Virginia corporation
Its: General Partner
By: _________________________
Name: Neil P. Byrne
Title: Vice President
________________ _______________________________________
Date Executed Douglas S. Holladay, Jr.
________________ _______________________________________
Date Executed Donald A. Doering
________________ _______________________________________
Date Executed William J. Dorran
________________ WEP INTERMEDIATE CORP.,
Date Executed A DELAWARE CORPORATION
By: ___________________________
Name: William Laverack, Jr.
Title: President
<PAGE> 5
AMENDMENT TO THE LIMITED LIABILITY COMPANY AGREEMENT OF
DIGITAL TELEVISION SERVICES, LLC BY WRITTEN CONSENT
PAGE 5
________________ FLEET VENTURE RESOURCES, INC.,
Date Executed A RHODE ISLAND CORPORATION
By: ______________________________
Name: Riordon B. Smith
Title: Senior Vice President
________________ FLEET EQUITY PARTNERS VI, L.P.,
Date Executed A DELAWARE LIMITED PARTNERSHIP
By: Fleet Growth Resources II, Inc.
Its: General Partner
By: ______________________________
Name: Riordon B. Smith
Title: Senior Vice President
________________ CHISHOLM PARTNERS III, L.P.,
Date Executed A DELAWARE LIMITED PARTNERSHIP
By: Silverado III, L.P.
Its: General Partner
By: Silverado III Corp.
Its: General Partner
By: _____________________
Name: Riordon B. Smith
Title: Senior Vice President
<PAGE> 6
AMENDMENT TO THE LIMITED LIABILITY COMPANY AGREEMENT OF
DIGITAL TELEVISION SERVICES, LLC BY WRITTEN CONSENT
PAGE 6
_______________ KENNEDY PLAZA PARTNERS,
Date Executed A RHODE ISLAND GENERAL PARTNERSHIP
By: ________________________________
Name: Riordon B. Smith
Title: General Partner
MANAGER:
________________ DTS MANAGEMENT, LLC,
Date Executed A GEORGIA LIMITED LIABILITY COMPANY
By: ________________________________
Name: Douglas S. Holladay, Jr.
Title: President
<PAGE> 7
EXHIBIT I
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
CERTIFICATE OF DESIGNATIONS
OF
SERIES A PAYMENT-IN-KIND CONVERTIBLE PREFERRED STOCK
OF
DIGITAL TELEVISION SERVICES, INC.
(Pursuant to Section 151 of the General
Corporation Law of the State of Delaware)
Digital Television Services, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation (the "Board of Directors"):
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors by the Certificate of Incorporation of the
Corporation (as amended from time to time, the "Certificate of Incorporation"),
there hereby is created, out of the 10,000,000 shares of preferred stock, par
value $.01 per share, of the Corporation authorized in Article FOURTH of the
Certificate of Incorporation (the "Preferred Stock"), a series of Preferred
Stock consisting of 5,000,000 shares, which series shall have the following
powers, designations, preferences and relative, participating, optional and
other rights, and the following qualifications, limitations and restrictions (in
addition to the powers, designations, preferences and relative, participating,
optional and other rights, and the qualifications, limitations and restrictions,
stated in the Certificate of Incorporation as applicable to the Preferred
Stock):
"SECTION 1. DESIGNATION. The shares of such series created hereby shall
be designated as the "Series A Payment-in-Kind Convertible Preferred Stock"
(referred to herein as the "PIK Preferred Stock"), and the authorized number of
shares constituting such series shall be 5,000,000. The par value of the PIK
Preferred Stock shall be $.01 per share. The PIK Preferred Stock shall not be
subject to any sinking fund or mandatory redemption provision.
SECTION 2. PRIORITY. The PIK Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up or dissolution, whether
voluntary or involuntary, whether now or hereafter issued rank (i) on a parity
with any other series of Preferred Stock established hereafter by the Board of
Directors the terms of which shall specifically provide that such series shall
rank on a parity with the PIK Preferred Stock with respect to dividend rights
and rights on liquidation, winding up or dissolution (all of such series of
Preferred Stock to which the PIK Preferred Stock ranks on a parity, the "Parity
Securities"), (ii) junior to any series of Preferred
<PAGE> 8
Stock established hereafter by the Board of Directors the terms of which shall
specifically provide that such series shall rank senior to the PIK Preferred
Stock with respect to dividend rights and rights on liquidation, winding up or
dissolution (all of such series of Preferred Stock to which the PIK Preferred
Stock ranks junior, the "Senior Securities") and (iii) senior to the common
stock, par value $.01 per share (the "Common Stock") of the Corporation, and any
series of Preferred Stock established hereafter by the Board of Directors the
terms of which shall specifically provide that such series shall rank junior to
the PIK Preferred Stock with respect to dividend rights and rights on
liquidation, winding up or dissolution (all of such series of Preferred Stock to
which the PIK Preferred Stock ranks senior, the "Junior Securities").
SECTION 3. DIVIDENDS.
The holders of the PIK Preferred Stock shall be entitled to receive
when, as and if declared by the Corporation's Board of Directors, out of funds
legally available therefor, cumulative dividends payable on the shares of the
PIK Preferred Stock for each quarterly dividend period (a "Quarterly Dividend
Period"), which Quarterly Dividend Periods shall commence on March 15, June 15,
September 15 and December 15 of each year and shall end on and include the day
next preceding the first day of the next Quarterly Dividend Period, at a rate of
8% per annum, compounded annually, in respect of the Liquidation Preference (as
defined in Section 5(a)). All such dividends shall be payable on March 15, June
15, September 15 and December 15 of each year (each, a "Dividend Payment Date"),
commencing on the Dividend Payment Date next succeeding the date of issuance of
the Preferred Stock. Such dividends shall be paid to the holders of record at
the close of business on the date specified by the Board of Directors at the
time such dividend is declared, which date shall not be more than 50 or less
than 10 days prior to the applicable Dividend Payment Date.
The Corporation may, at its option, pay that portion of such dividends
through the issuance of that number of additional shares of the PIK Preferred
Stock having an aggregate Liquidation Preference equal to the aggregate dollar
amount of dividends to be paid on such Dividend Payment Date multiplied by the
Permitted Portion (as defined in Section 7). Dividends accrue from the date of
issuance, shall accrue on a daily basis without regard to the occurrence of a
Dividend Payment Date or the declaration of any dividend, and will accumulate
until paid in cash or additional shares of the PIK Preferred Stock. In the event
that a dividend is not declared on any Dividend Payment Date (the "Contemplated
Date"), such dividend must be declared on the first subsequent Dividend Payment
Date on which a dividend is declared and will accumulate from the Contemplated
Date. No fractional shares of PIK Preferred Stock shall be issued, so that the
number of shares permitted to be paid as a dividend pursuant to this Section 3
shall be rounded to the nearest whole number of shares. All dividends paid in
additional shares of PIK Preferred Stock shall be deemed issued on the
applicable Dividend Payment Date, and will thereupon be duly authorized, validly
issued, fully paid and nonassessable and free and clear of all liens and
charges.
SECTION 4. VOTING. Except as provided by the General Corporation Law of
the State of Delaware, holders of shares of the PIK Preferred Stock shall have
only those voting rights set forth in the Stockholders Agreement.
I-2
<PAGE> 9
SECTION 5. LIQUIDATION RIGHTS.
(a) PRIORITY. Upon any liquidation, winding up or dissolution,
whether voluntary or involuntary, after payment or provision for payment of all
of the debts and other liabilities of the Corporation, each holder of
outstanding shares of PIK Preferred Stock shall be entitled to receive, in cash,
out of the remaining net assets of the Corporation, $[NOTE 1] per share of PIK
Preferred Stock, plus an amount, in cash, equal to any accrued but unpaid
dividends on each such share up to the date fixed for distribution (the
"Liquidation Preference"), before any distribution shall be made to the holders
of shares of any Junior Securities or Common Stock. If, upon any liquidation of
the Corporation, the assets distributable among the holders of shares of PIK
Preferred Stock are insufficient to permit payment in full to the holders of
shares of the PIK Preferred Stock, any Parity Securities and any Senior
Securities, then the entire assets of the Corporation thus distributable shall
be distributed among the holders of the PIK Preferred Stock, any Parity
Securities and any Senior Securities in order of relative priority as to
distribution in liquidation and, as to classes and series ranking pari passu
with one another in that regard, in proportion to the respective amounts that
would be payable per share if such assets were sufficient to permit payment in
full.
(b) ADDITIONAL DISTRIBUTIONS. If assets remain in the
Corporation after payment of the full preferential amount provided for herein to
the holders of the PIK Preferred Stock, any Parity Securities and any Senior
Securities or after funds necessary for such payment have been set aside in
trust for the holders thereof, then all such remaining assets shall be
distributed:
(i) first, to the holders of the Common Stock, until such
holders have received an amount equal to the Liquidation Preference per share;
provided that if after February 10, 1997 the Corporation (A) pays a dividend in
shares of Common Stock, (B) makes a distribution in shares of Common Stock to
holders of the Common Stock, (C) subdivides the outstanding shares of Common
Stock into a greater number of shares of Common Stock or (D) combines the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, and in any such case, each holder of Common Stock shall receive an
amount equal to (x) the Liquidation Preference multiplied by (y) the number of
shares of Common Stock that such holder would have had if no such dividends,
distributions, subdivisions and combinations had not been effected; and
(ii) second, on an equal per share basis to the holders of the
PIK Preferred Stock (on an as-if converted to Common Stock basis on the
distribution date), any Parity Securities, any Senior Securities, any Junior
Securities and the Common Stock.
- ----------
Note 1: Prior to the filing of this Certificate of Designations with the
Secretary of State of the State of Delaware, the Manager shall insert
here the number calculated pursuant to clause (B) of the definition of
"Preferred Stock Conversion Amount" set forth in Exhibit C to the LLC
Agreement.
I-3
<PAGE> 10
SECTION 6. CONVERSION INTO COMMON STOCK.
(a) MANDATORY AND VOLUNTARY CONVERSION. Holders of the PIK
Preferred Stock shall have the right, exercisable at any time and from time to
time (unless otherwise prohibited by law, rule or regulation), to convert any or
all of their shares of the PIK Preferred Stock into Common Stock at an initial
conversion ratio of one share of PIK Preferred Stock for one share of Common
Stock, subject to adjustment as described in Section 6(e). In addition, upon the
closing of a Qualified IPO, each share of PIK Preferred Stock shall be converted
automatically upon such closing into Common Stock at an initial conversion ratio
of one share of PIK Preferred Stock for one share of Common Stock, subject to
adjustment as described in Section 6(e). The Corporation shall not issue
fractions of shares of Common Stock upon conversion of the PIK Preferred Stock.
If any fraction of a share of Common Stock would be issuable upon conversion of
the PIK Preferred Stock, then the Corporation shall, in lieu thereof, pay to the
Person entitled thereto an amount in cash equal to the initial issuance price of
a share of Common Stock pursuant to such Qualified IPO of such fraction of a
share of Common Stock, calculated to the nearest one-hundredth of a share, to be
computed on the date that the conversion occurs.
(b) PROCEDURES; ACCRUED DIVIDENDS UPON CONVERSION. The holders
of PIK Preferred Stock whose shares are converted as provided in Section 6(a)
shall deliver the certificate or certificates therefor to the principal office
of the Corporation together with written notice or acknowledgement of conversion
in form reasonably satisfactory to the Corporation and (if so required by the
Corporation or any conversion agent) accompanied by instruments of transfer in
form reasonably satisfactory to the Corporation or to such conversion agent,
duly executed by the registered holder or his duly authorized attorney, as well
as transfer taxes, stamps or funds therefor, or evidence of payment thereof, if
required by Section 6(c). The automatic conversion of any outstanding shares of
PIK Preferred Stock into Common Stock by reason of a Qualified IPO shall be
deemed to have occurred upon the closing of the Qualified IPO. The Persons
entitled to receive shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holders of such shares at and from the
time that conversion is deemed to have occurred.
Upon the conversion of the PIK Preferred Stock into Common Stock, any
accrued but undeclared dividends on the PIK Preferred Stock shall be satisfied
as follows:
(i) to the extent permitted by law, the Corporation shall
declare such dividends on the conversion date as if the conversion date was a
Dividend Payment Date and any Permitted Portion of such dividend that the
Corporation elects to satisfy in PIK Preferred Stock under Section 3 above shall
be satisfied in Common Stock at the applicable conversion ratio; and
(ii) to the extent the Corporation is precluded by law from
declaring and paying cash dividends, such accrued and undeclared dividends shall
be declared and paid in Common Stock at the applicable conversion ratio on the
conversion date.
I-4
<PAGE> 11
(c) TAXES. If a share or shares of the PIK Preferred Stock are
converted, then the Corporation shall pay any documentary, stamp or similar
issue or transfer tax due on the issue of the Common Stock upon conversion, but
the holder shall pay to the Corporation the amount of any tax that is due (or
shall establish to the satisfaction of the Corporation payment thereof) if the
shares are to be issued in a name other than the name of such holder.
(d) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available, out of its authorized but unissued shares of Common
Stock, enough shares of Common Stock to issue all shares of Common Stock
issuable upon conversion of the PIK Preferred Stock. All shares of Common Stock
that may be issued upon conversion of shares of PIK Preferred Stock shall be,
when so issued, validly issued, fully paid and nonassessable. In order that the
Corporation may issue shares of Common Stock upon conversion of shares of PIK
Preferred Stock, the Corporation will endeavor to comply with all applicable
federal and state securities laws.
(e) ADJUSTMENTS TO CONVERSION RATE. The conversion rate in
effect at any time shall be subject to adjustment from time to time as follows:
(i) ADJUSTMENTS FOR STOCK SPLITS, STOCK DIVIDENDS,
ETC. If the Corporation (1) pays a dividend in shares of the Common
Stock to holders of the Common Stock, (2) makes distributions in shares
of Common Stock to holders of the Common Stock, (3) subdivides the
outstanding shares of Common Stock into a greater number of shares of
Common Stock or (4) combines the outstanding shares of Common Stock
into a smaller number of shares of Common Stock, then, and in any such
case, the conversion rate in effect immediately prior to such action
shall be adjusted so that the holder of any shares of PIK Preferred
Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock that such holder would
have owned immediately following such action had such shares of PIK
Preferred Stock been converted immediately prior thereto. An adjustment
made pursuant to this Section 6(e)(i) shall become effective on the
record date in the case of a dividend or distribution and on the
effective date in the case of a subdivision or combination.
(ii) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. If the
Corporation distributes pro rata to all holders of the Common Stock
shares of any class of capital stock (excluding the Common Stock), or
options, rights or warrants to acquire any class of capital stock
(including the Common Stock), or other assets of the Corporation
(excluding capital stock of the Corporation held in its treasury) and
does not make an equivalent distribution with respect to the PIK
Preferred Stock, then, and in any such case, the number of shares of
Common Stock into which each share of the PIK Preferred Stock shall be
convertible shall be adjusted so that the same shall equal the number
determined by multiplying the number of shares of Common Stock into
which such share of the PIK Preferred Stock was convertible immediately
prior to the record date of such distribution by a fraction of which
(x) the numerator shall be the Fair Market Value per share of the
Common Stock on the record date mentioned below and (y) the denominator
shall be such Fair Market Value less the then-Fair Market Value per
share of Common Stock or the securities or assets so distributed. Such
adjustment shall become effective on the record date for determination
of the holders of Common Stock entitled to receive
I-5
<PAGE> 12
the distribution. Notwithstanding the foregoing, if the Corporation
distributes rights or warrants pro rata to holders of the Common Stock
(the "Rights"), then the Corporation may, in lieu of making any
adjustment pursuant to this Section 6(e)(ii), make proper provision so
that each holder of a share of PIK Preferred Stock that is converted
into Common Stock after the record date for such distribution and prior
to the expiration or redemption of the Rights shall be entitled to
receive upon such conversion, in addition to the Common Stock issuable
upon such conversion (the "Conversion Shares"), a number of Rights to
be determined as follows: (i) if such conversion occurs on or prior to
the date for the distribution to the holders of Rights of separate
certificates evidencing such Rights ("the Distribution Date"), the same
number of Rights to which a holder of a number of shares of the Common
Stock equal to the number of Conversion Shares is entitled at the time
of such conversion in accordance with the terms and provisions of and
applicable to the Rights; and, (ii) if such conversion occurs after the
Distribution Date, the same number of Rights to which a holder of the
number of shares of the Common Stock into which a share of the PIK
Preferred Stock so converted was convertible immediately prior to the
Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the
Rights.
(iii) WEIGHTED AVERAGE PRICE PROTECTION. Subject to
the last sentence of this Section 6(e)(iii), if the Corporation shall,
in events other than as provided for in Sections 6(e)(i) and 6(e)(ii),
issue Common Stock or rights or warrants entitling the holders thereof
to subscribe for or to purchase shares of Common Stock at a price per
share (the "Exercise Price") less than $22.50 (adjusted for the events
described in Sections 6(e)(i) and 6(e)(ii) and this Section 6(e)(iii)),
then, and in any such case, the number of shares of Common Stock into
which each share of the PIK Preferred Stock shall be convertible shall
be adjusted to equal the number of shares of Common Stock into which
such share of PIK Preferred Stock was convertible immediately prior to
the date of such issuance multiplied by a fraction of which (x) the
numerator shall be the number of shares of Common Stock Deemed
Outstanding at the close of business on the day immediately prior to
such issuance plus the total number of shares of Common Stock (or
Common Stock underlying such rights or warrants) so offered for
subscription or purchase and (y) the denominator shall be the number of
shares of Common Stock Deemed Outstanding at the close of business on
the day immediately prior to such issuance plus the number of shares of
Common Stock that the aggregate of the Exercise Price for the shares of
Common Stock (or Common Stock underlying such rights or warrants) so
offered for subscription or purchase could purchase at $22.50 per share
(adjusted for the events set forth in Sections 6(e)(i) and 6(e)(ii) and
this Section 6(e)(iii)), such adjustment to become effective
immediately after the opening of business on the day following the date
fixed for such determination. For the purpose of this Section
6(e)(iii), the number of shares of Common Stock Deemed Outstanding at
any time shall not include shares held in the treasury of the
Corporation but shall include shares underlying outstanding options and
warrants and shares issuable upon the conversion of the PIK Preferred
Stock into shares of Common Stock. Notwithstanding the foregoing, in no
event shall any adjustment to the conversion ratio be made pursuant to
this Section 6(e)(iii) in respect of (i) any issuance of options,
rights or warrants in exchange for outstanding shares of Common Stock
if such options, rights or warrants entitle the holders thereof to
subscribe for no more than the number of shares of Common Stock
I-6
<PAGE> 13
exchanged therefor (subject to antidilution provisions similar to those
contained herein), (ii) any issuance of Common Stock upon conversion of
the PIK Preferred Stock, (iii) any issuance of Common Stock, rights or
warrants, in each case pursuant to the Employee Stock Plan or (iv) any
issuance of Common Stock (or options, rights or warrants to purchase
Common Stock) in connection with a Qualified Financing.
(iv) DEFERRAL OF ISSUANCE. In any case in which this
Section 6 shall require that an adjustment be made on or immediately
following a record date, the Corporation may elect to defer (but only
until five Business Days following the mailing of the notice described
in Section 6(h) issuing to the holder of any share of the PIK Preferred
Stock converted after such record date the shares of Common Stock into
which such PIK Preferred Stock shall have been converted, and in lieu
of the shares the issuance of which is so deferred the Corporation
shall issue or cause its transfer agent to issue temporary due bills or
other appropriate evidence of the right to receive such shares.
(f) COMPUTATIONS. All calculations under this Section 6 shall
be made to the nearest one-hundredth of a share.
(g) SHARES OTHER THAN COMMON SHARES. If, as result of any
adjustment made pursuant to Section 6(e), the holder of any share of PIK
Preferred Stock thereafter surrendered for conversion shall become entitled to
receive any shares of capital stock of the Corporation other than shares of
Common Stock, then the number of such other shares so receivable upon conversion
of any shares of the PIK Preferred Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section 6.
(h) NOTICE OF CONVERSION RATE CHANGE. Whenever the conversion
rate is adjusted, the Corporation shall promptly mail to all holders of record
of shares of the PIK Preferred Stock a notice of the adjustment.
(i) VOLUNTARY CONVERSION PRIOR TO CERTAIN EVENTS. If the
Corporation consolidates or merges with, or transfers all or substantially all
of its assets to, another corporation, and stockholders of the Corporation must
approve such transaction, then a holder of shares of the PIK Preferred Stock may
convert some or all of such shares into shares of Common Stock simultaneously
with the record date for, or the effective date of, such transaction so as to
receive the rights, warrants, securities or assets that a holder of shares of
the Common Stock on that date may receive. In furtherance thereof, the
Corporation shall mail to holders of shares of the PIK Preferred Stock a notice
stating the proposed record date or effective date, as the case may be. The
Corporation shall mail the notice at least 10 days before such date.
(j) EQUIVALENT CONVERSION. If any of the following occurs,
namely: (i) any reclassification of, or change in, outstanding shares of capital
stock of the class issuable upon conversion of the PIK Preferred Stock (other
than a change in name, or par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or combination), or
(ii) any consolidation or merger to which the Corporation is a party and which
does not result in any reclassification of, or change in (other than a change in
name, or par
I-7
<PAGE> 14
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), outstanding shares of such capital
stock, then the Corporation or the successor corporation, as the case may be,
shall, as a condition precedent to such reclassification, change, consolidation
or merger, provide in its certificate of incorporation or other charter document
that each share of the PIK Preferred Stock shall be convertible into the number
and class of shares of capital stock issuable upon conversion of such share of
PIK Preferred Stock immediately prior to such reclassification, change,
consolidation or merger. Such certificate of incorporation or other charter
document shall provide for adjustments that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 6. If this
Section 6(j) applies, then Section 6(e)(i) does not apply. If, in the case of
any such reclassification, change, consolidation or merger, the stock or other
securities and property (including cash) receivable thereupon by a holder of the
capital stock issuable upon conversion of the PIK Preferred Stock includes
shares of capital stock or other securities and property of a corporation other
than the successor corporation in such reclassification, change, consolidation
or merger, then the certificate of incorporation or other charter document of
such other corporation shall contain such additional provisions to protect the
interests of the holders of shares of the PIK Preferred Stock as the Board of
Directions shall reasonably consider necessary by reason of the foregoing, which
provisions shall be subject to approval by the affirmative vote or consent of
holders of at least 70% of the shares of the then-outstanding PIK Preferred
Stock. The provisions of this Section 6(j) shall similarly apply to successive
reclassifications, changes, consolidations and mergers.
SECTION 7. OTHER DEFINITIONS.
"Business Day" means any day other than a Saturday, Sunday or
other day on which banks are authorized or required to close by law or executive
order in Washington, D.C.
"Closing Price" with respect to any security on any Trading
Day shall mean the last reported sale price regular way or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices regular way, in either case on the New York Stock Exchange or,
if the shares of such security are not listed or admitted to trading on such
exchange, on the principal national securities exchange on which such shares are
listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the Nasdaq National Market.
"Deemed Outstanding" means the total number of outstanding
shares of Common Stock of the Corporation plus the total number of shares of
Common Stock of the Corporation into which all other outstanding securities of
the Corporation are exercisable or convertible, in each case other than (i)
shares of Common Stock issued in exchange for Class C Units of Digital
Television Services, LLC in connection with its conversion into the Corporation
and (ii) shares of Common Stock issued pursuant to the Employee Stock Plan or
any predecessor of the Employee Stock Plan.
"Employee Stock Plan" means the arrangements, terms and
procedures that the Corporation may establish from time to time for the issuance
of up to 180,000 shares of Common Stock (or such larger number of shares of
Common Stock as may be approved by (i)
I-8
<PAGE> 15
the "Compensation Committee" of the Board of Directors, or if no such committee
exists, by the Board of Directors and (ii) the holders of at least 70% of the
shares of PIK Preferred Stock) to employees or independent contractors of the
Corporation or any Subsidiary at prices equal to the market value thereof as of
the date of issuance and pursuant to such terms and conditions (including
vesting) as the Board of Directors shall determine.
"Fair Market Value" means: (a) with respect to any security,
(i) if such security is listed on any national securities exchange or authorized
for quotation by any national securities association, the average Closing Price
of such security over the 20 consecutive Trading Days immediately preceding the
day as to which Fair Market Value is to be determined, provided that if the Fair
Market Value is being determined as of the date on which the Company consummates
a Qualified IPO, the Fair Market Value of one share of Common Stock shall be the
price paid for one share of Common Stock in such Qualified IPO, or (ii) if there
is no such closing bid price or such security is not so listed or authorized for
quotation, the value of such security as determined in good faith by a
registered broker-dealer selected by the Board of Directors; and (b) with
respect to any other asset, the value of such asset as determined in good faith
by an appraiser selected by the Board of Directors and approved by the holders
of a majority of the PIK Preferred Stock, which approval of such appraiser shall
not be unreasonably withheld.
"IPO" means an offering of equity securities of the
Corporation or its successor entity pursuant to a registration statement filed
in accordance with the Securities Act of 1933, as amended.
"Permitted Portion" means the percentage of the dividends
payable on each share of PIK Preferred Stock that may, at the option of the
Company, be paid through the issuance of additional shares of the PIK Preferred
Stock, which percentage shall equal 100% prior to a Preferred Stock
Determination, and thereafter shall equal the lesser of (i) 50% and (ii) (A)
100% less (B) the Combined Effective Marginal Tax Rate. For purposes of this
definition, a "Preferred Stock Determination" shall mean the receipt by a
beneficial owner of the PIK Preferred Stock that is a citizen or resident of the
United States or a corporation, partnership or other entity organized or created
under the laws of the United States or a political subdivision thereof (a "PIK
Beneficial Owner") of advice from its tax advisors that there is a substantial
risk that such PIK Beneficial Owner will be required to recognize federal income
taxes (assuming no deductions or losses are available to such PIK Beneficial
Owner) as a result of the receipt of a dividend on the PIK Preferred Stock in
additional shares of PIK Preferred Stock, and such PIK Beneficial Owner so
notifies the Corporation of such occurrences; provided that no Preferred Stock
Determination shall occur if reasonably promptly after the Corporation's receipt
of such notice, such PIK Beneficial Owner receives an opinion of counsel
addressed to such PIK Beneficial Owner reasonably satisfactory to such PIK
Beneficial Owner (as to the identity of counsel (it being understood that
Nelson, Mullins Riley & Scarborough, L.L.P. shall be reasonably satisfactory),
the substance of the opinion and the factual bases supporting the opinion) to
the effect that such PIK Beneficial Owner will not be required under Section 305
of the Internal Revenue Code of 1986, as amended, or of any successor internal
revenue laws of the United States (the "Code"), or similar provisions of the
Code, to recognize income for federal income tax purposes in respect of any
dividends payable in additional shares of PIK Preferred Stock pursuant to
Section 3 hereto as a result of either (x) the application of the Code or
interpretations thereof that constitute "substantial authority" under Code
Section 6662 or (y)
I-9
<PAGE> 16
that given the facts and circumstances then existing there is a reasonable basis
for the conclusion that the PIK Preferred Stock is not properly characterized as
"preferred stock" for purposes of Code Section 305. For purposes of this
definition, the Combined Effective Marginal Tax Rate shall mean the highest
single effective rate (expressed as a percentage) of United States federal,
state and local income taxation applicable to holders of 5% or more of the PIK
Preferred Stock whose principal residence or commercial domicile is within the
United States determined as of each record date for the payment of dividends,
giving effect to any limitations on the deductibility of state and local income
taxes in computing United States federal taxable income, and assuming that such
holders of PIK Preferred Stock are individuals and subject to the highest United
Stated federal and highest state and local marginal income tax rates then
applicable in the jurisdictions in which they have their principal residence or
commercial domicile. The determination of the Combined Effective Marginal Tax
Rate shall be made by the Corporation.
"Person" means any natural person, partnership, trust, estate,
association, limited liability company, corporation, custodian, nominee,
governmental instrumentality or agency, body politic or any other entity in its
own or any representative capacity.
"Qualified Financing" means the first issuance after February
10, 1997 of $50,000,000 or more of indebtedness by the Corporation or any
Subsidiary in a single transaction, in which case the Corporation may issue
equity (or rights to acquire equity) in the Corporation in the same transaction
constituting no more than 5.0% of the outstanding capital stock of the
Corporation on a fully-diluted basis without resulting in the price protection
under Section 6(e)(iii).
"Qualified IPO" means an underwritten IPO resulting in gross
proceeds to the Corporation or its successor, before fees and expenses, of at
least $25,000,000 and for a per share price, which shall be determined by
dividing the then Total Equity Value of the Corporation by the total number of
shares of capital stock outstanding, equal to at least $33.75 per share if the
IPO is consummated on or before July 31, 1998; $39.37 per share if the IPO is
consummated after July 31, 1998 but on or before July 31, 1999; and $45.00 per
share if the IPO is consummated at any time after July 31, 1999, which per share
amounts shall be adjusted for the events described in Sections 6(e)(i) and
6(e)(ii).
"Subsidiary" means any entity more than 50% of the equity
interests of which are owned directly or indirectly by the Corporation or more
than 50% of the total voting power entitled to vote in the election of
directors, managers, general partners or trustees of which is held directly or
indirectly by the Corporation.
"Total Equity Value" means, as of any day of determination,
the enterprise value (without duplication) of the Corporation (including the
fair market value of its equity, but excluding the fair market value of its
debt), as determined by an independent investment banking firm of national
standing with experience in such valuations (which firm may be an underwriter of
the Qualified IPO) and evidenced by a written opinion in customary form,
addressed to the Board of Directors; provided that for purposes of any such
determination, the enterprise value of the Corporation shall be calculated as if
all of the shares of capital stock of the Corporation were registered and
publicly held with no restrictions on resale, and as if the Corporation had
I-10
<PAGE> 17
no controlling stockholder. For purposes of any such determination, such banking
firm's written opinion may state that such fair market value is no less than a
specified amount.
"Trading Day" with respect to a securities exchange or
automated quotation system means a day on which such exchange or system is open
for a full day of trading.
[SIGNATURES FOLLOW ON THE NEXT PAGE]
I-11
<PAGE> 18
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed by its authorized officers, this ________ day of
____________, ______.
DIGITAL TELEVISION SERVICES, INC.
By: _________________________________
Name:
Title:
Attest:
By: ___________________________
Name:
Title:
I-12
<PAGE> 19
EXHIBIT J
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
CERTIFICATE OF MERGER -- PREFERRED STOCK CORPORATE CONVERSION
CERTIFICATE OF MERGER
OF
DIGITAL TELEVISION SERVICES, LLC
INTO
WEP INTERMEDIATE CORP.
The undersigned corporation, organized and existing under and by virtue of the
General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and jurisdiction of organization of each of the
constituent entities of the merger is as follows:
NAME JURISDICTION OF ORGANIZATION
---- ----------------------------
WEP Intermediate Corp. Delaware
Digital Television Services, LLC Delaware
SECOND: That a plan and agreement of merger among the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent entities in accordance with the requirements of Section
18-209 of the Limited Liability Company Act of the State of Delaware and
Sections 264(c) and 251 of the General Corporation Law of the State of Delaware.
THIRD: That pursuant to Sections 264(e) and 251(e) of the General
Corporation Law of the State of Delaware, the certificate of incorporation of
the surviving corporation shall be substantially in the form of Exhibit M to the
Amended and Restated Limited Liability Agreement of Digital Television Services,
LLC (the "Limited Liability Company Agreement").
FOURTH: That the name of the surviving corporation of the merger is
Digital Television Services, Inc.
FIFTH: That the executed plan and agreement of merger is contained in
the Limited Liability Company Agreement. The merger effected by this Certificate
of Merger is a "Preferred Stock Corporate Conversion" as defined in the Limited
Liability Company
<PAGE> 20
Agreement. The Limited Liability Company Agreement is on file at the principal
place of business of the surviving corporation. The address of the principal
place of business of the surviving corporation is Building C-200, 880 Holcomb
Bridge Road, Roswell, GA 30076.
SIXTH: That a copy of the plan and agreement of merger will be
furnished by the surviving corporation, on request and without cost to any
member or stockholder or of any other person holding any interest in any
constituent entity.
IN WITNESS WHEREOF, WEP Intermediate Corp. has caused this Certificate
to be signed by Attorney-in-Fact, its authorized officer, this ______ day of
__________, ______.
WEP INTERMEDIATE CORP.
By: DTS Management, LLC,
as Attorney-in-Fact
By: ____________________________
Title:
J-2
<PAGE> 21
EXHIBIT K
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
CERTIFICATE OF MERGER -- COMMON STOCK CORPORATE CONVERSION
CERTIFICATE OF MERGER
OF
DIGITAL TELEVISION SERVICES, LLC
INTO
WEP INTERMEDIATE CORP.
The undersigned corporation, organized and existing under and by virtue of the
General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and jurisdiction of organization of each of the
constituent entities of the merger is as follows:
NAME JURISDICTION OF ORGANIZATION
---- ----------------------------
WEP Intermediate Corp. Delaware
Digital Television Services, LLC Delaware
SECOND: That a plan and agreement of merger among the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent entities in accordance with the requirements of Section
18-209 of the Limited Liability Company Act of the State of Delaware and
Sections 264(c) and 251 of the General Corporation Law of the State of Delaware.
THIRD: That pursuant to Sections 264(e) and 251(e) of the General
Corporation Law of the State of Delaware, the certificate of incorporation of
the surviving corporation shall be substantially in the form of Exhibit M to the
Amended and Restated Limited Liability Agreement of Digital Television Services,
LLC (the "Limited Liability Company Agreement").
FOURTH: That the name of the surviving corporation of the merger is
Digital Television Services, Inc.
FIFTH: That the executed plan and agreement of merger is contained in
the Limited Liability Company Agreement. The merger effected by this Certificate
of Merger is a "Common Stock Corporate Conversion" as defined in the Limited
Liability Company
<PAGE> 22
Agreement. The Limited Liability Company Agreement is on file at the principal
place of business of the surviving corporation. The address of the principal
place of business of the surviving corporation is Building C-200, 880 Holcomb
Bridge Road, Roswell, GA 30076.
SIXTH: That a copy of the plan and agreement of merger will be
furnished by the surviving corporation, on request and without cost to any
member or stockholder or of any other person holding any interest in any
constituent entity.
IN WITNESS WHEREOF, WEP Intermediate Corp. has caused this Certificate
to be signed by Attorney-in-Fact, its authorized officer, this ______ day of
__________, ______.
WEP INTERMEDIATE CORP.
By: DTS Management, LLC,
as Attorney-in-Fact
By: ____________________
Title:
K-2
<PAGE> 23
EXHIBIT L
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is made as of this
______ day of _________, ______ by and among Digital Television Services, Inc.,
a Delaware corporation (the "Company"), and the stockholders (the
"Stockholders") listed on the signature pages hereto.
WHEREAS, the Company was formerly a Delaware limited liability company
known as Digital Television Services, LLC (the "LLC") and the Stockholders were
all of the members of the LLC; and
WHEREAS, in accordance with the Amended and Restated Limited Liability
Company Agreement of the LLC (the "LLC Agreement"), the LLC has been converted
into the Company pursuant to a Preferred Stock Corporate Conversion (as defined
in the LLC Agreement); and
WHEREAS, the LLC Agreement requires the Stockholders to enter into this
Stockholders Agreement in order to set forth certain agreements with respect to
the management of the Company, the transfer of the securities of the Company now
owned or hereafter acquired by each of the Stockholders and certain other
matters;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. When used herein, the following terms shall
have the following meanings:
"Affiliate" shall mean, with respect to any specified Person, any other
Person that directly or indirectly controls, or is under common control with, or
is owned or controlled by, the specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, either
(x) the beneficial ownership of 50% or more of the equity securities issued by
such Person or (y) the power to direct the management and policies of the
specified Person through the ownership of voting securities or other equity
interests, by contract or otherwise, (ii) the terms "controlling," "control
with" and "controlled by," etc., shall have
<PAGE> 24
meanings correlative to the foregoing, and (iii) the stockholders and partners
of such Person shall be deemed to be Affiliates of such Person, provided,
however for purposes of the limitation on transactions with Affiliates set forth
in Section 2.3(a)(viii) (including the definition of Permitted Reimbursements),
the percentage in clause (i)(x) above shall be 10% and clause (iii) shall
include officers, directors and employees.
"Board of Directors" shall mean the board of directors of the Company.
"Certificate of Designations" shall mean the Certificate of
Designations of the PIK Preferred Stock as filed with the Secretary of State of
the State of Delaware, as amended from time to time.
"Change of Control of the Company" means (i) the merger, consolidation
or other business combination of the Company or any of its Subsidiaries with or
into, or the merger of, another Person (other than the Company or a Subsidiary
of the Company) with or into the Company with the effect that, immediately after
such transaction, the stockholders of the Company immediately prior to such
transaction hold less than a majority in interest of the total voting power
entitled to vote in the election of directors, managers or trustees of the
Person surviving such transaction or less than 50% of the economic interests in
such Person, or (ii) the acquisition by any Person or related group of Persons,
by way of merger, sale, transfer, consolidation or other business combination or
acquisition, of (x) all or substantially all of the assets, property or business
of the Company, (y) more than 50% of the total voting power entitled to vote in
the election of directors, managers or trustees of the Company or such other
Person as survives the transaction, or (z) more than 50% of the economic
interests in the Company or such other Person as survives the transaction.
"Change of Control of Columbia" shall mean, and such Change of Control
of Columbia shall be deemed to have occurred after, either of the following
events:
(A) if at any time, any Person or group of Persons other than
those Persons identified in that certain Class A Unit
Membership Interest Purchase Agreement between the LLC,
Whitney, Fleet and Columbia dated as of February 10, 1997 as
members of Columbia, partners of Columbia DBS Investors, L.P.,
shareholders of Columbia Capital Corporation or shareholders
of Columbia DBS, Inc., and their Family Members shall own in
the aggregate 50% or more of the partnership interests, member
interests, capital stock or other equity interests in either
Columbia or Columbia DBS Investors, L.P. or any successor
entity to either of them, or
(B) if at any time, Persons other than Robert B. Blow, James B.
Murray, Jr., David P. Mixer, Mark R. Warner, Mark J. Kington,
Harry F. Hopper III, R. Phillip Herget III, James Fleming,
Barton Schneider, or Neil P. Byrne shall constitute a majority
of the board of directors of the general partner of Columbia
DBS Investors, L.P., the managers of Columbia, or otherwise
have a majority of the votes on any board of directors, board
of managers or similar governing body that has plenary
authority over the business and affairs of Columbia or
Columbia
L-2
<PAGE> 25
DBS Investors, L.P. or otherwise has the power to direct
either of such Stockholder's investment in the Company.
"Chisholm" shall mean Chisholm Partners III, L.P., a Delaware limited
partnership.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor federal revenue law.
"Columbia" shall mean Columbia DBS Class A Investors, LLC, a Delaware
limited liability company, or its successors or assigns.
"Columbia Entities" shall mean Columbia Capital Corporation, Columbia,
Columbia DBS, Inc. and Columbia DBS Investors, L.P.
"Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Company.
"Employee Stock Plan" shall mean the arrangements, terms and procedures
that the Company may establish from time to time for the issuance of up to
180,000 shares of Common Stock (or such larger number of shares of Common Stock
as may be approved by (i) the "Compensation Committee" of the Board of
Directors, or if no such committee exists, the Board of Directors and (ii) the
holders of at least 70% of the shares of PIK Preferred Stock) to employees or
independent contractors of the Company or any Subsidiary at prices equal to the
market value thereof as of the date of issuance and pursuant to such terms and
conditions (including vesting) as the Board of Directors shall determine.
"Family Member" shall mean (a) with respect to any individual, such
individual's spouse, any descendants (whether natural, adopted or in the process
of adoption), any trust all of the beneficial interests of which are owned by
any of such individuals or by any of such individuals together with any
organization described in Code Section 501(c)(3), the estate of any such
individual, and any corporation, association, partnership or limited liability
company all of the equity interests of which are owned by those above-described
individuals, trusts or organizations and (b) with respect to any trust, the
owners of the beneficial interests of such trust.
"Fiscal Year" shall mean the calendar year.
"Fleet" shall mean collectively, the group consisting of the following
entities, or their successors: Fleet Venture Resources, Inc., a Rhode Island
corporation, Fleet Equity Partners VI, L.P., a Delaware limited partnership,
Chisholm and Kennedy Plaza Partners, a Rhode Island general partnership.
L-3
<PAGE> 26
"Guarantee and Collateral Agreement" shall mean that certain Guarantee
and Collateral Agreement made by the Company, as a grantor, Columbia DBS
Management, LLC, certain Subsidiaries of the Company, as guarantors and
grantors, and Columbia DBS, Inc., Columbia Capital Corporation, Columbia DBS
Investors, L.P. and certain individuals, as investors and pledgors in favor of
Canadian Imperial Bank of Commerce, as administrative agent dated as of November
27, 1996.
"Interim Financing" shall mean the issuance by the Company of up to
$25,000,000 of indebtedness prior to any Qualified Financing or IPO the proceeds
of which are used to fund the Company's acquisition of NRTC System Nos. 0422,
1071, 0120, 0073, and 0164 located in Georgia and Alabama.
"Liquidation Preference" shall have the meaning ascribed thereto in the
Certificate of Designations.
"NRTC" shall mean the National Rural Telecommunications Cooperative.
"NRTC System" shall mean any one of the geographical areas within the
United States of America specifically designated by the NRTC, within which the
NRTC has granted to any Person rights to distribute direct broadcast satellite
services.
"Permitted Reimbursements" shall mean the reimbursement by the Company
or any of its Subsidiaries to the Columbia Entities, Whitney or Fleet, or any of
their Affiliates of actual out-of-pocket travel expenses not to exceed $7,500
per year in the aggregate, and such other expenses as may be approved prior to
payment by the Chief Executive Officer or Chief Financial Officer of the
Company, and the Chisholm Designee and one Whitney Designee, which expenses in
each case are incurred in connection with services to the Company or any
Subsidiary in connection with the ongoing business and affairs (including
financing and acquisitions) of the Company or any Subsidiary, other than
services as a member of the Board of Directors or similar services associated
with monitoring the investment by Columbia, Columbia DBS Investors, L.P. or
Columbia DBS, Inc., Whitney or Fleet.
"Permitted Transferee" shall mean (i) in the case of Whitney, Whitney's
Affiliates and the Family Members of those Affiliates who are individuals, (ii)
in the case of each entity comprising the collective definition of "Fleet", the
Affiliates of such entity and the Family Member of those Affiliates who are
individuals (iii) in the case of Columbia, (a) Columbia's general partner
(Columbia Capital Corporation) and (b) Columbia Capital Corporation's and
Columbia's Affiliates and the Family Members of those Affiliates who are
individuals, and (iv) in the case of any other Stockholder, any Family Member of
such Stockholder; provided, however, that in each case such Person shall agree
in writing with the parties hereto to be bound by and to comply with all
applicable provisions of this Agreement.
"Person" shall mean any natural person, partnership, trust, estate,
association, limited liability company, corporation, custodian, nominee,
governmental instrumentality or agency, body politic or any other entity in its
own or any representative capacity.
L-4
<PAGE> 27
"PIK Preferred Stock" shall mean the Series A Payment-in-Kind
Convertible Preferred Stock, par value $.01 per share, of the Company.
"Preferred Stockholders" shall mean the record holders of the PIK
Preferred Stock and a "Preferred Stockholder" shall mean any one of them.
"Prime Rate" as of a particular date shall mean the prime rate of
interest as published on that date in the Wall Street Journal, and generally
defined therein as "the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks." If the Wall Street Journal is not published on a
date for which the Prime Rate must be determined, the Prime Rate shall be the
prime rate published in the Wall Street Journal on the nearest-preceding date on
which the Wall Street Journal was published.
"Qualified Financing" means the first issuance after February 10, 1997
of $50,000,000 or more of indebtedness by the Company or any Subsidiary in a
single transaction, in which case the Company may issue equity (or rights to
acquire equity) in the Company in the same transaction constituting no more than
5.0% of the outstanding capital stock of the Company on a fully-diluted basis
without resulting in the price protection under Section 6(e)(iii) of the
Certificate of Designations.
"Registration Rights Agreement" shall mean that certain registration
rights agreement dated February 10, 1997, by and among the LLC and the members
of the LLC on the date of such agreement.
"Stock" shall mean the Common Stock and the PIK Preferred Stock.
"Subsidiary" shall mean any entity more than 50% of the equity
interests of which are owned directly or indirectly by the Company or more than
50% of the total voting power entitled to vote in the election of directors,
managers, general partners or trustees of which is held directly or indirectly
by the Company.
"10% Stockholder" shall mean any Stockholder that holds at least 10% of
all outstanding capital stock of the Company, and in all events the term "10%
Stockholder" shall include Columbia, Columbia DBS Investors, L.P., Whitney, and
each entity that is part of the group of entities collectively defined as
"Fleet" herein.
"Transfer" shall mean any sale, assignment, transfer, conveyance,
pledge, hypothecation, or other disposition, voluntarily or involuntarily, by
operation of law, with or without consideration, or otherwise (including,
without limitation, by way of intestacy, will, gift, bankruptcy, receivership,
levy, execution, charging order or other similar sale or seizure by legal
process) of all or any portion of any asset.
"Transfer Notice" shall mean written notice given to the Company and
all Stockholders of all the details of any proposed Transfer of Stock including
the name of the proposed transferee, the date of the proposed Transfer, the
portion of the Stockholder's Stock to be transferred, the price or other
consideration, if any, to be received, and a complete description of all noncash
consideration to be received.
L-5
<PAGE> 28
"Vote Shift" shall mean (a) in the case there is a seven member Board
of Directors, (i) the elimination of the extra vote held by each of the two
directors entitled to two votes, and (ii) the increase in the number of votes
held by the Chisholm Designee and one of the Whitney Designees, in each case
from one vote to two votes, with the result that the Chisholm Designee and the
Whitney Designees shall have, in the aggregate, five of the nine votes on the
seven-member Board of Directors, and (b) in the case there is a nine member
Board of Directors, (i) the increase in the number of votes held by the Chisholm
Designee and one of the Whitney Designees from one vote to two votes each, and
(ii) the increase in the number of votes held by the other Whitney Designee from
one vote to three votes, with the result that the Chisholm Designee and the
Whitney Designees shall have, in the aggregate, seven of the thirteen total
votes on the nine member Board of Directors.
"Whitney" shall mean Whitney Equity Partners, L.P., a Delaware limited
partnership, or its successors or assigns.
SECTION 1.2. ADDITIONAL TERMS. The following terms shall have the
meanings indicated or referred to in the following Sections of this Agreement:
Term Section
---- -------
1933 Act 4.2(d)
AAA 6.10(b)
AAA Rules 6.10(b)
Agreement Introductory Paragraph
Appraisal Process 4.5(a)
Arbitration Notice 6.10(c)
Arbitrators 6.10(b)
Change Notice 5.1(b)
Chisholm Designee 5.1(a)
Class B Units 2.4(a)
Closing 4.4(b)
Company Introductory Paragraph
First Arbitrator 6.10(e)
Indirect Transfer 4.3(b)(iv)
LLC Introductory Paragraph
LLC Agreement Recitals
Offered Stock 4.3(a)
Optional Purchase Event 4.3(b)
Petitioner 6.10(d)
Respondent 6.10(d)
Second Arbitrator 6.10(e)
Sole Arbitrator 6.10(d)
Third Arbitrator 6.10(e)
Valuation Date 4.3(d)
Whitney Designee 5.1(a)
L-6
<PAGE> 29
ARTICLE II
CONDUCT OF BUSINESS
SECTION 2.1. SCOPE OF ARTICLE. The provisions of this Article II shall
apply to all Stock held by any Stockholder, whether or not held or acquired by
such Stockholder on or after the date of this Agreement or at or after any time
such Stockholder first became subject to this Agreement.
SECTION 2.2. INFORMATION TO BE PROVIDED. Within ninety (90) days after
the end of each Fiscal Year, each Stockholder shall be furnished with annual
financial statements containing a balance sheet, income statement, and statement
of changes in working capital as of or for the Fiscal Year then ending which
financial statements shall be prepared in accordance with generally accepted
accounting principles and shall be audited by Arthur Andersen & Co. or such
other firm of independent certified public accountants as may be selected by the
Board of Directors and reasonably satisfactory to the holders of at least 70% of
the PIK Preferred Stock. The Company shall also provide to each of Whitney,
Fleet and such other Stockholders as the Board of Directors may determine (i) an
annual operating budget and capital expenditure budget for each Fiscal Year
(which shall be delivered prior to December 1 of the previous Fiscal Year); (ii)
unaudited quarterly financial statements within 45 days of the completion of
each calendar quarter of the Fiscal Year; and (iii) unaudited monthly financial
statements containing a balance sheet, a statement of income, and a statement of
changes in working capital and showing variances to the annual operating budget
and capital expenditure budget within 30 days after the last day of each month.
SECTION 2.3. BOOKS AND RECORDS; VISIT TO BUSINESS PREMISES. The Company
shall keep books and records at its principal place of business, which shall set
forth an accurate account of all transactions of the Company. Any Stockholder or
its designated representative shall have the right, during normal business hours
and upon two business days prior written notice to the Company specifying the
records or information desired and the purpose for which the records or
information is sought, to have access to and inspect and copy, at its expense,
the contents of such books or records. Any 10% Stockholder or its designated
representative shall have the right, during normal business hours and upon three
(3) business days prior notice specifying the business premises of the Company
that the Stockholder wishes to visit and purpose for which the Stockholder
desires to visit, to personally visit and inspect any business premises of the
Company. The provisions of this Section 2.3 to the contrary notwithstanding, the
Company shall have the right to keep confidential from the Stockholder for such
period of time as the Company deems reasonable, any information which the
Company reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the Company in good faith believes is not in
the best interest of the Company.
SECTION 2.4. SPECIAL VOTING RIGHTS OF THE PIK PREFERRED STOCK.
(a) Class Vote Required. For so long as any shares of PIK Preferred
Stock are outstanding, without the vote of the holders of at least seventy
percent (70%) of the PIK Preferred Stock and, if there has been a Vote Shift as
a result of a Change of Control of Columbia, seventy percent (70%) of those
shares of the then outstanding Common Stock which
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were issued in exchange for Class B Units of the LLC (the "Class B Units"), the
Company shall not take any action that:
(i) Alters or changes the rights, preferences or
privileges with respect to the PIK Preferred Stock
(or, if there has been a Vote Shift, the Common
Stock).
(ii) Creates, by reclassification or otherwise, any new
class or series of capital stock having rights,
preferences or privileges senior or pari passu to the
PIK Preferred Stock (or, if there has been a Vote
Shift, the Common Stock).
(iii) Results in any merger, reorganization, Change of
Control of the Company or any transaction or a series
of related transactions in which all or substantially
all of the assets, properties, or businesses of the
Company and its Subsidiaries taken as a whole are
sold or otherwise transferred to Persons other than
the Company or any of its Subsidiaries, unless such
transaction would result in cash proceeds to the
holders of the PIK Preferred Stock with respect to
the PIK Preferred Stock of an amount per share equal
to or greater than the Liquidation Preference.
(iv) Results in an IPO that is not a Qualified IPO,
subject to the rights of the Stockholders under the
Registration Rights Agreement.
(v) Results in the redemption or repurchase of any
capital stock of the Company, whether in the form of
cash or promissory notes, or otherwise (except in
connection with the redemption or acquisition of
capital stock of the Company held by employees,
directors, or consultants of the Company or any
Subsidiary, or Permitted Transferees of such Persons,
in connection with or in furtherance of the
termination of such relationship).
(vi) Results in the issuance of any equity interest in the
Company or in any Subsidiary, or rights to acquire
such equity interests, other than under the Employee
Stock Plan or in connection with a Qualified
Financing or an Interim Financing.
(vii) Results in any distribution with respect to any
equity interests in the Company (other than as
permitted in clause (v) above).
(viii) Results in any contract, agreement, loan, transaction
or other relationship with the Company or any
Subsidiary and any of the Columbia Entities, Whitney
or Fleet, or with an Affiliate of any of them
(excluding for this purpose any Subsidiary) provided
that the foregoing shall not prohibit any payment of
Permitted Reimbursements.
(ix) Results in a change in the size, voting or
composition of the Board of Directors.
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(x) Results in an increase in the number of shares of
Common Stock authorized to be issued under the
Employee Stock Plan.
(xi) Results in the Company being engaged in any business
other than the distribution of, or the indirect
holding of rights to distribute, DirecTv broadcast
satellite services, programming and products.
(b) Special PIK Preferred Stock Vote. For so long as the any shares of
PIK Preferred Stock are outstanding, without the consent of holders of at least
fifty percent (50%) of the shares of PIK Preferred Stock neither the Company nor
any Subsidiary shall enter into or consummate an acquisition of any NRTC System
(other than those NRTC Systems permitted to be acquired by the LLC), or more
than one NRTC System in the same or a series of related transactions from a
single seller or group of Affiliated sellers, if the acquisition price per
household is greater than $120 or the aggregate purchase price exceeds
$25,000,000; provided, however, that this Section 2.4(b) shall expire on
February 10, 1999.
(c) Meetings of the Stockholders may be called by any 10% Stockholder
by notice to the other Stockholders setting forth the date and time of the
meeting, the nature of the business to be transacted and the place of the
meeting. Notice of any meeting shall be given in accordance with the Bylaws of
the Company to all Stockholders not less than two (2) days nor more than ninety
(90) days prior to the meeting.
ARTICLE III
PARTICIPATION RIGHTS
SECTION 3.1. PARTICIPATION RIGHTS. Except in the case of issuance of
shares of capital stock of the Company (i) pursuant to the Employee Stock Plan,
(ii) in connection with a Qualified Financing or Interim Financing, (iii) in
exchange for capital contributions consisting of property other than cash, or
(iv) pursuant to Section 6(e) of the Certificate of Designations, prior to
issuing any additional shares of capital stock of the Company all Stockholders
(other than any Stockholders who own shares of Common Stock solely through
participation in the Employee Stock Plan) shall have been offered the right to
purchase their proportionate share of such additional shares of capital stock on
the same terms and subject to the same conditions as the proposed issuance to
others, which rights to purchase shall be offered to such Stockholder in the
ratio that their aggregate number of shares of Stock (other than shares of
Common Stock obtained through the Employee Stock Plan) bear to the aggregate
number of shares of such Stock. Any shares of capital stock not initially
subscribed for by such Stockholders shall be reoffered to those Stockholders
electing initially to purchase their proportionate share hereunder in proportion
to the relative number of shares of Stock held by those Stockholders initially
electing to purchase their proportionate share. The Company shall determine the
timing and such other procedures as may be necessary and appropriate to enable
such Stockholders to exercise their rights hereunder, provided that in any event
such Stockholders shall be given no less than five (5) business days prior
notice before being required to commit to purchase the shares of capital stock
pursuant to this Section 3.1.
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ARTICLE IV
TRANSFERS OF STOCK
SECTION 4.1. SCOPE OF ARTICLE; MANDATORY PLEDGE OF STOCK. The
provisions of this Article IV shall apply to all Stock, whether or not held or
acquired by a Stockholder at or after the date of this Agreement or at or after
any time such Stockholder first became subject to this Agreement. Every Transfer
shall be subject to all of the terms, conditions, restrictions, and obligations
of this Agreement. Any attempted Transfer which does not comply with the
provisions of this Article shall be void and the Company shall not recognize the
attempted purchaser, assignee, or transferee for any purpose whatsoever, and the
Stockholder attempting such Transfer shall have breached this Agreement for
which the Company and the non-breaching Stockholders shall have all remedies
available for breach of contract.
Each Stockholder hereby agrees to grant a security interest in,
collaterally assign, pledge or hypothecate its Stock as security for the debts
of the Company and its Subsidiaries pursuant to the Guarantee and Collateral
Agreement. Each Stockholder agrees to execute any and all further instruments
and documents as may be necessary or appropriate to give effect to these
provisions. This provision shall no longer apply after such security interest is
released by the administrative agent under the Guarantee and Collateral
Agreement.
SECTION 4.2. CONDITIONS PRECEDENT TO TRANSFER OF STOCK. Subject to
Sections 4.3 and 4.4, a Stockholder may Transfer all or any shares of Stock held
by such Stockholder if all the following conditions are satisfied:
(a) Prior Notice. At least ten (10) days prior to any proposed Transfer
of Stock otherwise permitted pursuant to this Section, the Stockholder proposing
to Transfer all or any shares of Stock held by such Stockholder gives a Transfer
Notice.
(b) Expenses. The transferor agrees to reimburse the Company for any
expenses reasonably incurred by the Company in connection with the consummation
of the Transfer.
(c) Transfer Documents; Effective Time of Transfer. Such Stockholder
and its purchaser, transferee or assignee shall execute, acknowledge, and
deliver to the Company such instruments of transfer and assignment with respect
to such transaction as are in form and substance reasonably satisfactory to the
Company, including, without limitation, the written agreement of the purchaser,
transferee or assignee to assume and be bound by all of the obligations of the
transferor under this Agreement.
(d) Securities Law Compliance. Either (i) the Transfer is to the heirs,
devisees or legatees of a deceased Stockholder; (ii) the Stock to be Transferred
is registered under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "1933 Act"), and any applicable state securities
laws; or (iii) the Company determines that the Transfer qualifies for an
exemption from the registration requirements of the 1933 Act and any applicable
state securities laws. Except as specifically provided in the Registration
Rights Agreement, the Company has no obligation or intention to register any of
the Stock for resale under any federal
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or state securities laws or to take any action which would make available any
exemption from the registration requirements of such laws.
(e) Opinion of Counsel. In its discretion, the Company may require as a
condition precedent to any Transfer of Stock delivery to the Company, at the
proposed transferor Stockholder's expense, of an opinion of counsel satisfactory
(both as to the counsel and substance of the opinion) to the Company that the
proposed Transfer will satisfy all or certain of the conditions set forth in
Sections 4.2(c) and (d).
(f) Other Agreements. The Transfer complies with the provision of any
employment agreement or other agreement between the Stockholder and the Company
or any Subsidiary.
SECTION 4.3. RIGHT OF FIRST REFUSAL.
(a) Grant of Option. Upon the occurrence of an Optional Purchase Event
with respect to a Stockholder, the Company, followed by all of the 10%
Stockholders, shall have successive options to purchase all, but not less than
all, of the shares of Stock proposed to be sold, assigned or transferred by such
Stockholder (the "Offered Stock") pursuant to the terms and conditions set forth
in this Agreement.
Upon the occurrence of an Optional Purchase Event, the Stockholder with
respect to whom the Optional Purchase Event has occurred shall immediately give
written notice to the Company and to all 10% Stockholders, which notice shall
describe the Optional Purchase Event (unless the Optional Purchase Event is the
giving of a Transfer Notice, in which case the Transfer Notice shall suffice).
If the Stockholder with respect to whom the Optional Purchase Event has occurred
does not provide such notice and another Stockholder knows of the occurrence of
such Optional Purchase Event, such Stockholder may send written notice of the
Optional Purchase Event to the Company, and if the Company determines that
Optional Purchase Event has occurred, the Company shall provide to all 10%
Stockholders the Transfer Notice.
(b) Optional Purchase Events. For purposes of this Agreement, the term
"Optional Purchase Event" shall mean any of the following events with respect to
a Stockholder:
(i) The delivery of a Transfer Notice by the Stockholder
unless such Transfer is to a Permitted Transferee.
(ii) In the case of any Stockholder that is an individual,
the entry by any court of an order or adjudication
that the current or former spouse of the Stockholder
has acquired any rights in any shares of the
Stockholder's Stock as a result of divorce, equitable
distribution or community property partition
proceedings pursuant to the laws of any state or
jurisdiction.
(iii) In the case of any Stockholder who initially received
such Stock from the Company (or an equity interest in
a predecessor of the Company) when such Stockholder
was an officer, director, employee, manager or
independent contractor of the Company or any
Subsidiary, such
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Stockholder is no longer an officer, director,
employee, manager or an independent contractor of the
Company or any Subsidiary.
(iv) In the case of Columbia, Columbia DBS Investors,
L.P., Columbia DBS, Inc., or any other Stockholder
substantially all of the assets of which consist of
such Stockholder's Stock, any Transfer of its capital
stock or other equity interests, or the sale or
issuance of any capital stock or equity interest in
such Stockholder, unless such Transfer, sale or
issuance is to a Person who was an owner of such
Stockholder on February 10, 1997 or a Permitted
Transferee of such Stockholder (an "Indirect
Transfer"); provided however, Columbia, Columbia DBS
Investors, L.P. or Columbia DBS, Inc. may admit
partners, members or shareholders without triggering
this clause if such partners, members or shareholders
are employees of Columbia Capital Corporation or if
such additional partners, members or shareholders do
not acquire in the aggregate more than ten percent
(10%) of the equity interests in such Columbia
Entity. In the case of an Indirect Transfer, the
right of first refusal under this Section 4.3 and the
right of co-sale under Section 4.4 shall apply to
that number of shares of Stock of the Stockholder
with respect to which an Indirect Transfer has
occurred based upon the amount of the equity interest
of such Stockholder that is Transferred or issued in
the Indirect Transfer relative to the total equity
interests in such Stockholder.
(c) Proposed Transfer for Consideration. If the Optional Purchase Event
is the delivery of a Transfer Notice or an Indirect Transfer and the Transfer or
Indirect Transfer is for cash, indebtedness, property or other consideration,
then the Company's and the 10% Stockholders' successive options shall be to
purchase the Offered Stock for the fair market value of the consideration
proposed to be received in the Transfer or Indirect Transfer or payable at the
closing described below, and pursuant to all of the other terms and conditions
of the proposed Transfer or Indirect Transfer. The Stockholder desiring to
Transfer the Offered Stock (or the Stockholder with respect to which an Indirect
Transfer has occurred) and the Company (acting on behalf of all Persons who
exercise their option to purchase hereunder) shall attempt to agree, in writing,
on the fair market value of any noncash consideration to be received in the
proposed Transfer. If the Stockholder and the Company are unable to agree on the
fair market value of the noncash consideration within thirty (30) days following
the exercise of the options to purchase granted in this Section, either the
Stockholder or the Company may by notice to the other commence the Appraisal
Process.
(d) Other Optional Purchase Events. If the Optional Purchase Event is
not a proposed Transfer or Indirect Transfer for consideration, then the
successive options shall be for a purchase price equal to (i) the fair market
value of the Offered Stock as of the last day of the calendar month immediately
prior to the occurrence of the Optional Purchase Event (the "Valuation Date"),
plus (ii) interest at the Prime Rate on the amount determined under clause (i)
from the Valuation Date to the closing date, compounded monthly, reduced by
(iii) any dividends or other distributions with respect to the Offered Stock
from the Valuation Date through the closing. For purposes of determining the
purchase price, the fair market value of a share of Stock shall equal the amount
that would be received by the owner of such share of
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Stock if all of the assets of the Company were sold for cash equal to their fair
market value, the Company paid all of its liabilities and liquidated, all as of
the Valuation Date. The selling Stockholder and the Company (acting on behalf of
all Persons who have options to purchase hereunder) shall attempt in good faith
to agree on the fair market value of the Offered Stock. If they are unable to
agree, in writing, on the fair market value of the Offered Stock within thirty
(30) days following the exercise of the options to purchase granted in this
Section, either the selling Stockholder or the Company may by notice to the
other commence the Appraisal Process.
(e) Exercise of Option by the Company. The Company shall provide
written notice of exercise of the option to the Stockholder with respect to whom
an Optional Purchase Event has occurred and to all 10% Stockholders within
thirty (30) days following the Transfer Notice or the other written notice to
all 10% Stockholders of the occurrence of the Optional Purchase Event,
specifying whether or not the Company is exercising its option to purchase the
Offered Stock pursuant to this Section. A failure by the Company to give notice
within such period shall be deemed to be a notice of nonexercise.
(f) Exercise of Option by 10% Stockholders. In the event the Company
does not exercise its option, then each of the 10% Stockholders shall have the
option to (i) purchase the Offered Stock pursuant to this Section 4.3 on the
same terms as the Company in proportion to the relative number of shares of
Stock held by all the 10% Stockholders; (ii) exercise the rights of co-sale
specified in Section 4.4 below; or (iii) neither purchase any of such Offered
Stock nor exercise rights of co-sale. In order to exercise its option pursuant
to this Section, a 10% Stockholder shall provide written notice of exercise of
the option to the Stockholder with respect to whom an Optional Purchase Event
has occurred, to the Company and to all other 10% Stockholders within thirty
(30) days following the Company's nonexercise. If any 10% Stockholder elects not
to exercise their option, then those 10% Stockholders that do exercise their
option shall have the option, for an additional fifteen (15) days following the
end of the option period for all 10% Stockholders, to acquire the Offered Stock
that could have been acquired by the nonexercising 10% Stockholders in
proportion to the relative number of shares of Stock held by the exercising 10%
Stockholders.
(g) Waiver; Failure to Exercise Options. Any party with an option to
purchase Stock pursuant to this Article may waive its option at any time by
notice of such waiver to the Company. With respect to an Optional Purchase Event
that is the giving of a Transfer Notice, if Persons with options under this
Section shall fail to exercise their options to purchase the Offered Stock
within the applicable periods, or in the event the purchaser(s) shall fail to
tender the required consideration at the closing referred to below, then subject
to the rights of co-sale described in Section 4.4 below, the transferring
Stockholder may transfer the Offered Stock to the Person, and upon the terms and
price, specified in the notice of the proposed Transfer, but only if such
Transfer is consummated within ninety (90) days after the expiration or
withdrawal of the last option, or the failure to tender the consideration if
applicable. If the Offered Stock is not so transferred within the applicable
period, the Offered Stock shall again become subject to all of the terms and
conditions of the Agreement and may not thereafter be transferred except in the
manner and on the terms herein provided. In the event the Company or any 10%
Stockholder exercises an option hereunder, but fails to tender the required
consideration at the closing, the transferring Stockholder shall have all rights
and remedies against the Company or
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the exercising 10% Stockholders, as the case may be, available for breach of
contract, including the remedy of specific performance.
(h) Closing of Purchase of Stock; Payment of Purchase Price; Security.
The closing of the purchase of any Offered Stock by the Company or any of the
10% Stockholders pursuant to this Section shall occur at the offices of the
Company within thirty (30) days after the earlier of (a) the written agreement
of the parties on the fair market value of the Offered Stock or the
consideration to be received therefor, as the case may be, or (b) the conclusion
of the Appraisal Process. At the closing, the selling Stockholder shall deliver
to the purchaser(s) of the Offered Stock certificates evidencing the Offered
Stock, and the purchaser(s) shall deliver the purchase price as provided below
to the such Stockholder. The selling Stockholder and the purchaser(s) each shall
execute and deliver such other documents as may reasonably be requested by the
other.
The purchase price shall be delivered at closing as follows:
(i) If the purchase of the Offered Stock is as a result of a
proposed Transfer to a third party for consideration, the
purchase price determined under this Agreement shall be
payable on the same basis as the purchase price was to have
been paid by the third party.
(ii) If the purchase of the Offered Stock is as a result of any
other Optional Purchase Event the purchase price shall be
payable in cash or same day funds.
SECTION 4.4. RIGHT OF CO-SALE.
(a) Right of Co-Sale. In the event of a proposed Transfer of Stock to a
Person who is not a Permitted Transferee, to the extent the Stock proposed to be
transferred is not purchased by the Company pursuant to its right of first
refusal described in Section 4.3, each other Stockholder shall have the right to
participate in the Transfer in the manner set forth in this Section 4.4. Each
such nontransferring Stockholder may Transfer to the proposed transferee
identified in the Transfer Notice a pro rata share (defined below) of such
non-transferring Stockholders Stock, by giving written notice to the Company and
to the transferring Stockholder within the thirty (30) day period specified in
Section 4.3(f), which notice shall state that the Stockholder elects to exercise
its rights of co-sale under this Section 4.4. A notice of exercise of a
Stockholder's right of first refusal under Section 4.3(f) and a notice of
exercise of a Stockholder's rights of co-sale hereunder shall be mutually
exclusive and the first such notice given shall be binding and irrevocable. Each
nontransferring Stockholder shall be deemed to have waived its right of co-sale
hereunder either if it fails to give notice within the prescribed time period or
if such Stockholder gives notice exercising its right of first refusal pursuant
to Section 4.3(f). A nontransferring Stockholder's pro rata share for this
purpose shall equal that number of shares of the nontransferring Stockholder's
Stock represented by the number obtained by multiplying the number of shares of
Stock that are the subject of the proposed Transfer by a fraction, the numerator
of which is the number of shares of Stock then held by such nontransferring
Stockholder, and the denominator of which is the number of shares of Stock then
held by all persons entitled to this right of co-sale plus the number of shares
of Stock proposed to be Transferred by the transferring Stockholder. Insofar as
possible this right of co-sale shall
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apply to Stock of the same class or classes as the Stock subject to the Transfer
Notice. If any Stockholder desiring to exercise its rights of co-sale hereunder
does not have a sufficient number of Stock of the same class as the Stock
subject to the Transfer Notice, such Stockholder may substitute Stock of another
class so long as such class ranks senior in liquidation to the class of Stock
subject to the Transfer Notice. In the event the proposed Transfer is of Common
Stock and a Person wishing to exercise its rights of co-sale hereunder does not
have sufficient shares of Common Stock, but has PIK Preferred Stock, such Person
may convert a sufficient number of PIK Preferred Stock into Common Stock in
accordance with the procedures set forth in the Certificate of Designations.
(b) Consummation of Co-Sale. Each nontransferring Stockholder, in
exercising its right of co-sale hereunder, may participate in the Transfer by
delivering to the transferring Stockholder at the closing of the Transfer of the
transferring Stockholder's Stock to the transferee (the "Closing") one or more
certificates duly endorsed representing the shares of Stock to be transferred by
such nontransferring Stockholder. At the Closing, such certificates will be
delivered to the purchaser (whether such purchaser is the proposed transferee
set forth in the Transfer Notice or those Stockholders who have exercised their
rights of first refusal under Section 4.3) and the transferring Stockholder will
remit, or will cause to be remitted, to the nontransferring Stockholder at the
Closing that portion of the proceeds of the Transfer to which such
nontransferring Stockholder would otherwise be entitled by reason of such
nontransferring Stockholder's participation in such Transfer pursuant to these
rights of co-sale.
(c) Indirect Transfers. In the case of an Indirect Transfer, the right
of co-sale under this Section 4.4 shall be the right to put that number of
shares of Stock of the Stockholders electing their rights of co-sale hereunder
to the Stockholder with respect to whom the Indirect Transfer has occurred, as
if such Stockholder had Transferred that proportionate number of shares of Stock
described in Section 4.3(b)(iv) above.
SECTION 4.5. APPRAISAL PROCESS.
(a) If a Stockholder and the Company are unable to agree, in writing,
on the fair market value of any shares of Stock or the consideration to be
received in exchange for any shares of Stock within the time limits set forth in
Article IV, at any time following the expiration of such time limit either may
invoke the process described in this Section (the "Appraisal Process") by
sending the notice selecting an appraiser as described in subparagraph (i)
below, in which case the determination of fair market value in accordance with
this Article shall be final and binding on all parties to this Agreement. If the
purchaser of the Stock is one or more of the Stockholders, all decisions
relating to the Appraisal Process shall be made by the Company on behalf of the
Stockholders who have exercised their options to purchase; neither the
Stockholder whose Stock is being purchased nor the nonexercising Stockholders
shall participate in any of the Company's decisions relating to the Appraisal
Process.
(i) First Appraisal. The written notice invoking the Appraisal Process
shall state that the Appraisal Process is being invoked and shall set forth the
name and address of the unrelated third party appraiser selected by the party
invoking the Appraisal Process. Any appraiser selected pursuant to this Section
shall be a Person qualified with respect to determining the fair
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market value of the shares of Stock or other property that is in question. The
party to the purchase and sale transaction who did not invoke the Appraisal
Process shall have ten (10) days following the notice of the selection of the
first appraiser to select a second unrelated third party appraiser by sending to
the other party written notice setting forth the name and address of the second
appraiser.
If a second appraiser is not selected within the 10 day time period,
the appraiser selected by the party invoking the Appraisal Process shall prepare
his appraisal report and submit it to the owner of the shares of Stock and the
Company within sixty (60) days following the notice of his selection as an
appraiser, in which case the Appraisal Process shall be concluded and the fair
market value of the property in question shall be the amount set forth in the
appraiser's report.
(ii) Second Appraisal. If a second appraiser has been selected pursuant
to subparagraph (i) above, the two appraisers so selected shall consult with
each other in an effort to reach an agreement as to the fair market value. If
the two appraisers shall agree in writing as to the fair market value of the
property in question within forty-five (45) days following the appointment of
the second appraiser, the fair market value of such property shall be the amount
to which the appraisers have agreed, and the Appraisal Process shall be
concluded.
In the event the two appraisers are unable to agree as to the fair
market value, the two appraisers shall prepare their separate reports and submit
them to the Company and the owner of the shares of Stock within sixty (60) days
following the appointment of the second appraiser. If the higher fair market
value exceeds the lower fair market value by 10% or less of the lower fair
market value the Appraisal Process shall be concluded and the fair market value
of the property in question shall be the average of the two fair market values
as set forth in the two appraisal reports. If the higher fair market value
exceeds the lower fair market value by more than 10% of the lower fair market
value, the owner of the shares of Stock and the Company shall further attempt to
agree as to the fair market value.
(iii) Third Appraisal. If the higher fair market value of the two
appraisals exceeds the lower fair market value by more than 10% of the lower
fair market value and, as of the eleventh (11th) day following the submission of
both appraisal reports, neither party has sent written notice calling for a
third appraiser, the Appraisal Process shall be concluded and the fair market
value of the property in question shall be the average of the two fair market
values as set forth in the two appraisal reports. If, however, the higher fair
market value exceeds the lower fair market value by more than 10% of the lower
fair market value and, within ten (10) days following the submission of the
first two appraisers' reports, either party sends written notice to the other
calling for a third appraiser, the two previously-selected appraisers shall
promptly (but in any event within thirty (30) days following the submission of
both appraisal reports) select a third appraiser to determine the fair market
value of the property in question. The first two appraisers shall notify the
Company, which shall in turn notify the owner of the shares of Stock and all
other Stockholders, of the name and address of the third appraiser so selected;
provided, however, that if the Company has not received notice of the name and
address of the third appraiser within such thirty (30) day period, then the fair
market value of the property in question shall be the average of the two
appraisals that have been completed. Neither the previously selected appraisers,
the Stockholder whose shares of Stock are being
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purchased, the Company, the Stockholders nor any Persons related to any of them
shall disclose to the third appraiser the appraisal reports of the first two
appraisers or the results of the first two appraisals. Within thirty (30) days
following his appointment, the third appraiser shall submit to the owner of the
shares of Stock and the Company his appraisal report, in which case the
Appraisal Process shall be concluded and the fair market value of the property
in question shall be the average of the two appraisals that are closest to each
other.
(b) Costs of Appraisal Process.
(i) General Rules. Unless provided otherwise in clause (b)(ii) below,
the costs of the Appraisal Process shall be borne equally by the Stockholder
whose shares of Stock are being purchased and by the Person(s) obligated to
purchase such shares of Stock. If one or more of the Stockholders exercised its
option to purchase such shares of Stock, the portion of the costs of the
Appraisal Process that are not borne by the owner of such shares of Stock shall
be divided among the exercising Stockholders based upon the relative number of
shares of Stock being purchased.
(ii) Exception. Notwithstanding subparagraph (i) above, in the event a
party calls for a third appraiser as provided above and the fair market value of
the property in question as determined pursuant to the Appraisal Process is less
favorable to that party than if the fair market value was determined by
averaging the appraised fair market values as determined by the first two
appraisers, the entire costs of the Appraisal Process shall be borne by the
party calling for the third appraiser.
ARTICLE V
BOARD OF DIRECTORS
SECTION 5.1. SIZE AND COMPOSITION OF BOARD OF DIRECTORS. (a) Each of
the Stockholders agrees that the number of members of the Board of Directors
shall be seven (7) and that such Stockholder shall not take or permit to be
taken any action, unless expressly permitted by this Section 5.1, which would
change such number. Each Stockholder agrees to vote or otherwise cause the
election of the following individuals as directors:
(i) Two (2) individuals designated in writing by Whitney (each, a
"Whitney Designee").
(ii) One (1) individual designated in writing by Chisholm (the
"Chisholm Designee").
(iii) The chief executive officer of the Company, as may be elected
from time to time by the Board of Directors.
(iv) Those two (2) individuals elected by a vote of the holders of
Common Stock who received such Common Stock in exchange for
Class B Units pursuant to the Preferred Stock Corporate
Conversion, with each such holder being entitled to cast that
number of votes equal to the number of such shares of Common
Stock
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held by such holder, which vote shall be taken separately with
respect to each of the two (2) seats without cumulative
voting. The two (2) individuals designated pursuant to this
clause (iv) shall be entitled to two (2) votes each on all
matters before the Board of Directors until such time that the
size of the Board of Directors is increased to nine members as
provided below, or until there is a Vote Shift.
(v) One (1) individual elected by a vote of the holders of the
Common Stock, with each such holder being entitled to cast
that number of votes equal to the number of such shares of
Common Stock held by such holder.
Those Persons serving on the board of managers of the LLC on the date
hereof shall continue to serve as members of the Board of Directors until their
death or resignation, or until their successor is designated as provided herein.
(b) Upon the affirmative vote of Columbia, Whitney and Chisholm, the
size of the Board of Directors shall be increased from seven (7) to nine (9).
The two additional seats shall be filled by individuals approved by Columbia,
Whitney and Chisholm, and elected by holders of a majority of the Stock, and who
are not otherwise Affiliates of any of the Columbia Entities, Whitney or Fleet.
In the event of such an increase in the size of the Board of Directors, the two
(2) individuals designated pursuant to clause (iv) above and the two (2) new
designated individuals shall be entitled to one vote each.
Within five (5) days following any Change of Control of Columbia, then
the Columbia Entities shall give notice of such event to Whitney and Chisholm
("Change Notice"). If the Columbia Entities do not give the required Change
Notice, Columbia and Columbia DBS Investors, L.P. shall be in breach of this
Agreement, and in addition Whitney or Chisholm still have the right at any time
to give the Change Notice. At any time following a Change Notice and continuing
for a period of one year thereafter, either Whitney or Chisholm shall have the
right to implement the Vote Shift by notice to the Board and all of the
Stockholders. The Vote Shift shall be effective immediately upon such notice;
provided however, if the Change of Control of Columbia is curable, the Columbia
Entities shall have 90 days following the Vote Shift to cure the Change of
Control of Columbia, and if cured within such period the Vote Shift shall be
deemed rescinded as of the date of such cure.
(c) The Board of Directors shall meet not less often than once per
quarter. In the event that the Board of Directors create an "Executive
Committee," a "Compensation Committee," an "Audit Committee," or committees with
similar functions such committees shall have at least one member designated by
each of Columbia, Whitney and Chisholm.
(d) At such time as there are no longer any shares of PIK Preferred
Stock outstanding, the following shall be the composition of the Board of
Directors: (i) the size of the Board of Directors shall be the same as that
immediately prior to such time, (ii) each member of the Board of Directors shall
have one vote on all matters and (iii) all directors shall be elected by the
holders of the Common Stock.
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SECTION 5.2 INSURANCE. The Company shall obtain "directors and
officers" insurance for the members of the Board of Directors in such form and
with such coverage amounts as shall be determined by the Board of Directors and
satisfactory to Whitney and Fleet (but in no event shall coverage in excess of
$3,000,000 be required by Whitney and Fleet) no later than the earlier to occur
of March 25, 1997 and the closing of any Qualified Financing. The Company shall
obtain no later than April 10, 1997, and thereafter maintain in force so long as
requested to do so by Whitney, Fleet, or Columbia, key man insurance on the life
of the Company's Chief Executive Officer in an amount of coverage not less than
$10,000,000 and on the life of the Company's Chief Financial Officer in an
amount of coverage not less than $3,000,000, provided, however, that such
individuals are insurable at commercially reasonable rates.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. NOTICES. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be delivered personally to the Person or to an officer or
manager of the Person to whom the same is directed, or sent by regular,
registered, or certified United States mail, or by facsimile transmission or by
private mail or courier service, addressed as follows: if to the Company, to the
principal office address of the Company, or to such other address as may be
specified from time to time by notice to the Stockholders; if to a Stockholder,
to the address set forth in the records of the Company, or to such other address
as the Stockholder may specify from time to time by notice to the Company. Any
such notice shall be deemed to be delivered, given, and received for all
purposes (i) as of the date of actual receipt if delivered personally or if sent
by regular mail, facsimile transmission or by private mail or courier service,
or (ii) four (4) business days after the date on which the same was deposited in
a regularly-maintained receptacle for the deposit of United States mail, if sent
by registered or certified United States mail, postage and charges prepaid,
return receipt requested.
SECTION 6.2. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Stockholders, and their respective
heirs, legatees, legal representatives, successors, transferees, and assigns.
SECTION 6.3. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Stockholder. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
The parties acknowledge that each party to this Agreement has shared equally in
the drafting and construction of this Agreement and, accordingly, no court
construing this Agreement shall construe it more strictly against one party
hereto than the other.
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SECTION 6.4. ENTIRE AGREEMENT; RELATIONSHIP TO CERTIFICATE OF
INCORPORATION AND BYLAWS; AMENDMENTS. This Agreement constitutes the entire
agreement among the Stockholders with respect to the affairs of the Company and
the conduct of its business, and supersedes all prior agreements and
understandings, whether oral or written. To the extent any provision of this
Agreement is inconsistent with any provision of the Certificate of Incorporation
(including the Certificate of Designations) or Bylaws of the Company, the
Stockholders agree that as among themselves this Agreement shall control. The
Stockholders agree to take any action necessary, including voting their Stock,
to give effect to the foregoing sentence. This Agreement may only be amended by
an agreement in writing signed by the Company and by (i) Preferred Stockholders
holding of record 70% or more of the then outstanding PIK Preferred Stock and
(ii) Stockholders holding of record 70% or more of those shares of the then
outstanding Common Stock which were issued in exchange for Class B Units. Any
such amendment shall be binding on the Company and all Stockholders.
SECTION 6.5. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 6.6. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 6.7. ADDITIONAL DOCUMENTS. Each Stockholder, upon the request
of the Company, agrees to perform all further acts and execute, acknowledge, and
deliver any documents that may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
SECTION 6.8. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 6.9. TERMINATION. Notwithstanding any other provision herein
contained to the contrary, this Agreement shall be terminated and shall cease to
have any force and effect upon the consummation of a Qualified IPO (as defined
in the Certificate of Designations of the PIK Preferred Stock).
SECTION 6.10. GOVERNING LAW; CONSENT TO JURISDICTION; DISPUTE
RESOLUTION.
(a) The laws of the State of Delaware shall govern the validity of this
Agreement and the construction and interpretation of its terms. All disputes
between or among any Stockholders arising out of or in any way connected with
the execution, interpretation and performance of this Agreement (including the
validity, scope and enforceability of the dispute resolution provisions
contained herein) shall be solely and finally settled in accordance with this
Section 6.10. Each Stockholder hereby irrevocably consents to the personal
jurisdiction of the courts of the Commonwealth of Virginia with respect to
matters arising out of or related to the enforcement of the provisions of this
Section 6.10 and with respect to matters, if any, related to this Agreement not
required to be resolved pursuant to this Section 6.10.
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(b) Mandatory Arbitration. All disputes between or among any
Stockholders arising out of or in connection with the execution, interpretation
and performance of this Agreement (including the validity, scope and
enforceability of this arbitration provision) shall be solely and finally
settled by a board of arbitrators consisting of either one arbitrator or three
arbitrators, as set forth below (the term "Arbitrators" shall refer to the board
of arbitrators, whether it consists of one or three members). The arbitration
proceedings shall be held in the Washington, D.C. metropolitan area, and except
as otherwise may be provided in this Section, the arbitration proceedings shall
be conducted in accordance with the Commercial Arbitration Rules (the "AAA
Rules") of the American Arbitration Association (the "AAA").
(c) Arbitration Notice. If a Stockholder or Stockholders determine to
submit a dispute for arbitration pursuant to this Section, such Stockholder(s)
shall furnish the other Stockholders with a dated, written statement (the
"Arbitration Notice") indicating (i) such Stockholder's intent to commence
arbitration proceedings, (ii) the nature, with reasonable detail, of the dispute
and (iii) the remedy or remedies such Stockholder will seek.
(d) Selection of Sole Arbitrator. Within ten (10) days of the date of
the Arbitration Notice, the Stockholder or Stockholders commencing the
arbitration (collectively, the "Petitioner") and the party with whom the
Petitioner has its dispute (collectively, the "Respondent") shall attempt to
agree on and then select one neutral arbitrator (the "Sole Arbitrator"). A
"neutral" arbitrator shall be a Person who would not be subject to
disqualification under rule No. 19 of the AAA Rules.
(e) Arbitration Panel. If, within such ten (10) day period, the
Petitioner and Respondent are unable to agree upon a Sole Arbitrator, each of
them shall have five (5) business days (following the expiration of the ten (10)
day period) to select (and provide written notice of such selection to the other
Stockholders and the Company) a qualifying arbitrator. A "qualifying" arbitrator
is a Person who is not (i) an Affiliate or Family Member of either the
Petitioner or Respondent or (ii) counsel to any such Person at such time. If
either the Petitioner or Respondent fails to select a qualifying arbitrator or
provide such notice within the five (5) day period, the AAA shall have the right
to make such selection. (Such qualifying arbitrators hereafter may be referred
to, respectively, as the "First Arbitrator" and the "Second Arbitrator.") Within
ten (10) days following their selection, the First and Second Arbitrator shall
select (and provide written notice to the Stockholders and the Company of such
selection) a third arbitrator (the "Third Arbitrator") from a list of members of
the AAA's National Panel of Commercial Arbitrators. The Third Arbitrator must be
"neutral" as that term is defined above. Notwithstanding the foregoing, if a
dispute involves more than two Stockholders, all proceedings shall be conducted
before a Sole Arbitrator, who shall be selected by the AAA if the Stockholders
are unable to agree upon such Sole Arbitrator within the ten (10) day period
mentioned above.
(f) Discovery Requests. At any time within forty (40) days after the
date of the Arbitration Notice, the Petitioner and Respondent can make discovery
requests of the other (including, but not limited to, requests for delivery of
documents, production of witnesses for testimony and delivery of interrogatory
responses). The recipient of a discovery request shall have ten (10) days after
the receipt of such request to object to any or all portions of such request and
make an application to the Arbitrators to limit the scope of such discovery
request,
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and shall respond to any portions of such request not so objected to within
twenty (20) days of the receipt of such request. All objections shall be in
writing and shall indicate the reasons for such objections. Within five (5)
business days after the end of the period for the submission by the requested
party of an application to limit the discovery request, the Arbitrators shall
grant or deny such discovery request, in whole or in part, to the extent the
Arbitrators determine such discovery is or is not, as the case may be,
reasonably necessary to enable the requesting party to obtain information
relevant to the dispute without unreasonably burdening the requested party. The
requested party shall comply with a discovery request granted by the Arbitrators
within ten (10) business days after such discovery request is granted, or within
such longer period as the Arbitrators may determine upon application of the
requested party for extension thereof for reasonable cause. Neither party shall
be permitted to make more than one application for discovery to the Arbitrators.
All depositions shall be taken in the city in which the Person being deposed
resides or has its principal place of business, unless otherwise agreed by the
parties. The Arbitrators are not authorized to subpoena documents or perform
independent investigations.
(g) Timing of Hearings. Hearings must commence no later than ninety
(90) days following the date of the Arbitration Notice and such hearings shall
be conducted for no more than five (5) business days.
(h) Format of Hearings. Each of the Petitioner and the Respondent shall
submit a brief, outlining such party's claim for relief or defense to any claim,
to the other and to the Arbitrators on or before the tenth (10th) day following
the date of the last hearing. Reply briefs must be exchanged and submitted to
the Arbitrators on or before the twentieth (20th) day following the date of the
last hearing. The final decision of the Arbitrators is due on or before the
thirtieth (30th) day following the date of the last hearing. The Arbitrators
shall choose the form of final decision that, in their judgment, is most
consistent with the terms of this Agreement and the intent of the Stockholders,
as supported by evidence presented by the Petitioner and Respondent in the
arbitration proceeding or, if the subject matter of the dispute is not clearly
addressed in or determinable under this Agreement, that, in their opinion, would
be most fair to the Petitioner and Respondent under the arbitration. The
Arbitrators shall not be required to provide reasons for their decision.
(i) Fees and Expenses. The fees of the First and Second Arbitrators
shall be borne by the Petitioner and Respondent, respectively. All other
expenses of the arbitration shall be shared equally by the Petitioner and
Respondent in accordance with the AAA Rules.
(j) Arbitrators' Discretion. The foregoing time periods and procedural
steps may be modified or extended by the Arbitrators in their discretion to the
extent they deem necessary to prevent fundamental unfairness; provided that at
all times the Arbitrators shall be mindful of the Stockholders' desire for the
most expeditious possible resolution of the Stockholders' disputes; and
provided, further, that a final decision of the Arbitrators shall be rendered
within 120 days of the Arbitration Notice.
(k) Enforceability. To the extent permissible under applicable law, the
Stockholders agree that the award of the Arbitrators shall be final and shall
not be subject to judicial review. Judgment on the arbitration award may be
entered and enforced in any court having jurisdiction over the parties or their
assets. It is the intent of the parties that the arbitration provisions
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hereof be enforced to the fullest extent permitted by applicable law, including
the Federal Arbitration Act, 9 U.S.C. Section 2.
(l) Injunctive Relief. Nothing contained in this Section shall prevent
a Stockholder from seeking injunctive relief or require arbitration of any issue
for which injunctive relief is sought by either party hereto.
SECTION 6.11. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This
Agreement may be executed in any number of counterparts with the same effect as
if the Company and all of the Stockholders had signed the same document. Such
executions may be transmitted to the Company and/or the other Stockholders by
facsimile and such facsimile execution shall have the full force and effect of
an original signature. All fully executed counterparts, whether original
executions or facsimile executions or a combination, shall be construed together
and shall constitute one and the same agreement.
SECTION 6.12. DISSOLUTION OF THE COMPANY.
(a) TRIGGERS. The Company shall dissolve at any time after
February 10, 2003, if at such time the aggregate Liquidation Preference is at
least $7.5 million (excluding the Liquidation Preference on any PIK Preferred
Stock distributed as a dividend) and holders of at least a majority of PIK
Preferred Stock then outstanding vote to dissolve the Company and provide notice
of such vote to the Board of Directors; provided, however, that in the event
that such a vote and resulting dissolution of the Company would result in an
event of default or an incipient default under any then existing indebtedness of
the Company or any Subsidiary with an outstanding balance of $10 million or
more, then such majority vote shall not cause the dissolution of the Company,
but rather shall constitute notice by the holders of the PIK Preferred Stock to
the Board of Directors that such holders desire that the Board of Directors
promptly arrange the sale of the Company (including its Subsidiaries) or a sale
of all or substantially all of its assets.
(b) WINDING UP OR SALE. Upon dissolution of the Company the
Board of Directors shall wind up the Company's affairs; but the Delaware Court
of Chancery, upon cause shown, may wind up the Company's affairs upon
application of any 10% Stockholder, his legal representative or assignee, and in
connection therewith, may appoint a liquidating trustee. The Persons charged
with winding up the Company shall settle and close the Company's business, and
dispose of and convey the Company's noncash assets as promptly as reasonably
possible following dissolution as is consistent with obtaining the fair market
value for the Company's assets.
If the holders of the PIK Preferred Stock have given notice under
Section 6.12(a) (regardless of whether such notice has caused the dissolution of
the Company), and if the Company has not entered into a definitive agreement for
the sale or other disposition of substantially all of its equity interests or
assets on or prior to the date that is six (6) months after the date of such
notice, or if the Company has not closed the sale or other disposition of
substantially all of its equity interests or assets on or prior to the date that
is nine (9) months after the date of such notice, then at any time after either
of such dates the holders of the PIK
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Preferred Stock acting by a vote of the holders of a majority of such PIK
Preferred Stock may give notice of a Vote Shift, which Vote Shift shall be
immediately effective.
SECTION 6.13. SPECIAL PRICE ADJUSTMENT IN THE CASE OF INTERIM
FINANCING. If, in connection with any Interim Financing, the Company is required
to issue Common Stock or rights or warrants entitling the holders thereof to
subscribe for or to purchase shares of Common Stock, then in lieu of the
weighted average price protection provided in Section 6(e)(iii) of the
Certificate of Designations, the number of shares of Common Stock into which the
shares of PIK Preferred Stock shall be convertible shall be increased so that:
(i) the ratio of (x) the number of shares of Common Stock into
which the PIK Preferred Stock is convertible immediately after such Interim
Financing to (y) the sum of (A) the total number of shares of Common Stock
outstanding (on a fully diluted basis) immediately after such Interim Financing
plus (B) shares of Common Stock underlying the PIK Preferred Stock immediately
after such Interim Financing equals
(ii) the ratio of (x) shares of Common Stock underlying the
PIK Preferred Stock immediately before such Interim Financing to (y) the sum of
(A) the total number of shares of Common Stock outstanding (on a fully diluted
basis) immediately before such Interim Financing plus (B) the total number of
shares of Common Stock into which the PIK Preferred Stock is convertible
immediately before such Interim Financing.
In addition, any commitment, underwriting, structuring or syndication fees
(other than customary periodic agency fees for administrative services) in
excess of four percent (4%) of the principal amount of the Interim Financing
which are payable by the Company in connection therewith shall be borne by the
Columbia Entities in proportion to their equity interests without recourse to
the Company.
SECTION 6.14. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
[SIGNATURES FOLLOW ON THE NEXT PAGE]
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Execution Page to the Stockholders Agreement
IN WITNESS WHEREOF, the Company and Stockholders have executed this
Agreement on the following execution pages, to be effective as of the date first
set forth above.
THE COMPANY:
DIGITAL TELEVISION SERVICES, INC.
A DELAWARE CORPORATION
By: ___________________________
Title: ___________________________
STOCKHOLDERS:
COLUMBIA DBS, INC.,
A VIRGINIA CORPORATION
COLUMBIA DBS CLASS A INVESTORS, LLC
A DELAWARE LIMITED LIABILITY COMPANY
COLUMBIA DBS INVESTORS, L.P.,
A DELAWARE LIMITED PARTNERSHIP
WHITNEY EQUITY PARTNERS, L.P.
A DELAWARE LIMITED PARTNERSHIP
FLEET VENTURE RESOURCES, INC.
A RHODE ISLAND CORPORATION
FLEET EQUITY PARTNERS VI, L.P.,
A DELAWARE LIMITED PARTNERSHIP
CHISHOLM PARTNERS III, L.P.,
A DELAWARE LIMITED PARTNERSHIP
KENNEDY PLAZA PARTNERS,
A RHODE ISLAND GENERAL PARTNERSHIP
DOUGLAS S. HOLLADAY, JR.
DONALD A. DOERING
WILLIAM J. DORRAN
By: DTS Management, LLC,
a Delaware limited liability company,
their Attorney-in-Fact
By: ______________________
Title: ______________________
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EXHIBIT M
TO THE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
CERTIFICATE OF INCORPORATION
AND BYLAWS
UPON QUALIFIED CORPORATE CONVERSION
FIRST: The name of this corporation is Digital Television Services,
Inc. (hereinafter referred to as the "Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle, 19801, and its registered agent at such address is THE CORPORATION TRUST
COMPANY.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which the Corporation may be organized under the General
Corporation Law of the State of Delaware.
The purpose specified in the foregoing paragraph shall in no way be
limited or restricted by the reference to, or inference from, the terms of any
provision in this Certificate of Incorporation.
The Corporation shall possess and may exercise all powers and
privileges necessary or convenient to effect the foregoing purpose, including
the general powers now or hereafter conferred by the laws of the State of
Delaware upon corporations formed under the General Corporation Law of the State
of Delaware.
FOURTH: The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is twenty million (20,000,000) shares,
of which ten million (10,000,000) shares shall be designated common stock, par
value $.01 per share (the "Common Stock"), and ten million (10,000,000) shares
shall be designated preferred stock, par value $.01 per share (the "Preferred
Stock").
The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article FOURTH, to provide for the issuance of
the shares of Preferred Stock in series, and by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
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The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that
series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the Common Stock with respect to the same
dividend period.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation the assets available for distribution to holders
of shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of Preferred
Stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The private property of the stockholders of the Corporation
shall not be subject to the payment of the corporate debts to any extent
whatsoever.
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SEVENTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the directors and
stockholders:
(1) The number of directors of the Corporation shall be no
less than seven and no more than nine. Election of directors need not be by
written ballot unless the bylaws of the Corporation so provide.
(2) The Board of Directors shall have power without the assent
or vote of the stockholders:
(a) To make, alter, amend, change, add to or repeal the bylaws
of the Corporation; to determine the use and disposition of any surplus
or net profits; and to fix the times for the declaration and payment of
dividends; and
(b) To determine from time to time whether, and to what
extent, and at what time and places, and under what conditions and
regulation, the accounts and books of the Corporation (other than the
stock ledger), or any of them, shall be open to the inspection of the
stockholders.
(3) In addition to the powers and authorities hereinbefore or
by statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and to do all such acts and things as may be exercised
or done by the Corporation; subject, nevertheless, to the provisions of the
General Corporation Law of Delaware, of this Certificate of Incorporation, and
to any bylaws from time to time adopted by the stockholders; provided, however,
that no bylaw so adopted shall invalidate any prior act of the directors which
would have been valid if such bylaw had not been made.
EIGHTH: The Corporation shall, to the fullest extent permitted by the
provisions of the General Corporation Law of Delaware, as now or hereafter in
effect, indemnify all persons whom it may indemnify under such provisions. The
indemnification provided by this Article EIGHTH shall not limit or exclude any
rights, indemnities or limitations of liability to which any person may be
entitled, whether as a matter of law, under the bylaws of the Corporation, by
agreement, vote of the stockholders or disinterested directors of the
Corporation or others. The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the State
of Delaware as the same may be amended or supplemented. Except as specifically
required by the Delaware General Corporation Law as the same exists or may
hereafter be amended, no director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of his or her
fiduciary duty as a director. No amendment to or repeal of this provision shall
apply to or have any effect on the liability or alleged liability of any
director for or with respect to any acts or omissions of such director occurring
prior to such amendment or repeal.
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NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by statute, and all rights and powers
conferred upon stockholders, directors, and officers herein are granted subject
to this reservation.
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BYLAWS OF
DIGITAL TELEVISION SERVICES, INC.
ARTICLE I.
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of stockholders for the
purpose of electing directors and of transacting such other business as may come
before it shall be held at such time as may be specified by resolution of the
Board of Directors.
Section 2. Special Meetings. Special meetings of the stockholders or of
a class of stockholders for any purpose or purposes may be called at any time by
the Chairman of the Board, by the President, by resolution of the Board of
Directors or by the Secretary. At a special meeting of the stockholders or of a
class of stockholders, no business shall be transacted and no corporate action
shall be taken other than that stated in the notice of the meeting.
Section 3. Time and Place. Meetings of the stockholders shall be held
at such time and place either within or without the State of Delaware as shall
be designated from time to time by the Board of Directors and stated in the
notice of meeting or in a duly executed waiver of notice thereof.
Section 4. Notice of Meetings. It shall be the duty of the Secretary to
cause a notice of each meeting of the stockholders or of a class of stockholders
of the Corporation to be mailed at least ten and not sooner than sixty days
before the meeting, unless a different period is prescribed by law, to each
stockholder entitled to vote at such meeting at his or her address as it appears
upon the books of the Corporation, stating the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is held.
Section 5. Quorum. At any meeting of the stockholders or of a class of
stockholders, the stockholders present in person or by proxy of a majority of
the outstanding shares of capital stock entitled to vote shall constitute a
quorum of the stockholders for all purposes (unless the representation of a
larger number of shares shall be required by law or by the Certificate of
Incorporation, in which case the representation of the number of shares so
required shall constitute a quorum).
The holders of a majority of the outstanding shares of capital stock
entitled to vote who are present in person or by proxy at any meeting (whether
or not constituting a quorum of the outstanding shares) may adjourn the meeting
from time to time without notice other than by announcement thereat; and at any
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally called,
but only those stockholders entitled to vote at the meeting originally noticed
shall be entitled to vote at any adjournment or adjournments thereof. However,
if the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
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Section 6. Organization and Conduct of Meetings. The President shall
call meetings of stockholders to order and shall act as Chairman of such
meetings. In the absence of the President at any meeting, the Chairman of the
Board shall act as Chairman. In the absence of the President or the Chairman of
the Board at any meeting, the holders of a majority of the shares of capital
stock entitled to vote present in person or by proxy at such meeting shall elect
a Chairman.
The Secretary of the Corporation shall act as Secretary of all meetings
of the stockholders; but, in the absence of the Secretary, the Chairman may
appoint any person to act as Secretary of the meeting.
It shall be the duty of the Secretary to prepare and make, at least ten
days before every meeting of stockholders, a complete list of stockholders
entitled to vote at said meeting, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in his or her
name. Such list shall be open to the examination of any stockholder for any
purpose germane to the meeting, during ordinary business hours, for the ten days
preceding the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 7. Voting. Except as otherwise provided in the Certificate of
Incorporation or by law, every holder of capital stock of the Corporation which
is entitled to vote shall be entitled to one vote in person or by proxy for each
share of such stock registered in the name of such stockholder upon the books of
the Corporation, but no proxy shall be voted on after three years from its date,
unless the proxy provides for a longer period. All elections for directors shall
be decided by a plurality of the vote of the shares of capital stock present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors; all other questions shall be decided by vote of the
majority of shares of capital stock entitled to vote on the subject matter who
are present in person or by proxy, except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
Section 8. Action by Written Consent. Any action required to be taken
at any annual or special meeting of stockholders or a class of stockholders of
the Corporation, or any action which may be taken at any annual or special
meeting of such stockholders or class of stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of issued and
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
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ARTICLE II.
BOARD OF DIRECTORS
Section 1. General Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors, which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute, the Certificate of Incorporation or these Bylaws directed or
required to be exercised or done by the stockholders.
Section 2. Number. The Sole Incorporator of the Corporation shall
determine the number of directors to constitute the first Board of Directors of
the Corporation. Thereafter, the number of directors of the Corporation shall be
determined from time to time by resolution adopted by the Board of Directors.
The directors shall be elected at the annual meeting of the stockholders, except
for the first Board of Directors, which shall be elected by the Sole
Incorporator, and except as provided in Section 3 of this Article, each director
shall hold office until his successor is duly elected and qualified or until his
earlier death, resignation or removal. Directors need not be stockholders.
Section 3. Vacancies, Removal and Newly Created Directorships.
Vacancies occurring for any reason and newly created directorships resulting
from any increase in the authorized number of directors shall be filled by the
affirmative vote of a majority of the directors then in office, though less than
a quorum, or by a sole remaining director, and each director so chosen shall
hold office until the next annual election and until his successor is duly
elected and qualified or until his earlier death, resignation or removal. If
there are no directors in office, an election of directors may be held in the
manner provided by statute. Except as otherwise provided by the Certificate of
Incorporation, at any special meeting of the stockholders the notice of which
shall state that the removal of a director or directors and the filling of a
vacancy or vacancies are among the purposes of the meeting, the holders of
capital stock entitled to vote thereon, present in person or by proxy, by vote
of a majority of the outstanding shares thereof, may remove any director for or
without cause and may fill any vacancy caused by such removal.
Section 4. Place of Meeting, etc. The Board of Directors may hold its
meetings and may have an office and keep the books of the Corporation (except as
may be otherwise provided by law) in such place or places in the State of
Delaware or outside the State of Delaware as the Board of Directors from time to
time shall determine.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board of Directors shall
determine. No notice shall be required for any regular meeting of the Board of
Directors.
Section 6. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, by the President, or
by a majority of the directors in office at the time. Notice of each such
meeting shall be either delivered personally or by telephone to each director at
least one day prior to the date of each such meeting, or sent by mail, telegram,
telex, cable or like transmission to each director at least two days prior to
the date of each such meeting. Each such notice shall state the time and place
of the meeting but need not state the purposes thereof. Any notice given
personally or by telephone shall be
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confirmed by mail, telegram, telex, cable or like transmission, which
confirmation shall be sent at least one day before the meeting. Notice of any
meeting of the Board of Directors need not be given to any director, however, if
waived by him in writing or by mail, telegram, telex or like transmission,
whether before or after such meeting is held, or if he shall be present at such
meeting, and any meeting of the Board of Directors shall be a legal meeting
without any notice thereof having been given, if all the directors then in
office shall be present thereat.
Section 7. Quorum. A quorum for the transaction of business shall
consist of no fewer than one-half of the total number of directors, and except
as otherwise provided in the Certificate of Incorporation or in these Bylaws,
the act of a majority of the directors present at any meeting of the Board of
Directors at which a quorum is present shall be the act of the Board of
Directors. If at any meeting of the Board of Directors there be less than a
quorum present, a majority of those present may adjourn the meeting from time to
time, and no notice need be given of any such adjourned session of the meeting.
Section 8. Compensation of Directors. The amount, if any, which each
director shall be entitled to receive as compensation for his services as such
shall be fixed from time to time by resolution of the Board of Directors. If any
director shall serve as a member of any committee of the Board of Directors or
perform special services at the instance of the Board of Directors, such
director may be paid such additional compensation as the Board of Directors may
from time to time determine. Each director shall be entitled to reimbursement
for traveling expenses incurred by him in attending any meeting of the Board of
Directors or of a committee of the Board of Directors. Such compensation and
reimbursement shall be payable even though there be an adjournment because of
the absence of a quorum. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
Section 9. Conduct of Meetings. At all meetings of the Board of
Directors business shall be transacted in such order as the Board of Directors
may determine.
The Chairman of the Board shall preside at all meetings of the Board of
Directors. In the absence of the Chairman of the Board, a Chairman of the
meeting shall be elected from the directors present. The Secretary of the
Corporation shall act as Secretary of all meetings of the directors, but in the
absence of the Secretary, the Chairman of the meeting may appoint any person to
act as Secretary of the meeting.
Section 10. Action Without Meeting. Nothing contained in these Bylaws
shall be deemed to restrict the power of the directors or members of any
committee to take any action required or permitted to be taken by them, without
a meeting, in accordance with applicable provisions of law.
Section 11. Telecommunication Meetings. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee by means of
conference telephone or other telecommunications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at such meeting.
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Section 12. Contracts. The Board of Directors of the Corporation in its
discretion may submit for approval, ratification or confirmation by the
stockholders any contract, transaction or act of the Board of Directors or any
committee thereof or of any officer, agent or employee of the Corporation, and
any such contract, transaction or act which shall have been so approved,
ratified or confirmed by the holders of a majority of the issued and outstanding
stock entitled to vote shall be as valid and binding upon the Corporation and
upon the stockholders thereof as though it had been approved and ratified by
each and every stockholder of the Corporation.
ARTICLE III.
COMMITTEES
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. If provision be made
for any such committee or committees, the members thereof shall be appointed by
the Board of Directors and shall serve during the pleasure of the Board of
Directors. The Board of Directors may designate one or more directors as
alternate members of any such committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending these Bylaws; and, unless the
resolution, these Bylaws or the Certificate of Incorporation shall expressly so
provide, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger. Such committee or committees shall have such name or names
as may be determined from time to time by resolution adopted by the Board of
Directors. The Board of Directors may at its pleasure discontinue any such
committee or committees.
ARTICLE IV.
OFFICERS
Section 1. Officers. The officers of the Corporation shall be a Chief
Executive Officer, a President, one or more Vice-Presidents (who may be further
classified by such descriptions as executive or senior, as determined by the
Board of Directors), a Treasurer, a Secretary and a Chief Financial Officer,
each of whom shall be elected by the Board of Directors. The Board of Directors
may also from time to time appoint Assistant Treasurers and Assistant
Secretaries and such other officers as the Board of Directors may deem
advisable, and who shall have such
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authority and shall perform such duties as from time to time may be prescribed
by the Board of Directors. In the event of any office becoming vacant because of
removal, resignation or other reason, the Board of Directors may fill the
vacancy at such time as it may determine. The Chief Executive Officer shall be a
member of the Board of Directors; the other officers may, but need not, be
directors.
All officers, agents and employees shall be subject to removal, with or
without cause, at any time by the affirmative vote of a majority of the
directors in office at the time. Any agent or employee other than one elected or
appointed by the Board of Directors shall also be subject to removal at any time
by the officer or by the committee appointing him or her.
In addition to the powers and duties of the officers of the Corporation
as set forth in these Bylaws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.
Section 2. The Chief Executive Officer. The Chief Executive Officer
shall preside at all meetings of the Board of Directors and shall do and perform
such other duties as from time to time may be assigned to him by the Board of
Directors.
Section 3. The President. The President shall preside at all meetings
of the stockholders and shall have such additional powers and shall perform such
duties as from time to time may be assigned to him by the Board of Directors.
The President shall, subject to the control of the Board of Directors, have
general and active management and control of the affairs and business of the
Corporation, and shall perform all other duties and exercise all other powers
commonly incident to his office, or which are or may at any time be authorized
or required by law.
Section 4. The Vice Presidents. The Vice Presidents in the order of
their seniority, unless otherwise determined by the Board of Directors, shall,
in the absence or disability of the President, perform the duties and exercise
the powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 5. The Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors or by any officer appointed by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his or her transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond for such
term in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his or her
office and for the restoration to the Corporation, in case
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of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the Corporation.
Section 6. The Assistant Treasurers. The Assistant Treasurers in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer. They shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 7. The Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of the stockholders or a class of
stockholders and record all the proceedings of the meetings of the Corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees of the Board of Directors when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders or a class of stockholders and special meetings of the Board
of Directors, and shall perform such other duties as may be assigned to him or
her by the Board of Directors or the President, under whose supervision he or
she shall be. The Secretary shall have custody of the corporate seal of the
Corporation and he or she shall have authority to affix the same to any
instrument requiring it and, when so affixed, it may be attested by his or her
signature. The President or the Board of Directors may authorize any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
Section 8. The Assistant Secretaries. The Assistant Secretaries in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary. They shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 9. Chief Financial Officer. The Chief Financial Officer shall
have the responsibilities and duties as set forth by the Board of Directors or
the Chief Executive Officer.
Section 10. Giving of Bond by Officers. Any officer of the Corporation,
if required to do so by the Board of Directors, shall furnish a bond to the
Corporation for the faithful performance of his or her duties, in such penalties
and with such conditions and security or surety or sureties as the Board shall
require.
Section 11. Voting Upon Stocks. Unless otherwise ordered by the Board
of Directors, the President, or any other officer of the Corporation designated
by the President, shall have full power and authority on behalf of the
Corporation to attend and to act and to vote in person or by proxy at any
meeting of the holders of securities of any corporation in which the Corporation
may own or hold stock or other securities, and at such meeting shall possess and
may exercise in person or by proxy any and all rights, powers and privileges
incident to the ownership of such stock or other securities which the
Corporation, as the owner or holder thereof, might have possessed and exercised
if present. The President, or any other officer of the Corporation designated by
the President, may also execute and deliver on behalf of the Corporation powers
of attorney, proxies, waivers of notice and other instruments relating to the
stocks or securities
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owned or held by the Corporation. The Board of Directors may, from time to time,
by resolution confer like powers upon any other person or persons.
Section 12. Compensation of Officers. The officers of the Corporation
shall be entitled to receive such compensation for their services as shall from
time to time be determined by the Board of Directors.
ARTICLE V.
CAPITAL STOCK CERTIFICATES - TRANSFER OF STOCK - SEAL - FISCAL YEAR
Section 1. Certificates for Shares. The certificates for shares of the
capital stock of the Corporation shall be in such form as is prescribed by law
and approved by the Board of Directors.
Section 2. Lost, Stolen, or Destroyed Certificates. Any person claiming
a stock certificate in lieu of one alleged to have been lost, stolen or
destroyed shall give the Corporation or its agent an affidavit as to his or her
ownership of the certificate and of the facts which go to prove that it has been
lost, stolen or destroyed. If required by the Board of Directors, he or she also
shall give the Corporation a bond, in such form as may be approved the Board of
Directors, sufficient to indemnify the Corporation against any claim that may be
made against it or on account of the alleged loss, theft or destruction of the
certificate or the issuance of a new certificate.
Section 3. Transfer of Shares. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. Regulations. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates for shares of the capital
stock of the Corporation.
Section 5. Fixing of Record Dates. The powers of the Board of Directors
with respect to the fixing of record dates shall be as provided by the laws of
the State of Delaware at the time in effect.
Section 6. Corporate Seal. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors,
a duplicate of the seal may be kept and be used by any officer of the
Corporation designated by the Board of Directors.
Section 7. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
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Section 8. Only Record Holders Recognized. The Corporation shall be
entitled to treat the holder of record of any share of capital stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
otherwise expressly provided by the laws of the State of Delaware.
Section 9. Addresses of Stockholders. It shall be the responsibility of
every stockholder to notify the Corporation of his or her post office address
and of any change therein. The latest address furnished by each stockholder
shall be entered on the stock ledger of the Corporation and the latest address
appearing thereon shall be deemed conclusively to be the post office address and
the last-known post office address of such stockholder. If any stockholder shall
fail to notify the Corporation of his or her post office address, it shall be
sufficient to send corporate notices to such stockholder at the address, if any,
understood by the Secretary to be such stockholder's post office address.
ARTICLE VI.
MISCELLANEOUS PROVISIONS
Section 1. Checks, Notes, etc. Checks and other orders for the payment
of money shall be signed by the Treasurer or by such person or persons as the
Board of Directors shall from time to time by resolution determine.
Section 2. Notices. Whenever any notice is required to be given to any
stockholder, director, committee member or officer, whether by statute, the
Certificate of Incorporation, these Bylaws or committee Bylaws or otherwise,
such notice, except as otherwise provided by law, may be given personally or, in
the case of directors, committee members or officers, by telephone or by
telegram, telex, cable or like transmission, addressed to such director,
committee member or officer at his or her place of business with the
Corporation, if any, or at such address as appears on the books of the
Corporation; or the notice may be given in writing by mail, in a sealed wrapper,
postage prepaid, addressed to such stockholder at the address as it appears on
the books of the Corporation, or to such director, committee member or officer
at his or her place of business with the Corporation, if any, or at such address
as appears on the books of the Corporation. Any notice given by telegram, telex,
cable or like transmission shall be deemed to have been given when it shall have
been delivered for transmission and any notice given by mail shall be deemed to
have been given when it shall have been deposited in a post office, in a
regularly maintained letter box or with a postal carrier.
Section 3. Waivers of Notice. Whenever notice is required to be given
under any provision of law or of the Certificate of Incorporation or of these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting of stockholders or of directors or
of a committee shall constitute waiver of notice of such meeting, except where
otherwise provided by law.
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ARTICLE VII.
INDEMNIFICATION
The Corporation shall indemnify each director and officer of the
Corporation, and each person serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, to the fullest extent permitted by the laws of Delaware, as
from time to time in effect. The Corporation may, if and to the extent
authorized by the Board of Directors of the Corporation in a specific case,
indemnify employees or agents of the Corporation in the same manner and to the
same extent. The indemnification obligations set forth herein shall inure to the
benefit of heirs, executors, administrators and personal representatives of
those entitled to indemnification and shall be binding upon any successor to the
Corporation to the fullest extent permitted by the laws of Delaware, as from
time to time in effect. The foregoing shall not be construed to limit the powers
of the Board of Directors to provide any other rights of indemnity which it may
deem appropriate.
ARTICLE VIII.
AMENDMENTS
These Bylaws and any amendments thereof may be altered, amended,
changed or repealed, or new Bylaws may be adopted, by the Board of Directors at
any regular or special meeting by the affirmative vote of a majority of all the
members of the Board of Directors; but these Bylaws and any amendments thereof,
including Bylaws adopted by the Board of Directors, may be altered, amended,
changed or repealed and other Bylaws may be enacted by the stockholders at any
annual meeting or at any special meeting, provided that notice of such proposed
alteration, amendment, change, repeal or enactment shall have been given in the
notice of the meeting.
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EXHIBIT 3.2(a)
CERTIFICATE OF INCORPORATION
OF
DTS CAPITAL, INC.
FIRST: The name of this corporation is DTS CAPITAL, INC. (hereinafter
referred to as the "Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle, 19801, and its registered agent at such address is THE CORPORATION TRUST
COMPANY.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which the Corporation may be organized under the General
Corporation Law of the State of Delaware.
The purpose specified in the foregoing paragraph shall in no way be
limited or restricted by the reference to, or inference from, the terms of any
provision in this Certificate of Incorporation.
The Corporation shall possess and may exercise all powers and
privileges necessary or convenient to effect the foregoing purpose, including
the general powers now or hereafter conferred by the laws of the State of
Delaware upon corporations formed under the General Corporation Law of the State
of Delaware.
FOURTH: The total number and the designation of the shares of capital
stock which this Corporation shall have authority to issue is:
1,000 shares of common stock, par value of $.01 per share.
FIFTH: The name and mailing address of the sole incorporator is as
follows:
NAME MAILING ADDRESS
---- ---------------
Lisa M. DeBarber Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center
Suite 3350
100 North Tryon Street
Charlotte, NC 28202-4000
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders of the Corporation
shall not be subject to the payment of the corporate debts to any extent
whatsoever.
EIGHTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the directors and
stockholders:
<PAGE> 2
(1) The number of directors of the Corporation shall be such
as from time to time shall be fixed by, or in the manner provided in,
the Bylaws of the Corporation. Election of directors need not be by
written ballot unless the bylaws of the Corporation so provide.
(2) The Board of Directors shall have power without the assent
or vote of the stockholders
(a) To make, alter, amend, change, add to or repeal
the bylaws of the Corporation; to determine the use and
disposition of any surplus or net profits; and to fix the
times for the declaration and payment of dividends; and
(b) To determine from time to time whether, and to
what extent, and at what time and places, and under what
conditions and regulation, the accounts and books of the
Corporation (other than the stock ledger), or any of them,
shall be open to the inspection of the stockholders.
(3) In addition to the powers and authorities hereinbefore or
by statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and to do all such acts and
things as may be exercised or done by the corporation; subject,
nevertheless, to the provisions of the statutes of Delaware, of this
Certificate of Incorporation, and to any bylaws from time to time make
by the stockholders; provided, however, that no bylaw so made shall
invalidate any prior act of the directors which would have been valid
if such bylaw had not been made.
NINTH: The Corporation shall, to the fullest extent permitted by the
provisions of the General Corporation Law of Delaware, as now or hereafter in
effect, indemnify all persons whom it may indemnify under such provisions. The
indemnification provided by this Section shall not limit or exclude any rights,
indemnities or limitations of liability to which any person may be entitled,
whether as a matter of law, under the bylaws of the Corporation, by agreement,
vote of the stockholders or disinterested directors of the corporation or
others. The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware as the same
may be amended or supplemented. Except as specifically required by the Delaware
General Corporation Law as the same exists or may hereafter amended, no director
of the Corporation shall be liable to the Corporation or its stockholders for
monetary damages for breach of his or her fiduciary duty as a director. No
amendment to or repeal of this provision shall apply to or have any effect on
the liability or alleged liability of any director for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by statute, and all rights and powers
conferred upon stockholders, directors, and officers herein are granted subject
to this reservation.
<PAGE> 3
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this Certificate of Incorporation, hereby
declaring and certifying that this is my act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand the ____ day of July,
1997.
--------------------------------
Lisa M. DeBarber
Sole Incorporator
<PAGE> 1
EXHIBIT 3.2(b)
BYLAWS OF
DTS CAPITAL, INC.
ARTICLE I.
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of stockholders for the
purpose of electing directors and of transacting such other business as may come
before it shall be held at such time as may be specified by resolution of the
Board of Directors.
Section 2. Special Meetings. Special meetings of the stockholders or of
a class of stockholders for any purpose or purposes may be called at any time by
the Chairman of the Board, by the President, by resolution of the Board of
Directors or by the Secretary. At a special meeting of the stockholders or of a
class of stockholders, no business shall be transacted and no corporate action
shall be taken other than that stated in the notice of the meeting.
Section 3. Time and Place. Meetings of the stockholders shall be held
at such time and place either within or without the State of Delaware as shall
be designated from time to time by the Board of Directors and stated in the
notice of meeting or in a duly executed waiver of notice thereof.
Section 4. Notice of Meetings. It shall be the duty of the Secretary to
cause a notice of each meeting of the stockholders or of a class of stockholders
of the Corporation to be mailed at least ten and not sooner than sixty days
before the meeting, unless a different period is prescribed by law, to each
stockholder entitled to vote at such meeting at his or her address as it appears
upon the books of the Corporation, stating the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is held.
Section 5. Quorum. At any meeting of the stockholders or of a class of
stockholders, the stockholders present in person or by proxy of a majority of
the outstanding shares of capital stock entitled to vote shall constitute a
quorum of the stockholders for all purposes (unless the representation of a
larger number of shares shall be required by law or by the Certificate of
Incorporation, in which case the representation of the number of shares so
required shall constitute a quorum).
The holders of a majority of the outstanding shares of capital stock
entitled to vote who are present in person or by proxy at any meeting (whether
or not constituting a quorum of the outstanding shares) may adjourn the meeting
from time to time without notice other than by announcement thereat; and at any
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally called,
but only those stockholders entitled to vote at the meeting originally noticed
shall be entitled to vote at any adjournment or adjournments thereof. However,
if the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
<PAGE> 2
Section 6. Organization and Conduct of Meetings. The President shall
call meetings of stockholders to order and shall act as Chairman of such
meetings. In the absence of the President at any meeting, the Chairman of the
Board shall act as Chairman. In the absence of the President or the Chairman of
the Board at any meeting, the holders of a majority of the shares of capital
stock entitled to vote present in person or by proxy at such meeting shall elect
a Chairman.
The Secretary of the Corporation shall act as Secretary of all meetings
of the stockholders; but, in the absence of the Secretary, the Chairman may
appoint any person to act as Secretary of the meeting.
It shall be the duty of the Secretary to prepare and make, at least ten
days before every meeting of stockholders, a complete list of stockholders
entitled to vote at said meeting, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in his or her
name. Such list shall be open to the examination of any stockholder for any
purpose germane to the meeting, during ordinary business hours, for the ten days
preceding the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 7. Voting. Except as otherwise provided in the Certificate of
Incorporation or by law, every holder of capital stock of the Corporation which
is entitled to vote shall be entitled to one vote in person or by proxy for each
share of such stock registered in the name of such stockholder upon the books of
the Corporation, but no proxy shall be voted on after three years from its date,
unless the proxy provides for a longer period. All elections for directors shall
be decided by a plurality of the vote of the shares of capital stock present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors; all other questions shall be decided by vote of the
majority of shares of capital stock entitled to vote on the subject matter who
are present in person or by proxy, except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
Section 8. Action by Written Consent. Any action required to be taken
at any annual or special meeting of stockholders or a class of stockholders of
the Corporation, or any action which may be taken at any annual or special
meeting of such stockholders or class of stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of issued and
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
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<PAGE> 3
ARTICLE II.
BOARD OF DIRECTORS
Section 1. General Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors, which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute, the Certificate of Incorporation or these By-Laws directed or
required to be exercised or done by the stockholders.
Section 2. Number. The Sole Incorporator of the Corporation shall
determine the number of directors to constitute the first Board of Directors of
the Corporation. Thereafter, the number of directors of the Corporation shall be
determined from time to time by resolution adopted by the Board of Directors.
The directors shall be elected at the annual meeting of the stockholders, except
for the first Board of Directors, which shall be elected by the Sole
Incorporator, and except as provided in Section 3 of this Article, each director
shall hold office until his successor is duly elected and qualified or until his
earlier death, resignation or removal. Directors need not be stockholders.
Section 3. Vacancies, Removal and Newly Created Directorships.
Vacancies occurring for any reason and newly created directorships resulting
from any increase in the authorized number of directors shall be filled by the
affirmative vote of a majority of the directors then in office, though less than
a quorum, or by a sole remaining director, and each director so chosen shall
hold office until the next annual election and until his successor is duly
elected and qualified or until his earlier death, resignation or removal. If
there are no directors in office, an election of directors may be held in the
manner provided by statute. Except as otherwise provided by the Certificate of
Incorporation, at any special meeting of the stockholders the notice of which
shall state that the removal of a director or directors and the filling of a
vacancy or vacancies are among the purposes of the meeting, the holders of
capital stock entitled to vote thereon, present in person or by proxy, by vote
of a majority of the outstanding shares thereof, may remove any director for or
without cause and may fill any vacancy caused by such removal.
Section 4. Place of Meeting, etc. The Board of Directors may hold its
meetings and may have an office and keep the books of the Corporation (except as
may be otherwise provided by law) in such place or places in the State of
Delaware or outside the State of Delaware as the Board from time to time shall
determine.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board shall determine. No notice
shall be required for any regular meeting of the Board of Directors.
Section 6. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, by the President, or
by a majority of the directors in office at the time. Notice of each such
meeting shall be either delivered personally or by telephone to each director at
least one day prior to the date of each such meeting, or sent by mail, telegram,
telex, cable or like transmission to each director at least two days prior to
the date of each such meeting. Each such notice shall state the time and place
of the meeting but need not state the purposes thereof. Any notice given
personally or by telephone shall be
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<PAGE> 4
confirmed by mail, telegram, telex, cable or like transmission, which
confirmation shall be sent at least one day before the meeting. Notice of any
meeting of the Board need not be given to any director, however, if waived by
him in writing or by mail, telegram, telex or like transmission, whether before
or after such meeting is held, or if he shall be present at such meeting, and
any meeting of the Board shall be a legal meeting without any notice thereof
having been given, if all the directors then in office shall be present thereat.
Section 7. Quorum. A quorum for the transaction of business shall
consist of no fewer than one-half of the total number of directors, and except
as otherwise provided in the Certificate of Incorporation or in these By-Laws,
the act of a majority of the directors present at any meeting of the Board of
Directors at which a quorum is present shall be the act of the Board of
Directors. If at any meeting of the Board there be less than a quorum present, a
majority of those present may adjourn the meeting from time to time, and no
notice need be given of any such adjourned session of the meeting.
Section 8. Compensation of Directors. The amount, if any, which each
director shall be entitled to receive as compensation for his services as such
shall be fixed from time to time by resolution of the Board of Directors. If any
director shall serve as a member of any committee of the Board or perform
special services at the instance of the Board, such director may be paid such
additional compensation as the Board of Directors may from time to time
determine. Each director shall be entitled to reimbursement for traveling
expenses incurred by him in attending any meeting of the Board of Directors or
of a committee of the Board. Such compensation and reimbursement shall be
payable even though there be an adjournment because of the absence of a quorum.
No such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 9. Conduct of Meetings. At all meetings of the Board of
Directors business shall be transacted in such order as the Board may determine.
The Chairman of the Board shall preside at all meetings of the Board of
Directors. In the absence of the Chairman of the Board, a Chairman of the
meeting shall be elected from the directors present. The Secretary of the
Corporation shall act as Secretary of all meetings of the directors, but in the
absence of the Secretary, the Chairman of the meeting may appoint any person to
act as Secretary of the meeting.
Section 10. Action Without Meeting. Nothing contained in these By-Laws
shall be deemed to restrict the power of the directors or members of any
committee to take any action required or permitted to be taken by them, without
a meeting, in accordance with applicable provisions of law.
Section 11. Telecommunication Meetings. Members of the Board of
Directors, or any committee designated by the Board, may participate in a
meeting of the Board or such committee by means of conference telephone or other
telecommunications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
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<PAGE> 5
Section 12. Contracts. The Board of Directors of the Corporation in its
discretion may submit for approval, ratification or confirmation by the
stockholders any contract, transaction or act of the Board of Directors or any
committee thereof or of any officer, agent or employee of the Corporation, and
any such contract, transaction or act which shall have been so approved,
ratified or confirmed by the holders of a majority of the issued and outstanding
stock entitled to vote shall be as valid and binding upon the Corporation and
upon the stockholders thereof as though it had been approved and ratified by
each and every stockholder of the Corporation.
ARTICLE III.
COMMITTEES
The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. If provision be made for any such
committee or committees, the members thereof shall be appointed by the Board of
Directors and shall serve during the pleasure of the Board of Directors. The
Board may designate one or more directors as alternate members of any such
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending
these By-Laws; and, unless the resolution, these By-Laws or the Certificate of
Incorporation shall expressly so provide, no such committee shall have the power
or authority to declare a dividend, to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. The Board of Directors may at its pleasure
discontinue any such committee or committees.
ARTICLE IV.
OFFICERS
Section 1. Officers. The officers of the Corporation shall be a Chief
Executive Officer, a President, one or more Vice-Presidents (who may be further
classified by such descriptions as executive or senior, as determined by the
Board), a Treasurer, a Secretary and a Chief Financial Officer, each of whom
shall be elected by the Board of Directors. The Board of Directors may also from
time to time appoint Assistant Treasurers and Assistant Secretaries and such
other officers as the Board may deem advisable, and who shall have such
authority and
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<PAGE> 6
shall perform such duties as from time to time may be prescribed by the Board of
Directors. In the event of any office becoming vacant because of removal,
resignation or other reason, the Board of Directors may fill the vacancy at such
time as it may determine. The Chief Executive Officer shall be a member of the
Board of Directors; the other officers may, but need not, be directors.
All officers, agents and employees shall be subject to removal, with or
without cause, at any time by the affirmative vote of a majority of the
directors in office at the time. Any agent or employee other than one elected or
appointed by the Board of Directors shall also be subject to removal at any time
by the officer or by the committee appointing him or her.
In addition to the powers and duties of the officers of the Corporation
as set forth in these ByLaws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.
Section 2. The Chief Executive Officer. The Chief Executive Officer
shall preside at all meetings of the Board of Directors and shall do and perform
such other duties as from time to time may be assigned to him by the Board of
Directors.
Section 3. The President. The President shall preside at all meetings
of the stockholders and shall have such additional powers and shall perform such
duties as from time to time may be assigned to him by the Board of Directors.
The President shall, subject to the control of the Board of Directors, have
general and active management and control of the affairs and business of the
Corporation, and shall perform all other duties and exercise all other powers
commonly incident to his office, or which are or may at any time be authorized
or required by law.
Section 4. The Vice Presidents. The Vice Presidents in the order of
their seniority, unless otherwise determined by the Board of Directors, shall,
in the absence or disability of the President, perform the duties and exercise
the powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 5. The Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors or by any officer appointed by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his or her transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond for such
term in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his or her
office and for the restoration to the Corporation, in case
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<PAGE> 7
of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the Corporation.
Section 6. The Assistant Treasurers. The Assistant Treasurers in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer. They shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 7. The Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of the stockholders or a class of
stockholders and record all the proceedings of the meetings of the Corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees of the Board when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders or a class of stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be assigned to him or her
by the Board of Directors or the President, under whose supervision he or she
shall be. The Secretary shall have custody of the corporate seal of the
Corporation and he or she shall have authority to affix the same to any
instrument requiring it and, when so affixed, it may be attested by his or her
signature. The President or the Board of Directors may authorize any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
Section 8. The Assistant Secretaries. The Assistant Secretaries in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary. They shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 9. Chief Financial Officer. The Chief Financial Officer shall
have the responsibilities and duties as set forth by the Board of Directors or
the Chief Executive Officer.
Section 10. Giving of Bond by Officers. Any officer of the Corporation,
if required to do so by the Board of Directors, shall furnish a bond to the
Corporation for the faithful performance of his or her duties, in such penalties
and with such conditions and security or surety or sureties as the Board shall
require.
Section 11. Voting Upon Stocks. Unless otherwise ordered by the Board
of Directors, the President, or any other officer of the Corporation designated
by the President, shall have full power and authority on behalf of the
Corporation to attend and to act and to vote in person or by proxy at any
meeting of the holders of securities of any corporation in which the Corporation
may own or hold stock or other securities, and at such meeting shall possess and
may exercise in person or by proxy any and all rights, powers and privileges
incident to the ownership of such stock or other securities which the
Corporation, as the owner or holder thereof, might have possessed and exercised
if present. The President, or any other officer of the Corporation designated by
the President, may also execute and deliver on behalf of the Corporation powers
of attorney, proxies, waivers of notice and other instruments relating to the
stocks or securities
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owned or held by the Corporation. The Board of Directors may, from time to time,
by resolution confer like powers upon any other person or persons.
Section 12. Compensation of Officers. The officers of the Corporation
shall be entitled to receive such compensation for their services as shall from
time to time be determined by the Board of Directors.
ARTICLE V.
CAPITAL STOCK CERTIFICATES - TRANSFER OF STOCK - SEAL - FISCAL YEAR
Section 1. Certificates for Shares. The certificates for shares of the
capital stock of the Corporation shall be in such form as is prescribed by law
and approved by the Board of Directors.
Section 2. Lost, Stolen, or Destroyed Certificates. Any person claiming
a stock certificate in lieu of one alleged to have been lost, stolen or
destroyed shall give the Corporation or its agent an affidavit as to his or her
ownership of the certificate and of the facts which go to prove that it has been
lost, stolen or destroyed. If required by the Board of Directors, he or she also
shall give the Corporation a bond, in such form as may be approved the Board of
Directors, sufficient to indemnify the Corporation against any claim that may be
made against it or on account of the alleged loss, theft or destruction of the
certificate or the issuance of a new certificate.
Section 3. Transfer of Shares. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. Regulations. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates for shares of the capital
stock of the Corporation.
Section 5. Fixing of Record Dates. The powers of the Board of Directors
with respect to the fixing of record dates shall be as provided by the laws of
the State of Delaware at the time in effect.
Section 6. Corporate Seal. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors,
a duplicate of the seal may be kept and be used by any officer of the
Corporation designated by the Board.
Section 7. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
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Section 8. Only Record Holders Recognized. The Corporation shall be
entitled to treat the holder of record of any share of capital stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
otherwise expressly provided by the laws of the State of Delaware.
Section 9. Addresses of Stockholders. It shall be the responsibility of
every stockholder to notify the Corporation of his or her post office address
and of any change therein. The latest address furnished by each stockholder
shall be entered on the stock ledger of the Corporation and the latest address
appearing thereon shall be deemed conclusively to be the post office address and
the last-known post office address of such stockholder. If any stockholder shall
fail to notify the Corporation of his or her post office address, it shall be
sufficient to send corporate notices to such stockholder at the address, if any,
understood by the Secretary to be such stockholder's post office address.
ARTICLE VI.
MISCELLANEOUS PROVISIONS
Section 1. Checks, Notes, etc. Checks and other orders for the payment
of money shall be signed by the Treasurer or by such person or persons as the
Board of Directors shall from time to time by resolution determine.
Section 2. Notices. Whenever any notice is required to be given to any
stockholder, director, committee member or officer, whether by statute, the
Certificate of Incorporation, these By-laws or committee By-Laws or otherwise,
such notice, except as otherwise provided by law, may be given personally or, in
the case of directors, committee members or officers, by telephone or by
telegram, telex, cable or like transmission, addressed to such director,
committee member or officer at his or her place of business with the
Corporation, if any, or at such address as appears on the books of the
Corporation; or the notice may be given in writing by mail, in a sealed wrapper,
postage prepaid, addressed to such stockholder at the address as it appears on
the books of the Corporation, or to such director, committee member or officer
at his or her place of business with the Corporation, if any, or at such address
as appears on the books of the Corporation. Any notice given by telegram, telex,
cable or like transmission shall be deemed to have been given when it shall have
been delivered for transmission and any notice given by mail shall be deemed to
have been given when it shall have been deposited in a post office, in a
regularly maintained letter box or with a postal carrier.
Section 3. Waivers of Notice. Whenever notice is required to be given
under any provision of law or of the Certificate of Incorporation or of these
By-Laws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting of stockholders or of directors or
of a committee shall constitute waiver of notice of such meeting, except where
otherwise provided by law.
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ARTICLE VII.
INDEMNIFICATION
The Corporation shall indemnify each director and officer of the
Corporation, and each person serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, to the fullest extent permitted by the laws of Delaware, as
from time to time in effect. The Corporation may, if and to the extent
authorized by the Board of Directors of the Corporation in a specific case,
indemnify employees or agents of the Corporation in the same manner and to the
same extent. The indemnification obligations set forth herein shall inure to the
benefit of heirs, executors, administrators and personal representatives of
those entitled to indemnification and shall be binding upon any successor to the
Corporation to the fullest extent permitted by the laws of Delaware, as from
time to time in effect. The foregoing shall not be construed to limit the powers
of the Board of Directors to provide any other rights of indemnity which it may
deem appropriate.
ARTICLE VIII.
AMENDMENTS
These By-Laws and any amendments thereof may be altered, amended,
changed or repealed, or new By-Laws may be adopted, by the Board of Directors at
any regular or special meeting by the affirmative vote of a majority of all the
members of said Board; but these ByLaws and any amendments thereof, including
By-Laws adopted by the Board of Directors, may be altered, amended, changed or
repealed and other By-Laws may be enacted by the stockholders at any annual
meeting or at any special meeting, provided that notice of such proposed
alteration, amendment, change, repeal or enactment shall have been given in the
notice of the meeting.
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EXHIBIT 3.3(a)
ARTICLES OF ORGANIZATION
OF
COLUMBIA DBS MANAGEMENT, LLC
ARTICLE I
NAME. The name of the Limited Liability Company is COLUMBIA DBS
MANAGEMENT, LLC.
ARTICLE II
LATEST DATE OF DISSOLUTION. The latest date upon which the Company is
to dissolve is December 31, 2036.
ARTICLE III
Management of the Company shall be vested in one or more managers.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Organization, this 21st day of June, 1996.
-----------------------------
Philip H. Moise, as Organizer
<PAGE> 1
EXHIBIT 3.3(b)
ARTICLES OF AMENDMENT
TO
ARTICLES OF ORGANIZATION
OF
COLUMBIA DBS MANAGEMENT, LLC
I.
The name of the limited liability company is
Columbia DBS Management, LLC.
II.
The Articles of Organization were filed on June 21, 1996.
III.
Article I of the Articles of Organization shall be amended to read as
follows:
NAME. The name of the Limited Liability Company is DTS Management, LLC.
* * * * *
IN WITNESS WHEREOF, the undersigned, constituting all the members of the
Company, have executed these Articles of Amendment to Articles of Organization
of Columbia DBS Management, LLC as of February 3, 1997.
Member:
COLUMBIA CAPITAL CORPORATION,
a Virginia corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Member:
DIGITAL TELEVISION SERVICES, LLC
a Delaware limited liability company
By: Columbia DBS Management, LLC
Its: Manager
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE> 1
EXHBIT 3.3(c)
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
RECITALS.......................................................................1
ARTICLE I - FORMATION..........................................................1
SECTION 1.1. Formation; Assignment..................................1
SECTION 1.2. Name...................................................2
SECTION 1.3. Purposes...............................................2
SECTION 1.4. Registered Agent; Registered Office....................2
SECTION 1.5. Commencement and Term..................................2
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities........................................2
SECTION 1.7. Title to Assets; Transactions..........................3
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................3
SECTION 2.1. Capital Contributions..................................3
SECTION 2.2. Liability of Members .................................3
ARTICLE III - DISTRIBUTIONS....................................................3
SECTION 3.1. Distributions..........................................3
ARTICLE IV - MANAGEMENT........................................................4
SECTION 4.1. Management.............................................4
SECTION 4.2. Limitation of Liability; Indemnification...............4
ARTICLE V - TRANSFER OF INTERESTS .............................................4
SECTION 5.1. Transfer of Interests..................................4
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS.............5
SECTION 6.1. Dissolution Triggers...................................5
SECTION 6.2. Winding Up.............................................5
SECTION 6.3. Liquidating Distributions..............................5
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ARTICLE VII - BOOKS AND RECORDS................................................5
SECTION 7.1. Books and Records......................................5
ARTICLE VIII - MISCELLANEOUS...................................................5
SECTION 8.1. Binding Effect.........................................5
SECTION 8.2. Construction...........................................5
SECTION 8.3. Entire Agreement; No Oral Operating Agreements.........6
SECTION 8.4. Headings...............................................6
SECTION 8.5. Severability...........................................6
SECTION 8.6. Variation of Pronouns..................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction.................6
SECTION 8.8. Counterpart Execution; Facsimile Execution.............6
SECTION 8.9. Time of the Essence....................................6
SECTION 8.10. Exhibits...............................................6
EXHIBIT A: Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
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AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
THIS AMENDED AND RESTATED OPERATING AGREEMENT is made and entered into
as of 10:00 A.M. Eastern Time, February 7, 1997, (the "Effective Time") by and
between Digital Television Services, LLC, a Delaware limited liability company
(formerly Columbia DBS Holdings, LLC (successor by conversion to DBS Holdings,
L.P., a Delaware limited partnership)) ("Holdings"), and Columbia Capital
Corporation, a Virginia corporation ("Columbia"). Unless otherwise indicated,
capitalized words and phrases in this Amended and Restated Operating Agreement
(the "Agreement") shall have the meanings set forth in the Glossary of Terms
attached hereto as Exhibit B.
RECITALS
A. DTS Management, LLC (the "LLC") was formed on June 21, 1996, upon
the filing of the Articles of Organization with the Secretary of State of
Georgia.
B. The LLC has had two members from its formation until the effective
date of this Agreement, specifically, Columbia with a 1% Interest and Holdings
with a 99% Interest.
C. The LLC is the sole manager of Holdings and Holdings is consummating
a series of transactions, including the admission of additional Members and the
amendment and restatement of Holdings' limited liability company agreement.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree that the operating agreement of the LLC shall be amended
and restated to read as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; ASSIGNMENT.
The LLC was formed on June 21, 1996, and shall be continued pursuant to
the terms hereof.
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Columbia
hereby assigns and transfers all of its right, title and interest in and to its
1% member Interest in the LLC to Holdings, as a capital contribution with
respect to its interest in Holdings without any further issuance of equity
interests in Holdings, and shall be deemed to have withdrawn as a Member of the
LLC, all effective 10:01 A.M. Eastern Time, February 7, 1997, which assignment
and transfer shall be
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in all respects subject to the security interest granted under Section 3 of the
Guarantee and Collateral Agreement (the "Security Interest"), with the effect
that as of 10:01 A.M. Eastern Time, February 7, 1997, Holdings shall hold 100%
of the Interests in the LLC, and thus become the sole member of the LLC, with
its entire Interest subject to the Security Interest. Columbia hereby represents
and warrants to the LLC and to Holdings that with the exception of the Security
Interest, its Interest in the LLC assigned hereby is free and clear of all
liens, claims and encumbrances of any nature whatsoever. Columbia shall cause or
take all necessary further action as may be requested by the LLC or by Holdings
to confirm and ensure the complete assignment of its Interest as provided
herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Articles of Organization, as amended, attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to provide
management and administrative services to various entities operating direct
satellite broadcast businesses, including Holdings, (ii) to serve as an
intermediate holding company owning interests in entities operating direct
satellite broadcast businesses, (iii) to own, hold, maintain, encumber, lease,
sell, transfer or otherwise dispose of all property or assets or interests in
property or assets as may be necessary, appropriate or convenient to accomplish
the activities described in clauses (i) and (ii) above, (iv) to incur
indebtedness or obligations in furtherance of the activities described in
clauses (i), (ii) and (iii) above, and (v) to conduct such other activities as
may be necessary or incidental to the foregoing, all on the terms and conditions
and subject to the limitations set forth in this Agreement.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be Douglas S. Holladay, Jr. and the LLC's registered office shall be
880 Holcomb Bridge Rd., Bldg. C-200, Roswell, GA 30076. The LLC's registered
agent or registered office may be changed as provided in Act Section 14-11-209,
or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the time and date appearing in the Articles of Organization and shall continue
until it is dissolved, its affairs are wound up and final liquidating
distributions are made pursuant to this Agreement but in any event, not later
than December 31, 2036.
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes
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(provided that the LLC has not elected on Form 8832 to be treated as a
corporation). In all events, however, the LLC shall keep books and records
separate from those of its Member and its Subsidiaries and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member and of its Subsidiaries.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member or any
Subsidiary. The LLC shall enter into and engage in all transactions in its own
name and not in the name of its Member or any Subsidiary. In furtherance
thereof, the LLC shall evidence its execution of instruments as follows:
DTS Management, LLC,
a Georgia limited liability company
By:__________________________________
Title: Manager [or other authorized person]
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member and the
Managers shall determine; provided, however, that any such additional Capital
Contributions shall be evidenced in writing and recorded in the books and
records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Georgia, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the Managers shall determine.
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ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by a board of
managers, which board of managers shall consist of such individuals and shall be
governed in all respects by the Parent LLC Agreement. Except as provided in the
Parent LLC Agreement, the LLC's board of managers shall have complete authority
and exclusive control over the business and affairs of the LLC; provided,
however, in no event shall the board of managers or the Member take any action
or cause the LLC to take any action inconsistent with the relative rights,
privileges and obligations of the members of Holdings as reflected in the Parent
LLC Agreement.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager or
Member shall be liable, responsible, or accountable in damages or otherwise to
the LLC or to any Member or assignee of a Member for any loss, damage, cost,
liability, or expense incurred by reason of or caused by any act or omission
performed or omitted by such manager or Member, whether alleged to be based upon
or arising from errors in judgment, negligence, or breach of duty (including
alleged breach of any duty of care or duty of loyalty or other fiduciary duty),
except for (i) acts or omissions the manager or Member knew at the time of the
acts or omissions were clearly in conflict with the interest of the LLC, or (ii)
any transaction from which the manager or Member derived an improper personal
benefit, (iii) a willful breach of this Agreement, or (iv) gross negligence,
recklessness, willful misconduct, or knowing violation of law. Without limiting
the foregoing, no manager or Member shall in any event be liable for (A) the
failure to take any action not specifically required to be taken by the manager
or Member under the terms of this Agreement, (B) any action or omission taken or
suffered by any other manager or Member, or (C) any mistake, misconduct,
negligence, dishonesty or bad faith on the part of any employee or other agent
of the LLC appointed in good faith by such manager or Member. The provisions
regarding the indemnification of certain Persons are set forth in the
Indemnification Exhibit attached hereto as Exhibit C.
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC
Agreement, the Member may transfer its Interest at such time, in such amount and
pursuant to such terms, in whole or in part, as the Member shall in its sole
discretion determine.
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ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the delivery for filing with the Secretary of State of a
Statement of Commencement of Winding Up of the LLC pursuant to Act Section
14-11-606.
(b) The entry of a decree of judicial dissolution under Act Section
14-11-603(a).
SECTION 6.2. WINDING UP. Upon dissolution of the LLC the same Persons
who are entitled to wind up the Member under the Parent LLC Agreement shall wind
up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the Member in liquidation as provided in the Act, by the
Persons charged with winding up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member and of its Subsidiaries. The
LLC shall prepare financial statements at least annually, which shall include at
least a balance sheet and income statement prepared in accordance with GAAP,
which financial statements need not be audited, except in connection with any
audit that the Member or the LLC's ultimate parent entity may obtain.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any
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Member. No provision of this Agreement is to be interpreted as a penalty upon,
or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL OPERATING AGREEMENTS. This
Agreement, together with the Parent LLC Agreement, constitutes the entire
agreement with respect to the affairs of the LLC and the conduct of its
business, and supersede all prior agreements and understandings, whether oral or
written. The LLC shall have no oral operating agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Georgia shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Member hereby irrevocably consents to the personal jurisdiction of the courts of
the State of Georgia with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
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IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
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EXECUTION PAGE
TO THE
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
INITIAL AND CONTINUING MEMBER:
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC
Its: Manager
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: Vice President
INITIAL AND WITHDRAWING MEMBER:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
COLUMBIA CAPITAL CORPORATION,
A VIRGINIA CORPORATION
By: ___________________________
Name: Neil P. Byrne
Title: Vice President
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EXHIBIT A
ARTICLES OF ORGANIZATION
OF
COLUMBIA DBS MANAGEMENT, LLC
ARTICLE I
NAME. The name of the Limited Liability Company is COLUMBIA DBS
MANAGEMENT, LLC.
ARTICLE II
LATEST DATE OF DISSOLUTION. The latest date upon which the Company is
to dissolve is December 31, 2036.
ARTICLE III
Management of the Company shall be vested in one or more managers.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Organization, this 21st day of June, 1996.
-----------------------------
Philip H. Moise, as Organizer
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ARTICLES OF AMENDMENT
TO
ARTICLES OF ORGANIZATION
OF
COLUMBIA DBS MANAGEMENT, LLC
I.
The name of the limited liability company is
Columbia DBS Management, LLC.
II.
The Articles of Organization were filed on June 21, 1996.
III.
Article I of the Articles of Organization shall be amended to read as
follows:
NAME. The name of the Limited Liability Company is DTS Management, LLC.
* * * * *
IN WITNESS WHEREOF, the undersigned, constituting all the members of the
Company, have executed these Articles of Amendment to Articles of Organization
of Columbia DBS Management, LLC as of February 3, 1997.
Member:
COLUMBIA CAPITAL CORPORATION,
a Virginia corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Member:
DIGITAL TELEVISION SERVICES, LLC
a Delaware limited liability company
By: Columbia DBS Management, LLC
Its: Manager
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
A-2
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EXHIBIT B
TO THE
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
GLOSSARY OF TERMS
"Act" shall mean the Georgia Limited Liability Company Act, as in
effect in Georgia and set forth at Section 14-11-100 et. seq. (or any
corresponding provision of succeeding law).
"Agreement" shall mean this Amended and Restated Operating Agreement as
amended from time to time and, as the context shall require, includes the Parent
LLC Agreement.
"Articles of Organization" shall mean the articles of organization
required to be filed by the LLC pursuant to the Act together with any amendments
thereto.
"Capital Contribution" shall mean with respect to the Member, the
amount of money and any property (other than money) contributed to the LLC with
respect to the Interest of such Member.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor federal revenue law.
"Effective Time" shall have the meaning set forth in the paragraph
immediately preceding the Recitals.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time, including without
limitation, those principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entities as approved
by a significant segment of the accounting profession.
"Guarantee and Collateral Agreement" shall mean that certain Guarantee
and Collateral Agreement made by Columbia DBS Holdings, LLC as a Grantor,
Columbia DBS Management, LLC, certain Subsidiaries of Columbia DBS Holdings,
LLC, as Guarantors and Grantors, and Columbia DBS, Inc., Columbia Capital
Corporation, Columbia DBS Investors, L.P. and certain individuals, as Investors
and Pledgors in favor of Canadian Imperial Bank of Commerce, as Administrative
Agent dated as of November 27, 1996.
"Holdings" shall mean Digital Television Services, LLC, a Delaware
limited liability company, formerly Columbia DBS Holdings, LLC, a Delaware
limited liability company, successor by conversion to DBS Holdings, L.P., a
Delaware limited partnership.
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"Interest" shall mean all of the rights, privileges, preferences and
obligations of the Member or assignee with respect to the LLC created under this
Agreement or under the Act.
"LLC" shall mean the limited liability company formed pursuant to this
Agreement.
"Managers" shall refer collectively to those individuals who constitute
the board of managers of the LLC which individuals are designated as members of
the LLC's board of managers pursuant to the provisions of that certain Amended
and Restated Limited Liability Company Agreement of Digital Television Services,
LLC, a Delaware limited liability company.
"Member" shall mean (i) at any time prior to 10:01 A.M., February 7,
1997, Holdings and Columbia, and (ii) at any time on or thereafter, Holdings.
"Parent LLC Agreement" shall mean the Amended and Restated Limited
Liability Company Agreement of Holdings dated February 10, 1997, as amended
thereafter from time to time as provided therein.
"Person" shall mean any natural person, partnership, trust, estate,
association, limited liability company, corporation, custodian, nominee,
governmental instrumentality or agency, body politic or any other entity in its
own or any representative capacity.
"Subsidiaries" shall mean Digital Television Services of Alabama, LLC,
Digital Television Services of California, LLC, Digital Television Services of
Colorado, LLC, Digital Television Services of Georgia, LLC, Digital Television
Services of Kansas, LLC, Digital Television Services of Kentucky, LLC, Digital
Television Services of New Mexico, LLC, Digital Television Services of New York
I, LLC, Digital Television Services of New York II, LLC, Digital Television
Services of South Carolina I, LLC, Digital Television Services of South Carolina
II, LLC, Digital Television Services of Vermont, LLC, Spacenet, Inc., or any
other Person all of the equity interests of which are owned directly or
indirectly by the LLC.
[THE REMAINDER OF THIS PAGE INTENTIONALLY HAS BEEN LEFT BLANK.]
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EXHIBIT C
TO THE
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
DTS MANAGEMENT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
INDEMNIFICATION EXHIBIT
(a) Rights to Indemnification.
(i) Pursuant to Act Section 14-11-306, and to the full
extent otherwise permitted by law, the LLC shall
indemnify and save harmless its Member, the members
of the board of managers of the LLC, its Member's
members, and all members, partners, shareholders,
directors, officers, trustees, employees and agents
of any of those Persons ("Representatives"),
(collectively, the "Indemnitees") from and against
any and all claims, liabilities, damages, losses,
costs and expenses (including amounts paid in
satisfaction of judgments, compromises and
settlements, as fines and penalties and legal or
other costs and expenses of investigating or
defending against any claim or alleged claim) of any
nature whatsoever, known or unknown, liquidated or
unliquidated, that are incurred by any Indemnitee and
arise out of or in connection with the business of
the LLC or the performance by such Indemnitee of any
of the Person's responsibilities under this
Agreement. The rights created by this Exhibit shall
continue as to an Indemnitee who has ceased to be a
Member, or a Representative and shall inure to the
benefit of such Indemnitee's heirs, executors,
administrators, legal representatives, successors and
assigns.
(ii) Without limiting any other provisions of this
Exhibit, the LLC shall pay or reimburse, and
indemnify and hold harmless each Indemnitee against,
expenses incurred by such Indemnitee in connection
with his appearances as a witness or other
participation in a Proceeding involving or affecting
the LLC at a time when the Indemnitee is not a named
defendant or respondent in the Proceeding. For the
purposes of this Exhibit, a "Proceeding" shall mean
any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an
action, suit or proceeding, and any inquiry or
investigation that could lead to such an action, suit
or proceeding.
(iii) Notwithstanding any other provision of this Exhibit
any indemnification hereunder shall be provided out
of and to the extent of LLC assets only, and no
Member of the LLC shall have personal liability on
account thereof.
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(b) Indemnification Procedures.
(i) Any Person seeking indemnification pursuant to this
Exhibit (including any Advancement of Expenses as
provided in Subsection (c) of this Exhibit) shall be
subject to the procedures of this Subsection (b) for
indemnification.
(ii) Any indemnification of any Representative under this
Exhibit, unless ordered by a court or arbitration
panel, shall be made by the LLC only as authorized in
the specific case and only upon a determination by
the LLC's Member (or by special legal counsel
pursuant to Subsection (v) below if so requested by
an Indemnitee) that (1) the Indemnitee acted in good
faith, (2) the Indemnitee reasonably believed that
its conduct was in the best interests of the LLC or
at least not opposed to the best interests of the
LLC, and in the case of a criminal Proceeding, had no
cause to believe that its conduct was criminal, and
(3) Indemnitee's conduct did not constitute gross
negligence, recklessness, or intentional misconduct,
fraud, or a knowing violation or breach of this
Agreement. The termination of any Proceeding by
judgment, order, settlement, conviction or on a plea
of nolo contendere or its equivalent shall not alone
determine that Indemnitee did not meet the
requirements set forth in the preceding sentence.
(iii) To claim indemnification under this Exhibit, a
Representative shall submit to the Member a written
request for indemnification, including therewith (or
affirming that there will be made available to the
LLC) such documentation and information as is
reasonably available to Indemnitee and as the Member
may reasonably request to support such claims and
enable the Member to make or cause to be made the
determinations hereinafter provided for. If at the
time of receipt of such request, the LLC has in
effect or is entitled to claim reimbursement for such
request under any policy of insurance covering such
claim, the LLC shall thereafter take proper action to
cause such insurers to accept coverage and thereafter
shall take all necessary action to cause such
insurers to pay such claim to or on behalf of
Indemnitee.
(iv) Indemnitee and the LLC shall cooperate with each
other and the Person making the indemnification
determination, including providing upon reasonable
advance request such information that is not
privileged or otherwise protected from disclosure and
which is reasonably necessary to such determination.
(v) Any "special legal counsel" selected to make any
indemnification determination required hereunder
shall be a law firm, or member of a law firm,
experienced in matters of corporation, partnership
and LLC law and which neither presently is, nor in
the past five (5) years has been, retained to
represent the LLC, the Indemnitee or any other party
to the Proceeding
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<PAGE> 18
giving rise to the claim for indemnification, and
shall not include any Person who, under prevailing
applicable standards of professional conduct, would
have a conflict of interest with Indemnitee or the
LLC or any other party to the Proceeding. Any
determination required herein, if Indemnitee has so
requested, shall be made by special legal counsel
selected by the Indemnitee and reasonably
satisfactory to the Member.
(vi) An Indemnitee shall not be denied indemnification in
whole or in part under this Subsection (b) solely on
the grounds that it had an interest in the
transaction with respect to which the indemnification
applies, if the transaction was fully disclosed to
the Member in advance and was otherwise permitted to
be carried out by the terms of the Agreement.
(vii) The indemnification provided in this Exhibit is
solely for the benefit of Indemnitees and shall not
give rise to any right to indemnification in favor of
any other Persons.
(c) Advance Payment of Expenses. Expenses incurred by an Indemnitee in
defense or settlement of any claim that may be subject to a right of
indemnification hereunder may be advanced by the LLC prior to the final
disposition thereof (an "Advancement of Expense") upon receipt of a written
agreement by the Indemnitee to repay such amount to the extent that it shall be
determined ultimately that such Indemnitee is not entitled to be indemnified
hereunder.
(d) Right of Indemnitee to Commence Proceeding.
(i) If a claim under Subsection (a) of this Exhibit is
not paid in full by the LLC within sixty (60) days
after a written claim has been received by the LLC,
except in the case of a claim for an Advancement of
Expenses, in which case the applicable period shall
be twenty (20) days, an Indemnitee may at any time
thereafter commence a Proceeding against the LLC in
the State Courts of Georgia. If successful in whole
or in part in any such Proceeding, or in a Proceeding
brought by the LLC to recover any Advancement of
Expenses, the Indemnitee shall also be entitled to be
paid the expenses of prosecuting or defending such
Proceeding.
(ii) In any Proceeding brought by an Indemnitee to enforce
a right to Indemnification hereunder (but not in a
Proceeding brought by Indemnitee to enforce a right
to an Advancement of Expenses) it shall be a defense
that (and in any Proceeding by the LLC to recover an
Advancement of Expenses, the LLC shall be entitled to
recover such expenses upon a final adjudication that)
the Indemnitee has not met the requirements for
indemnification hereunder; provided, however, that in
any such Proceeding, neither (A) the failure of the
Member to have made the determination prior to the
commencement of such Proceeding that indemnification
of Indemnitee is proper in the circumstances, (B) an
actual determination by the Member that Indemnitee
has not met such applicable requirements, nor (C)
termination of any Proceeding by any judgment,
C-3
<PAGE> 19
order, settlement, or plea therein shall, of itself,
create a presumption that Indemnitee has not met such
applicable legal requirements or, in the case of such
a Proceeding brought by Indemnitee, be a defense to
such a Proceeding.
(iii) In any Proceeding brought by Indemnitee to enforce a
right to indemnification or to an Advancement of
Expenses hereunder, or by the LLC to recover an
Advancement of Expenses, the burden of proving that
Indemnitee is not entitled to be indemnified, or to
such Advancement or Expenses, under this Exhibit or
otherwise shall be on the LLC.
(iv) Without limiting the foregoing, any action commenced
pursuant to this Subsection (d) shall be conducted in
all respects as a de novo adjudication on the merits;
provided, however, if a determination shall have been
made, or deemed to have been made pursuant to
Subsection (b) above, that a Person is entitled to
indemnification, the LLC shall be bound thereby. The
LLC and all Members shall be precluded from asserting
in any action pursuant to this Subsection (d) that
the procedures and presumptions of this Exhibit are
not valid, binding and enforceable.
(e) Non-Exclusivity of Rights. The rights to indemnification and to the
Advancement of Expenses conferred in this Exhibit shall not be exclusive of any
other right which any Person may have or hereafter acquire under applicable law,
under any other agreement, pursuant to any determination by the Member or
otherwise, provided that the Indemnitee shall not be entitled to recover more
than once for the same damage.
(f) Insurance. The LLC shall be authorized to maintain insurance, in
reasonable amounts and with responsible carriers, at the LLC's expense, to
insure any amounts indemnifiable hereunder as well as to protect the Indemnitees
or any employee or agent of the LLC or another enterprise against any expense,
liability or loss of the kind referred to in this Exhibit, whether or not the
LLC would have the power to indemnify such Person against such expense,
liability or loss under the applicable law.
(g) Contribution by LLC. The LLC hereby agrees that, in the event that
the indemnification provided for in this Exhibit is for any reason finally
judicially determined to be unavailable, the LLC shall contribute to the payment
of any and all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA or other excise taxes or penalties, and amounts paid in
settlement) in such proportion as is appropriate to reflect the relative fault
of the LLC and the Indemnitee with respect to such expenses, liability and loss.
(h) Other Indemnification Sources. Any Indemnitees entitled to
indemnification from the LLC hereunder shall first seek recovery under any
insurance policies by which such Indemnitee is covered and shall obtain the
written consent of the Member prior to entering into any compromise or
settlement that would result in an obligation of the LLC to indemnify such
Indemnitee. If the amounts in respect of which such indemnification is sought
arise out of the conduct of the business and affairs of the LLC and also of any
other Person for which the Person entitled to indemnification from the LLC
hereunder was then acting in a similar capacity,
C-4
<PAGE> 20
the amount of the indemnification provided by the LLC shall be limited to the
LLC's proportionate share thereof as determined in good faith by the Member.
(i) Survival. The provisions of this Exhibit shall survive the
dissolution of the LLC.
[THE REMAINDER OF THIS PAGE INTENTIONALLY HAS BEEN LEFT BLANK.]
C-5
<PAGE> 1
EXHIBIT 3.4(a)
CERTIFICATE OF FORMATION
OF
DIGITAL TELEVISION SERVICES OF CALIFORNIA, LLC
The undersigned, desiring to form a limited liability company pursuant
to Sections 18-214(b)(2) and 18-201 of the Delaware Limited Liability Company
Act, 6 Delaware Code, Chapter 18, do hereby certify as follows:
I.
The name of the limited liability company is DIGITAL TELEVISION
SERVICES OF CALIFORNIA, LLC.
II.
The address of the registered office of the LLC in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of
New Castle. The name of the LLC's registered agent for service of process in the
State of Delaware at such address is The Corporation Trust Company.
III.
This Certificate of Formation shall be effective as of 10:00
a.m. local time in Dover, Delaware on February 7, 1997, which effective time and
date is later than the time and date of the filing of this Certificate in the
Office of the Secretary of State of Delaware.
<PAGE> 2
EXECUTION PAGE TO
CERTIFICATE OF FORMATION
OF
DIGITAL TELEVISION SERVICES OF CALIFORNIA, LLC
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Formation of Digital Television Services of California, LLC as of February 3,
1997.
Member:
COLUMBIA DBS, INC.,
A VIRGINIA CORPORATION
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Member:
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC,
a Georgia limited liability company
Its Manager
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE> 1
EXHIBIT 3.4(b)
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF CALIFORNIA, LLC
A DELAWARE LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF CALIFORNIA, LLC
A DELAWARE LIMITED LIABILITY COMPANY
RECITALS.......................................................................1
ARTICLE I - FORMATION..........................................................2
SECTION 1.1. Formation; Conversion; Assignment......................2
SECTION 1.2. Name...................................................3
SECTION 1.3. Purposes...............................................3
SECTION 1.4. Registered Agent; Registered Office....................3
SECTION 1.5. Commencement and Term..................................3
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities........................................3
SECTION 1.7. Title to Assets; Transactions..........................3
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................4
SECTION 2.1. Capital Contributions..................................4
SECTION 2.2. Liability of Members .................................4
ARTICLE III - DISTRIBUTIONS....................................................4
SECTION 3.1. Distributions..........................................4
ARTICLE IV - MANAGEMENT........................................................4
SECTION 4.1. Management.............................................4
SECTION 4.2. Limitation of Liability; Indemnification...............4
ARTICLE V - TRANSFER OF INTERESTS .............................................5
SECTION 5.1. Transfer of Interests..................................5
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS.............5
SECTION 6.1. Dissolution Triggers...................................5
SECTION 6.2. Winding Up.............................................5
SECTION 6.3. Liquidating Distributions..............................5
i
<PAGE> 3
ARTICLE VII - BOOKS AND RECORDS................................................6
SECTION 7.1. Books and Records......................................6
ARTICLE VIII - MISCELLANEOUS...................................................6
SECTION 8.1. Binding Effect.........................................6
SECTION 8.2. Construction...........................................6
SECTION 8.3. Entire Agreement; No Oral Limited Liability Company
Agreements.............................................6
SECTION 8.4. Headings...............................................6
SECTION 8.5. Severability...........................................6
SECTION 8.6. Variation of Pronouns..................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction.................7
SECTION 8.8. Counterpart Execution; Facsimile Execution.............7
SECTION 8.9. Time of the Essence....................................7
SECTION 8.10. Exhibits...............................................7
EXHIBIT A: Certificate of Conversion and Certificate of Formation.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
ii
<PAGE> 4
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF CALIFORNIA, LLC
A DELAWARE LIMITED LIABILITY COMPANY
THIS LIMITED LIABILITY COMPANY AGREEMENT is made and entered into as of
10:00 A.M. Eastern Time, February 7, 1997, (the "Effective Time") by and among
Digital Television Services, LLC, a Delaware limited liability company (formerly
Columbia DBS Holdings, LLC, a Delaware limited liability company (successor by
conversion to DBS Holdings, L.P., a Delaware limited partnership)) ("Holdings"),
and Columbia DBS, Inc., a Virginia corporation ("Columbia") (collectively, the
"Initial and Withdrawing Members") and DTS Management, LLC, a Georgia limited
liability company ("Management"). Unless otherwise indicated, capitalized words
and phrases in this Limited Liability Company Agreement (the "Agreement") shall
have the meanings set forth in the Glossary of Terms attached hereto as Exhibit
B.
RECITALS
A. Columbia San Luis Obispo DBS, L.P., a Delaware limited partnership
(the "Partnership"), was formed upon the filing of its Certificate of Limited
Partnership by the Secretary of State of Delaware on February 23, 1996.
B. The Partnership had two partners from its formation until the
effective date of this Agreement, specifically, Columbia, as general partner
with a 1% interest in the Partnership and Holdings as limited partner with a 99%
interest in the Partnership.
C. Columbia and Holdings, as the partners of the Partnership, have (i)
executed a "Written Approval of the Partners of Columbia San Luis Obispo DBS,
L.P. to Conversion of Delaware Limited Partnership to Delaware Limited Liability
Company" as of February 3, 1997 pursuant to Section 17-219 of the Delaware
Revised Uniform Limited Partnership Act, and pursuant to Section 18-214(h) of
the Act, and (ii) executed and delivered for filing with the Secretary of State
of Delaware a "Certificate of Conversion to Limited Liability Company of
Columbia San Luis Obispo DBS, L.P. to Digital Television Services of California,
LLC" pursuant to Section 18-214 of the Act; and Columbia and Holdings, as the
Initial and Withdrawing Members of the LLC, have executed and delivered for
filing with the Secretary of State of Delaware a "Certificate of Formation of
Digital Television Services of California, LLC" pursuant to Sections
18-214(b)(2) and 18-201 of the Act, all for the purpose of converting the
Partnership into a Delaware limited liability company.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
1
<PAGE> 5
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; CONVERSION; ASSIGNMENT.
The LLC is the successor in interest by conversion (the "Conversion")
to the Partnership effective as of the Effective Time, and as of the Effective
Time, Columbia and Holdings became the initial Members of the LLC. By virtue of
the Conversion, Columbia's 1% general partner interest in the Partnership shall
be converted into a 1% member Interest in the LLC and Holdings' 99% limited
partner interest in the Partnership shall be converted into a 99% member
Interest in the LLC, with each such member Interest (and the proceeds thereof)
continuing in all respects to be subject to the security interest granted under
Section 3 of the Guarantee and Collateral Agreement (the "Security Interest").
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Columbia
hereby assigns and transfers all of its right, title and interest in and to its
1% member Interest in the LLC to Holdings, as a capital contribution with
respect to its interest in Holdings without any further issuance of equity
interests in Holdings, and Columbia shall be deemed to have withdrawn as a
Member of the LLC effective 10:01 A.M. Eastern Time, February 7, 1997, and in
turn, Holdings hereby assigns and transfers all of its right, title and interest
in and to its 1% member Interest in the LLC to Management, as a capital
contribution with respect to its interest in Management without any further
issuance of equity interests in Management, and Holdings shall be deemed to have
withdrawn as a Member of the LLC effective 10:02 A.M. Eastern Time, February 7,
1997, which assignments and transfers shall be in all respects subject to the
Security Interest, with the effect that as of 10:02 A.M. Eastern Time, February
7, 1997, Management shall hold 100% of the Interests in the LLC, and thus become
the sole Member of the LLC, with its entire Interest subject to the Security
Interest.
Columbia hereby represents and warrants to the LLC and to Holdings
that, with the exception of the Security Interest, its Interest in the LLC
assigned hereby to Holdings is free and clear of all liens, claims, and
encumbrances of any nature whatsoever. Columbia shall cause or take all
necessary further action as may be requested by the LLC or Holdings to confirm
and ensure the complete assignment of its Interest as provided herein.
Holdings hereby represents and warrants to the LLC and to Management
that, with the exception of the Security Interest, its Interest in the LLC
assigned hereby to Management is free and clear of all liens, claims, and
encumbrances of any nature whatsoever. Holdings shall cause or take all
necessary further action as may be requested by the LLC or Management to confirm
and ensure the complete assignment of its Interest as provided herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
2
<PAGE> 6
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Certificate of Formation attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to perform
the obligations under the Purchase Agreement, (ii) to own and operate the
Business, (iii) to further develop the Business in such areas and under such
terms as provided in the NRTC Agreements, (iv) to manage, maintain, repair,
dispose of and otherwise deal with the Business within such service area, (v) to
mortgage or otherwise encumber all or any part of the assets of the Business,
(vi) to engage in other businesses ancillary to the Business as encompassed in
the NRTC Agreements, and (vii) to conduct such other activities as may be
necessary or incidental to the foregoing, all on the terms and conditions and
subject to the limitations set forth in this Agreement and in the Act. Nothing
in this Agreement shall prohibit any Member from engaging in any business,
investment or other activity in any service area even if such business,
investment or activity is competitive with the Business.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be The Corporation Trust Company and the LLC's registered office
shall be Corporation Trust Center, 1209 Orange Street, Wilmington, County of New
Castle, Delaware. The LLC's registered agent or registered office may be changed
as provided in Act Section 18-104, or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the Effective Time with the LLC being the successor in interest by conversion to
the Partnership. The term of the LLC shall continue until it is dissolved, its
affairs are wound up and final liquidating distributions are made pursuant to
this Agreement. Except as otherwise provided herein, the LLC shall have
perpetual existence.
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes (provided that the LLC has not elected on Form
8832 to be treated as a corporation). In all events, however, the LLC shall keep
books and records separate from those of its Member and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member. The LLC
shall enter into and engage in all transactions in its own name and not in the
name of its Member. In furtherance thereof, the LLC shall evidence its execution
of instruments as follows:
3
<PAGE> 7
Digital Television Services of California, LLC,
a Delaware limited liability company
By: DTS Management, LLC,
a Georgia limited liability company
Its: Member
By:__________________________________
Title:_________________________________
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member shall
determine in its sole and absolute discretion; provided, however, that any such
additional Capital Contributions shall be evidenced in writing and recorded in
the books and records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Delaware, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the board of managers of the Member shall
determine.
ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by its Member, who
shall have complete authority and exclusive control over the business and
affairs of the LLC.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager,
Member, or member of the board of managers of the Member shall be liable,
responsible, or accountable in damages or
4
<PAGE> 8
otherwise to the LLC or to any Member or assignee of a Member for any loss,
damage, cost, liability, or expense incurred by reason of or caused by any act
or omission performed or omitted by such manager, Member, or member of the board
of managers of the Member, whether alleged to be based upon or arising from
errors in judgment, negligence, or breach of duty (including alleged breach of
any duty of care or duty of loyalty or other fiduciary duty), except for (i)
acts or omissions the manager, Member, or member of the board of managers of the
Member knew at the time of the acts or omissions were clearly in conflict with
the interest of the LLC, or (ii) any transaction from which the manager, Member,
or member of the board of managers of the Member derived an improper personal
benefit, (iii) a willful breach of this Agreement, or (iv) gross negligence,
recklessness, willful misconduct, or knowing violation of law. Without limiting
the foregoing, no manager, Member, or member of the board of managers of the
Member shall in any event be liable for (A) the failure to take any action not
specifically required to be taken by the manager, Member or member of the board
of managers of the Member under the terms of this Agreement, (B) any action or
omission taken or suffered by any other manager, Member or member of the board
of managers of the Member, or (C) any mistake, misconduct, negligence,
dishonesty or bad faith on the part of any employee or other agent of the LLC
appointed in good faith by such manager, Member or member of the board of
managers of the Member. The provisions regarding the indemnification of certain
Persons are set forth in the Indemnification Exhibit attached hereto as Exhibit
C.
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC
Agreement, the Member may transfer its Interest at such time, in such amount and
pursuant to such terms, in whole or in part, as the Member shall in its sole
discretion determine.
ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the written consent of the Member.
(b) The entry of a decree of judicial dissolution under Act
Section 18-802.
SECTION 6.2. WINDING UP. Pursuant to Act Section 18-803, upon
dissolution of the LLC the Member shall wind up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the
5
<PAGE> 9
Member in liquidation as provided in the Act by the Persons charged with winding
up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member. The LLC shall prepare
financial statements at least annually, which shall include at least a balance
sheet and income statement prepared in accordance with GAAP, which financial
statements need not be audited, except in connection with any audit that the
Member or the LLC's ultimate parent entity may obtain.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members, and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL LIMITED LIABILITY COMPANY
AGREEMENTS. This Agreement constitutes the entire agreement with respect to the
affairs of the LLC and the conduct of its business, and supersedes all prior
agreements and understandings, whether oral or written. The LLC shall have no
oral limited liability company agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
6
<PAGE> 10
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Delaware shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Members hereby irrevocably consent to the personal jurisdiction of the courts of
the State of Delaware with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Certificate of Conversion and Certificate of Formation.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
7
<PAGE> 11
EXECUTION PAGE
TO THE
LIMITED LIABILITY COMPANY AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF CALIFORNIA, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
CONTINUING MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: President
INITIAL AND WITHDRAWING MEMBERS:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC,
a Georgia limited liability company
Its: Manager
By: ______________________
Name: Douglas S. Holladay, Jr.
Title: President
COLUMBIA DBS, INC.,
A VIRGINIA CORPORATION
By: ___________________________
Name: Neil P. Byrne
Title: Vice President
8
<PAGE> 1
EXHIBIT 3.5(a)
ARTICLES OF ORGANIZATION
OF
DIGITAL TELEVISION SERVICES OF COLORADO, LLC
Whereas Digital Television Services of Colorado, LP, a Georgia limited
partnership, has elected to become a limited liability company pursuant to
Section 14-11-212 of the Georgia Limited Liability Company Act (the "Act"), the
undersigned, pursuant to Act Sections 14-11-212 and 14-11-204, does hereby
certify as follows:
I.
The name of the limited liability company is
DIGITAL TELEVISION SERVICES OF COLORADO, LLC.
II.
These Articles of Organization shall be effective as of 10:00 a.m.
local time in Atlanta, Georgia on February 7, 1997, which effective date and
time is later than the date and time of filing of these Articles of Organization
as evidenced by the Secretary of State's date endorsement on the original
Articles of Organization.
III.
Filed with these Articles of Organization is a Certificate of Election
that is in the form required by Act Section 14-11-212.
IV.
Management of the Company is vested in the Member.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Organization of Digital Television Services of Colorado, LLC as of February 3,
1997.
MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE> 1
EXHIBIT 3.5(b)
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF COLORADO, LLC
A GEORGIA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF COLORADO, LLC
A GEORGIA LIMITED LIABILITY COMPANY
RECITALS.......................................................................1
ARTICLE I - FORMATION..........................................................1
SECTION 1.1. Formation; Conversion; Assignment......................1
SECTION 1.2. Name...................................................2
SECTION 1.3. Purposes...............................................2
SECTION 1.4. Registered Agent; Registered Office....................2
SECTION 1.5. Commencement and Term..................................2
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities........................................3
SECTION 1.7. Title to Assets; Transactions..........................3
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................3
SECTION 2.1. Capital Contributions..................................3
SECTION 2.2. Liability of Members .................................3
ARTICLE III - DISTRIBUTIONS....................................................4
SECTION 3.1. Distributions..........................................4
ARTICLE IV - MANAGEMENT........................................................4
SECTION 4.1. Management.............................................4
SECTION 4.2. Limitation of Liability; Indemnification...............4
ARTICLE V - TRANSFER OF INTERESTS..............................................5
SECTION 5.1. Transfer of Interests..................................5
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS.............5
SECTION 6.1. Dissolution Triggers...................................5
SECTION 6.2. Winding Up.............................................5
SECTION 6.3. Liquidating Distributions..............................5
i
<PAGE> 3
ARTICLE VII - BOOKS AND RECORDS................................................5
SECTION 7.1. Books and Records......................................5
ARTICLE VIII - MISCELLANEOUS...................................................6
SECTION 8.1. Binding Effect.........................................6
SECTION 8.2. Construction...........................................6
SECTION 8.3. Entire Agreement; No Oral Operating Agreements.........6
SECTION 8.4. Headings...............................................6
SECTION 8.5. Severability...........................................6
SECTION 8.6. Variation of Pronouns..................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction.................6
SECTION 8.8. Counterpart Execution; Facsimile Execution.............6
SECTION 8.9. Time of the Essence....................................6
SECTION 8.10. Exhibits...............................................7
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
ii
<PAGE> 4
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF COLORADO, LLC
A GEORGIA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made and entered into as of 10:00 A.M.
Eastern Time, February 7, 1997, (the "Effective Time") by and between Digital
Television Services, LLC, a Delaware limited liability company (formerly
Columbia DBS Holdings, LLC, a Delaware limited liability company (successor by
conversion to DBS Holdings, L.P., a Delaware limited partnership)) ("Holdings"),
and DTS Management, LLC (formerly Columbia DBS Management, LLC) a Georgia
limited liability company ("Management"). Unless otherwise indicated,
capitalized words and phrases in this Operating Agreement (the "Agreement")
shall have the meanings set forth in the Glossary of Terms attached hereto as
Exhibit B.
RECITALS
A. Digital Television Services of Colorado, LP, a Georgia limited
partnership (the "Partnership"), was formed on June 21, 1996.
B. The Partnership had two partners from its formation until the
effective date of this Agreement, specifically, Management, as general partner
with a 1% interest and Holdings as limited partner with a 99% interest.
C. Management and Holdings as the partners of the Partnership have
approved of the Partnership's election to become a limited liability company
pursuant to Act Section 14-11-212(a) as evidenced by their execution of the
Certificate of Election, attached hereto as Exhibit A and delivered for filing
with the Secretary of State of Georgia; and Management has executed and
delivered for filing with the Secretary of State of Georgia "Articles of
Organization" pursuant to Sections 14-11-212 and 14-11-204, all for the purpose
of causing the Partnership to become a limited liability company.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; CONVERSION; ASSIGNMENT.
The LLC is the successor in interest by conversion (the "Conversion")
to the Partnership effective as of the Effective Time and as of the Effective
Time, Management and Holdings became the initial Members of the LLC. By virtue
of the Conversion, Management's 1% general partner interest in the Partnership
shall be converted into a 1% member Interest in the LLC and Holdings' 99%
limited partner interest in the Partnership shall be converted into a 99% member
Interest in the LLC, with each such member Interest (and the proceeds thereof)
1
<PAGE> 5
continuing in all respects to be subject to the security interest granted under
Section 3 of the Guarantee and Collateral Agreement (the "Security Interest").
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Holdings
hereby assigns and transfers all of its right, title and interest in and to its
99% member Interest in the LLC to Management, as a capital contribution with
respect to its interest in Management, and shall be deemed to have withdrawn as
a Member of the LLC, all effective 10:01 A.M. Eastern Time, February 7, 1997,
which assignment and transfer shall be in all respects subject to the Security
Interest, with the effect that as of 10:01 A.M. Eastern Time, February 7, 1997,
Management shall hold 100% of the Interests in the LLC, and thus become the sole
member of the LLC, with its entire Interest subject to the Security Interest.
Holdings hereby represents and warrants to the LLC and to Management that, with
the exception of the Security Interest, its Interest in the LLC assigned hereby
is free and clear of all liens, claims, and encumbrances of any nature
whatsoever. Holdings shall cause or take all necessary further action as may be
requested by the LLC or by Management to confirm and ensure the complete
assignment of its Interest as provided herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Articles of Organization attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to perform
the obligations under the Purchase Agreement, (ii) to own and operate the
Business, (iii) to further develop the Business in such areas and under such
terms as provided in the NRTC Agreements, (iv) to manage, maintain, repair,
dispose of and otherwise deal with the Business within such service area, (v) to
mortgage or otherwise encumber all or any part of the assets of the Business,
(vi) to engage in other businesses ancillary to the Business as encompassed in
the NRTC Agreements, and (vii) to conduct such other activities as may be
necessary or incidental to the foregoing, all on the terms and conditions and
subject to the limitations set forth in this Agreement and in the Act. Nothing
in this Agreement shall prohibit any Member from engaging in any business,
investment or other activity in any service area even if such business,
investment or activity is competitive with the Business.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be Douglas S. Holladay, Jr. and the LLC's registered office shall be
880 Holcomb Bridge Rd., Bldg. C-200, Roswell, GA 30076. The LLC's registered
agent or registered office may be changed as provided in Act Section 14-11-209,
or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the Effective Time with the LLC being the successor in interest by conversion to
the Partnership. The term of the LLC shall continue until it is dissolved, its
affairs are wound up and final liquidating distributions are made pursuant to
this Agreement. Except as otherwise provided herein, the LLC shall have
perpetual existence.
2
<PAGE> 6
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes (provided that the LLC has not elected on Form
8832 to be treated as a corporation). In all events, however, the LLC shall keep
books and records separate from those of its Member and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member. The LLC
shall enter into and engage in all transactions in its own name and not in the
name of its Member. In furtherance thereof, the LLC shall evidence its execution
of instruments as follows:
Digital Television Services of Colorado, LLC,
a Georgia limited liability company
By: DTS Management, LLC,
a Georgia limited liability company
Its: Member
By:__________________________________
Title:_______________________________
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member shall
determine in its sole and absolute discretion; provided, however, that any such
additional Capital Contributions shall be evidenced in writing and recorded in
the books and records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
3
<PAGE> 7
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Georgia, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the board of managers of the Member shall
determine.
ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by its Member, who
shall have complete authority and exclusive control over the business and
affairs of the LLC.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager,
Member, or member of the board of managers of the Member shall be liable,
responsible, or accountable in damages or otherwise to the LLC or to any Member
or assignee of a Member for any loss, damage, cost, liability, or expense
incurred by reason of or caused by any act or omission performed or omitted by
such manager, Member, or member of the board of managers of the Member, whether
alleged to be based upon or arising from errors in judgment, negligence, or
breach of duty (including alleged breach of any duty of care or duty of loyalty
or other fiduciary duty), except for (i) acts or omissions the manager, Member,
or member of the board of managers of the Member knew at the time of the acts or
omissions were clearly in conflict with the interest of the LLC, or (ii) any
transaction from which the manager, Member, or member of the board of managers
of the Member derived an improper personal benefit, (iii) a willful breach of
this Agreement, or (iv) gross negligence, recklessness, willful misconduct, or
knowing violation of law. Without limiting the foregoing, no manager, Member, or
member of the board of managers of the Member shall in any event be liable for
(A) the failure to take any action not specifically required to be taken by the
manager, Member or member of the board of managers of the Member under the terms
of this Agreement, (B) any action or omission taken or suffered by any other
manager, Member or member of the board of managers of the Member, or (C) any
mistake, misconduct, negligence, dishonesty or bad faith on the part of any
employee or other agent of the LLC appointed in good faith by such manager,
Member or member of the board of managers of the Member. The provisions
regarding the indemnification of certain Persons are set forth in the
Indemnification Exhibit attached hereto as Exhibit C.
4
<PAGE> 8
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC Agreement
the Member may transfer its Interest at such time, in such amount and pursuant
to such terms, in whole or in part, as the Member shall in its sole discretion
determine.
ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the delivery for filing with the Secretary of State of a
Statement of Commencement of Winding Up of the LLC pursuant to Act Section
14-11-606.
(b) The entry of a decree of judicial dissolution under Act Section
14-11-603(a).
SECTION 6.2. WINDING UP. Pursuant to Act Section 14-11-604, upon
dissolution of the LLC the Member shall wind up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the Member in liquidation as provided in the Act by the
Persons charged with winding up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member. The LLC shall prepare
financial statements at least annually, which shall include at least a balance
sheet and income statement prepared in accordance with GAAP, which financial
statements need not be audited, except in connection with any audit that the
Member or the LLC's ultimate parent entity may obtain.
5
<PAGE> 9
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members, and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL OPERATING AGREEMENTS. This
Agreement constitutes the entire agreement with respect to the affairs of the
LLC and the conduct of its business, and supersedes all prior agreements and
understandings, whether oral or written. The LLC shall have no oral operating
agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Georgia shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Member hereby irrevocably consents to the personal jurisdiction of the courts of
the State of Georgia with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
6
<PAGE> 10
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
7
<PAGE> 11
EXECUTION PAGE
TO THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF COLORADO, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
INITIAL AND CONTINUING MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: President
INITIAL AND WITHDRAWING MEMBER:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC,
a Georgia limited liability company
Its: Manager
By: ______________________
Name: Douglas S. Holladay, Jr.
Title: President
8
<PAGE> 1
EXHIBIT 3.6(a)
ARTICLES OF ORGANIZATION
OF
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC
Whereas Digital Television Services of Georgia, LP, a Georgia limited
partnership, has elected to become a limited liability company pursuant to
Section 14-11-212 of the Georgia Limited Liability Company Act (the "Act"), the
undersigned, pursuant to Act Sections 14-11-212 and 14-11-204, does hereby
certify as follows:
I.
The name of the limited liability company is
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC.
II.
These Articles of Organization shall be effective as of 10:00 a.m.
local time in Atlanta, Georgia on February 7, 1997, which effective date and
time is later than the date and time of filing of these Articles of Organization
as evidenced by the Secretary of State's date endorsement on the original
Articles of Organization.
III.
Filed with these Articles of Organization is a Certificate of Election
that is in the form required by Act Section 14-11-212.
IV.
Management of the Company is vested in the Member.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Organization of Digital Television Services of Georgia, LLC as of February 3,
1997.
MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 1
EXHIBIT 3.6(b)
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC
A GEORGIA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC
A GEORGIA LIMITED LIABILITY COMPANY
RECITALS.......................................................................1
ARTICLE I - FORMATION..........................................................1
SECTION 1.1. Formation; Conversion; Assignment......................1
SECTION 1.2. Name...................................................2
SECTION 1.3. Purposes...............................................2
SECTION 1.4. Registered Agent; Registered Office....................2
SECTION 1.5. Commencement and Term..................................2
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities........................................3
SECTION 1.7. Title to Assets; Transactions..........................3
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................3
SECTION 2.1. Capital Contributions..................................3
SECTION 2.2. Liability of Members .................................3
ARTICLE III - DISTRIBUTIONS....................................................4
SECTION 3.1. Distributions..........................................4
ARTICLE IV - MANAGEMENT........................................................4
SECTION 4.1. Management.............................................4
SECTION 4.2. Limitation of Liability; Indemnification...............4
ARTICLE V - TRANSFER OF INTERESTS .............................................5
SECTION 5.1. Transfer of Interests..................................5
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS.............5
SECTION 6.1. Dissolution Triggers...................................5
SECTION 6.2. Winding Up.............................................5
SECTION 6.3. Liquidating Distributions..............................5
i
<PAGE> 3
ARTICLE VII - BOOKS AND RECORDS................................................5
SECTION 7.1. Books and Records......................................5
ARTICLE VIII - MISCELLANEOUS...................................................6
SECTION 8.1. Binding Effect.........................................6
SECTION 8.2. Construction...........................................6
SECTION 8.3. Entire Agreement; No Oral Operating Agreements.........6
SECTION 8.4. Headings...............................................6
SECTION 8.5. Severability...........................................6
SECTION 8.6. Variation of Pronouns..................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction.................6
SECTION 8.8. Counterpart Execution; Facsimile Execution.............6
SECTION 8.9. Time of the Essence....................................6
SECTION 8.10. Exhibits...............................................7
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
ii
<PAGE> 4
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC
A GEORGIA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made and entered into as of 10:00 A.M.
Eastern Time, February 7, 1997 (the "Effective Time") by and between Digital
Television Services, LLC, a Delaware limited liability company (formerly
Columbia DBS Holdings, LLC, a Delaware limited liability company (successor by
conversion to DBS Holdings, L.P., a Delaware limited partnership)) ("Holdings"),
and DTS Management, LLC (formerly Columbia DBS Management, LLC) a Georgia
limited liability company ("Management"). Unless otherwise indicated,
capitalized words and phrases in this Operating Agreement (the "Agreement")
shall have the meanings set forth in the Glossary of Terms attached hereto as
Exhibit B.
RECITALS
A. Digital Television Services of Georgia, LP, a Georgia limited
partnership (the "Partnership"), was formed on January 15, 1997.
B. The Partnership had two partners from its formation until the
effective date of this Agreement, specifically, Management, as general partner
with a 1% interest and Holdings as limited partner with a 99% interest.
C. Management and Holdings as the partners of the Partnership have
approved of the Partnership's election to become a limited liability company
pursuant to Act Section 14-11-212(a) as evidenced by their execution of the
Certificate of Election, attached hereto as Exhibit A and delivered for filing
with the Secretary of State of Georgia; and Management has executed and
delivered for filing with the Secretary of State of Georgia "Articles of
Organization" pursuant to Sections 14-11-212 and 14-11-204, all for the purpose
of causing the Partnership to become a limited liability company.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; CONVERSION; ASSIGNMENT.
The LLC is the successor in interest by conversion (the "Conversion")
to the Partnership effective as of the Effective Time and as of the Effective
Time, Management and Holdings became the initial Members of the LLC. By virtue
of the Conversion, Management's 1% general partner interest in the Partnership
shall be converted into a 1% member Interest in the LLC and Holdings' 99%
limited partner interest in the Partnership shall be converted into a 99% member
Interest in the LLC, with each such member Interest (and the proceeds thereof)
1
<PAGE> 5
continuing in all respects to be subject to the security interest granted under
Section 3 of the Guarantee and Collateral Agreement (the "Security Interest").
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Holdings
hereby assigns and transfers all of its right, title and interest in and to its
99% member Interest in the LLC to Management, as a capital contribution with
respect to its interest in Management, and shall be deemed to have withdrawn as
a Member of the LLC, all effective 10:01 A.M. Eastern Time, February 7, 1997,
which assignment and transfer shall be in all respects subject to the Security
Interest, with the effect that as of 10:01 A.M. Eastern Time, February 7, 1997,
Management shall hold 100% of the Interests in the LLC, and thus become the sole
member of the LLC, with its entire Interest subject to the Security Interest.
Holdings hereby represents and warrants to the LLC and to Management that, with
the exception of the Security Interest, its Interest in the LLC assigned hereby
is free and clear of all liens, claims, and encumbrances of any nature
whatsoever. Holdings shall cause or take all necessary further action as may be
requested by the LLC or by Management to confirm and ensure the complete
assignment of its Interest as provided herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Articles of Organization attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to perform
the obligations under the Purchase Agreements, (ii) to own and operate the
Business, (iii) to further develop the Business in such areas and under such
terms as provided in the NRTC Agreements, (iv) to manage, maintain, repair,
dispose of and otherwise deal with the Business within such service area, (v) to
mortgage or otherwise encumber all or any part of the assets of the Business,
(vi) to engage in other businesses ancillary to the Business as encompassed in
the NRTC Agreements, and (vii) to conduct such other activities as may be
necessary or incidental to the foregoing, all on the terms and conditions and
subject to the limitations set forth in this Agreement and in the Act. Nothing
in this Agreement shall prohibit any Member from engaging in any business,
investment or other activity in any service area even if such business,
investment or activity is competitive with the Business.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be Douglas S. Holladay, Jr. and the LLC's registered office shall be
880 Holcomb Bridge Rd., Bldg. C-200, Roswell, GA 30076. The LLC's registered
agent or registered office may be changed as provided in Act Section 14-11-209,
or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the Effective Time with the LLC being the successor in interest by conversion to
the Partnership. The term of the LLC shall continue until it is dissolved, its
affairs are wound up and final liquidating distributions are made pursuant to
this Agreement. Except as otherwise provided herein, the LLC shall have
perpetual existence.
2
<PAGE> 6
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes (provided that the LLC has not elected on Form
8832 to be treated as a corporation). In all events, however, the LLC shall keep
books and records separate from those of its Member and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member. The LLC
shall enter into and engage in all transactions in its own name and not in the
name of its Member. In furtherance thereof, the LLC shall evidence its execution
of instruments as follows:
Digital Television Services of Georgia, LLC,
a Georgia limited liability company
By: DTS Management, LLC,
a Georgia limited liability company
Its: Member
By:__________________________________
Title:_______________________________
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member shall
determine in its sole and absolute discretion; provided, however, that any such
additional Capital Contributions shall be evidenced in writing and recorded in
the books and records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
3
<PAGE> 7
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Georgia, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the board of managers of the Member shall
determine.
ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by its Member, who
shall have complete authority and exclusive control over the business and
affairs of the LLC.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager,
Member, or member of the board of managers of the Member shall be liable,
responsible, or accountable in damages or otherwise to the LLC or to any Member
or assignee of a Member for any loss, damage, cost, liability, or expense
incurred by reason of or caused by any act or omission performed or omitted by
such manager, Member, or member of the board of managers of the Member, whether
alleged to be based upon or arising from errors in judgment, negligence, or
breach of duty (including alleged breach of any duty of care or duty of loyalty
or other fiduciary duty), except for (i) acts or omissions the manager, Member,
or member of the board of managers of the Member knew at the time of the acts or
omissions were clearly in conflict with the interest of the LLC, or (ii) any
transaction from which the manager, Member, or member of the board of managers
of the Member derived an improper personal benefit, (iii) a willful breach of
this Agreement, or (iv) gross negligence, recklessness, willful misconduct, or
knowing violation of law. Without limiting the foregoing, no manager, Member, or
member of the board of managers of the Member shall in any event be liable for
(A) the failure to take any action not specifically required to be taken by the
manager, Member or member of the board of managers of the Member under the terms
of this Agreement, (B) any action or omission taken or suffered by any other
manager, Member or member of the board of managers of the Member, or (C) any
mistake, misconduct, negligence, dishonesty or bad faith on the part of any
employee or other agent of the LLC appointed in good faith by such manager,
Member or member of the board of managers of the Member. The provisions
regarding the indemnification of certain Persons are set forth in the
Indemnification Exhibit attached hereto as Exhibit C.
4
<PAGE> 8
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC Agreement
the Member may transfer its Interest at such time, in such amount and pursuant
to such terms, in whole or in part, as the Member shall in its sole discretion
determine.
ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the delivery for filing with the Secretary of State of a
Statement of Commencement of Winding Up of the LLC pursuant to Act Section
14-11-606.
(b) The entry of a decree of judicial dissolution under Act Section
14-11-603(a).
SECTION 6.2. WINDING UP. Pursuant to Act Section 14-11-604, upon
dissolution of the LLC the Member shall wind up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the Member in liquidation as provided in the Act by the
Persons charged with winding up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member. The LLC shall prepare
financial statements at least annually, which shall include at least a balance
sheet and income statement prepared in accordance with GAAP, which financial
statements need not be audited, except in connection with any audit that the
Member or the LLC's ultimate parent entity may obtain.
5
<PAGE> 9
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members, and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL OPERATING AGREEMENTS. This
Agreement constitutes the entire agreement with respect to the affairs of the
LLC and the conduct of its business, and supersedes all prior agreements and
understandings, whether oral or written. The LLC shall have no oral operating
agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Georgia shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Member hereby irrevocably consents to the personal jurisdiction of the courts of
the State of Georgia with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
6
<PAGE> 10
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
7
<PAGE> 11
EXECUTION PAGE
TO THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
INITIAL AND CONTINUING MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: President
INITIAL AND WITHDRAWING MEMBER:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC,
a Georgia limited liability company
Its: Manager
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: President
8
<PAGE> 1
EXHIBIT 3.7(a)
ARTICLES OF ORGANIZATION
OF
DIGITAL TELEVISION SERVICES OF KANSAS, LLC
Whereas Digital Television Services of Kansas, LP, a Georgia limited
partnership, has elected to become a limited liability company pursuant to
Section 14-11-212 of the Georgia Limited Liability Company Act (the "Act"), the
undersigned, pursuant to Act Sections 14-11-212 and 14-11-204, does hereby
certify as follows:
I.
The name of the limited liability company is
DIGITAL TELEVISION SERVICES OF KANSAS, LLC.
II.
These Articles of Organization shall be effective as of 10:00 a.m.
local time in Atlanta, Georgia on February 7, 1997, which effective date and
time is later than the date and time of filing of these Articles of Organization
as evidenced by the Secretary of State's date endorsement on the original
Articles of Organization.
III.
Filed with these Articles of Organization is a Certificate of Election
that is in the form required by Act Section 14-11-212.
IV.
Management of the Company is vested in the Member.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Organization of Digital Television Services of Kansas, LLC as of February 3,
1997.
MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
<PAGE> 1
EXHIBIT 3.7(b)
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF KANSAS, LLC
A GEORGIA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF KANSAS, LLC
A GEORGIA LIMITED LIABILITY COMPANY
RECITALS.......................................................................1
ARTICLE I - FORMATION..........................................................1
SECTION 1.1. Formation; Conversion; Assignment......................1
SECTION 1.2. Name...................................................2
SECTION 1.3. Purposes...............................................2
SECTION 1.4. Registered Agent; Registered Office....................2
SECTION 1.5. Commencement and Term..................................2
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities........................................3
SECTION 1.7. Title to Assets; Transactions..........................3
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................3
SECTION 2.1. Capital Contributions..................................3
SECTION 2.2. Liability of Members .................................3
ARTICLE III - DISTRIBUTIONS....................................................4
SECTION 3.1. Distributions..........................................4
ARTICLE IV - MANAGEMENT........................................................4
SECTION 4.1. Management.............................................4
SECTION 4.2. Limitation of Liability; Indemnification...............4
ARTICLE V - TRANSFER OF INTERESTS .............................................5
SECTION 5.1. Transfer of Interests..................................5
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS.............5
SECTION 6.1. Dissolution Triggers...................................5
SECTION 6.2. Winding Up.............................................5
SECTION 6.3. Liquidating Distributions..............................5
i
<PAGE> 3
ARTICLE VII - BOOKS AND RECORDS................................................5
SECTION 7.1. Books and Records......................................5
ARTICLE VIII - MISCELLANEOUS...................................................6
SECTION 8.1. Binding Effect.........................................6
SECTION 8.2. Construction...........................................6
SECTION 8.3. Entire Agreement; No Oral Operating Agreements.........6
SECTION 8.4. Headings...............................................6
SECTION 8.5. Severability...........................................6
SECTION 8.6. Variation of Pronouns..................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction.................6
SECTION 8.8. Counterpart Execution; Facsimile Execution.............6
SECTION 8.9. Time of the Essence....................................6
SECTION 8.10. Exhibits...............................................7
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
ii
<PAGE> 4
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF KANSAS, LLC
A GEORGIA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made and entered into as of 10:00 A.M.
Eastern Time, February 7, 1997, (the "Effective Time") by and between Digital
Television Services, LLC, a Delaware limited liability company (formerly
Columbia DBS Holdings, LLC, a Delaware limited liability company (successor by
conversion to DBS Holdings, L.P., a Delaware limited partnership)) ("Holdings"),
and DTS Management, LLC (formerly Columbia DBS Management, LLC) a Georgia
limited liability company ("Management"). Unless otherwise indicated,
capitalized words and phrases in this Operating Agreement (the "Agreement")
shall have the meanings set forth in the Glossary of Terms attached hereto as
Exhibit B.
RECITALS
A. Digital Television Services of Kansas, LP, a Georgia limited
partnership (the "Partnership"), was formed on November 22, 1996.
B. The Partnership had two partners from its formation until the
effective date of this Agreement, specifically, Management, as general partner
with a 1% interest and Holdings as limited partner with a 99% interest.
C. Management and Holdings as the partners of the Partnership have
approved of the Partnership's election to become a limited liability company
pursuant to Act Section 14-11-212(a) as evidenced by their execution of the
Certificate of Election, attached hereto as Exhibit A and delivered for filing
with the Secretary of State of Georgia; and Management has executed and
delivered for filing with the Secretary of State of Georgia "Articles of
Organization" pursuant to Sections 14-11-212 and 14-11-204, all for the purpose
of causing the Partnership to become a limited liability company.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; CONVERSION; ASSIGNMENT.
The LLC is the successor in interest by conversion (the "Conversion")
to the Partnership effective as of the Effective Time and as of the Effective
Time, Management and Holdings became the initial Members of the LLC. By virtue
of the Conversion, Management's 1% general partner interest in the Partnership
shall be converted into a 1% member Interest in the LLC and Holdings' 99%
limited partner interest in the Partnership shall be converted into a 99% member
Interest in the LLC, with each such member Interest (and the proceeds thereof)
1
<PAGE> 5
continuing in all respects to be subject to the security interest granted under
Section 3 of the Guarantee and Collateral Agreement (the "Security Interest").
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Holdings
hereby assigns and transfers all of its right, title and interest in and to its
99% member Interest in the LLC to Management, as a capital contribution with
respect to its interest in Management, and shall be deemed to have withdrawn as
a Member of the LLC, all effective 10:01 A.M. Eastern Time, February 7, 1997,
which assignment and transfer shall be in all respects subject to the Security
Interest, with the effect that as of 10:01 A.M. Eastern Time, February 7, 1997,
Management shall hold 100% of the Interests in the LLC, and thus become the sole
member of the LLC, with its entire Interest subject to the Security Interest.
Holdings hereby represents and warrants to the LLC and to Management that, with
the exception of the Security Interest, its Interest in the LLC assigned hereby
is free and clear of all liens, claims, and encumbrances of any nature
whatsoever. Holdings shall cause or take all necessary further action as may be
requested by the LLC or by Management to confirm and ensure the complete
assignment of its Interest as provided herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Articles of Organization attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to perform
the obligations under the Purchase Agreements, (ii) to own and operate the
Business, (iii) to further develop the Business in such areas and under such
terms as provided in the NRTC Agreements, (iv) to manage, maintain, repair,
dispose of and otherwise deal with the Business within such service area, (v) to
mortgage or otherwise encumber all or any part of the assets of the Business,
(vi) to engage in other businesses ancillary to the Business as encompassed in
the NRTC Agreements, and (vii) to conduct such other activities as may be
necessary or incidental to the foregoing, all on the terms and conditions and
subject to the limitations set forth in this Agreement and in the Act. Nothing
in this Agreement shall prohibit any Member from engaging in any business,
investment or other activity in any service area even if such business,
investment or activity is competitive with the Business.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be Douglas S. Holladay, Jr. and the LLC's registered office shall be
880 Holcomb Bridge Rd., Bldg. C-200, Roswell, GA 30076. The LLC's registered
agent or registered office may be changed as provided in Act Section 14-11-209,
or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the Effective Time with the LLC being the successor in interest by conversion to
the Partnership. The term of the LLC shall continue until it is dissolved, its
affairs are wound up and final liquidating distributions are made pursuant to
this Agreement. Except as otherwise provided herein, the LLC shall have
perpetual existence.
2
<PAGE> 6
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes (provided that the LLC has not elected on Form
8832 to be treated as a corporation). In all events, however, the LLC shall keep
books and records separate from those of its Member and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member. The LLC
shall enter into and engage in all transactions in its own name and not in the
name of its Member. In furtherance thereof, the LLC shall evidence its execution
of instruments as follows:
Digital Television Services of Kansas, LLC,
a Georgia limited liability company
By: DTS Management, LLC,
a Georgia limited liability company
Its: Member
By:__________________________________
Title:_______________________________
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member shall
determine in its sole and absolute discretion; provided, however, that any such
additional Capital Contributions shall be evidenced in writing and recorded in
the books and records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
3
<PAGE> 7
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Georgia, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the board of managers of the Member shall
determine.
ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by its Member, who
shall have complete authority and exclusive control over the business and
affairs of the LLC.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager,
Member, or member of the board of managers of the Member shall be liable,
responsible, or accountable in damages or otherwise to the LLC or to any Member
or assignee of a Member for any loss, damage, cost, liability, or expense
incurred by reason of or caused by any act or omission performed or omitted by
such manager, Member, or member of the board of managers of the Member, whether
alleged to be based upon or arising from errors in judgment, negligence, or
breach of duty (including alleged breach of any duty of care or duty of loyalty
or other fiduciary duty), except for (i) acts or omissions the manager, Member,
or member of the board of managers of the Member knew at the time of the acts or
omissions were clearly in conflict with the interest of the LLC, or (ii) any
transaction from which the manager, Member, or member of the board of managers
of the Member derived an improper personal benefit, (iii) a willful breach of
this Agreement, or (iv) gross negligence, recklessness, willful misconduct, or
knowing violation of law. Without limiting the foregoing, no manager, Member, or
member of the board of managers of the Member shall in any event be liable for
(A) the failure to take any action not specifically required to be taken by the
manager, Member or member of the board of managers of the Member under the terms
of this Agreement, (B) any action or omission taken or suffered by any other
manager, Member or member of the board of managers of the Member, or (C) any
mistake, misconduct, negligence, dishonesty or bad faith on the part of any
employee or other agent of the LLC appointed in good faith by such manager,
Member or member of the board of managers of the Member. The provisions
regarding the indemnification of certain Persons are set forth in the
Indemnification Exhibit attached hereto as Exhibit C.
4
<PAGE> 8
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC Agreement
the Member may transfer its Interest at such time, in such amount and pursuant
to such terms, in whole or in part, as the Member shall in its sole discretion
determine.
ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the delivery for filing with the Secretary of State of a
Statement of Commencement of Winding Up of the LLC pursuant to Act Section
14-11-606.
(b) The entry of a decree of judicial dissolution under Act Section
14-11-603(a).
SECTION 6.2. WINDING UP. Pursuant to Act Section 14-11-604, upon
dissolution of the LLC the Member shall wind up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the Member in liquidation as provided in the Act by the
Persons charged with winding up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member. The LLC shall prepare
financial statements at least annually, which shall include at least a balance
sheet and income statement prepared in accordance with GAAP, which financial
statements need not be audited, except in connection with any audit that the
Member or the LLC's ultimate parent entity may obtain.
5
<PAGE> 9
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members, and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL OPERATING AGREEMENTS. This
Agreement constitutes the entire agreement with respect to the affairs of the
LLC and the conduct of its business, and supersedes all prior agreements and
understandings, whether oral or written. The LLC shall have no oral operating
agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Georgia shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Member hereby irrevocably consents to the personal jurisdiction of the courts of
the State of Georgia with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
6
<PAGE> 10
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
7
<PAGE> 11
EXECUTION PAGE
TO THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF KANSAS, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
INITIAL AND CONTINUING MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: President
INITIAL AND WITHDRAWING MEMBER:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC,
a Georgia limited liability company
Its: Manager
By: _________________________
Name: Douglas S. Holladay, Jr.
Title: President
8
<PAGE> 1
EXHIBIT 3.8(a)
ARTICLES OF ORGANIZATION
OF
DIGITAL TELEVISION SERVICES OF KENTUCKY, LLC
Whereas Digital Television Services of Kentucky, LP, a Georgia limited
partnership, has elected to become a limited liability company pursuant to
Section 14-11-212 of the Georgia Limited Liability Company Act (the "Act"), the
undersigned, pursuant to Act Sections 14-11-212 and 14-11-204, does hereby
certify as follows:
I.
The name of the limited liability company is
DIGITAL TELEVISION SERVICES OF KENTUCKY, LLC.
II.
These Articles of Organization shall be effective as of 10:00 a.m.
local time in Atlanta, Georgia on February 7, 1997, which effective date and
time is later than the date and time of filing of these Articles of Organization
as evidenced by the Secretary of State's date endorsement on the original
Articles of Organization.
III.
Filed with these Articles of Organization is a Certificate of Election
that is in the form required by Act Section 14-11-212.
IV.
Management of the Company is vested in the Member.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Organization of Digital Television Services of Kentucky, LLC as of February 3,
1997.
MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
<PAGE> 1
EXHIBIT 3.8(b)
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF KENTUCKY, LLC
A GEORGIA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF KENTUCKY, LLC
A GEORGIA LIMITED LIABILITY COMPANY
RECITALS.......................................................................1
ARTICLE I - FORMATION..........................................................1
SECTION 1.1. Formation; Conversion; Assignment......................1
SECTION 1.2. Name...................................................2
SECTION 1.3. Purposes...............................................2
SECTION 1.4. Registered Agent; Registered Office....................2
SECTION 1.5. Commencement and Term..................................2
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities........................................3
SECTION 1.7. Title to Assets; Transactions..........................3
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................3
SECTION 2.1. Capital Contributions..................................3
SECTION 2.2. Liability of Members .................................3
ARTICLE III - DISTRIBUTIONS....................................................4
SECTION 3.1. Distributions..........................................4
ARTICLE IV - MANAGEMENT........................................................4
SECTION 4.1. Management.............................................4
SECTION 4.2. Limitation of Liability; Indemnification...............4
ARTICLE V - TRANSFER OF INTERESTS .............................................5
SECTION 5.1. Transfer of Interests..................................5
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS.............5
SECTION 6.1. Dissolution Triggers...................................5
SECTION 6.2. Winding Up.............................................5
SECTION 6.3. Liquidating Distributions..............................5
ARTICLE VII - BOOKS AND RECORDS................................................5
SECTION 7.1. Books and Records......................................5
ARTICLE VIII - MISCELLANEOUS...................................................6
SECTION 8.1. Binding Effect.........................................6
SECTION 8.2. Construction...........................................6
i
<PAGE> 3
SECTION 8.3. Entire Agreement; No Oral Operating Agreements.........6
SECTION 8.4. Headings...............................................6
SECTION 8.5. Severability...........................................6
SECTION 8.6. Variation of Pronouns..................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction.................6
SECTION 8.8. Counterpart Execution; Facsimile Execution.............6
SECTION 8.9. Time of the Essence....................................6
SECTION 8.10. Exhibits...............................................7
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
ii
<PAGE> 4
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF KENTUCKY, LLC
A GEORGIA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made and entered into as of 10:00 A.M.
Eastern Time, February 7, 1997, (the "Effective Time") by and between Digital
Television Services, LLC, a Delaware limited liability company (formerly
Columbia DBS Holdings, LLC, a Delaware limited liability company (successor by
conversion to DBS Holdings, L.P., a Delaware limited partnership)) ("Holdings"),
and DTS Management, LLC (formerly Columbia DBS Management, LLC) a Georgia
limited liability company ("Management"). Unless otherwise indicated,
capitalized words and phrases in this Operating Agreement (the "Agreement")
shall have the meanings set forth in the Glossary of Terms attached hereto as
Exhibit B.
RECITALS
A. Digital Television Services of Kentucky, LP, a Georgia limited
partnership (the "Partnership"), was formed on October 18, 1996.
B. The Partnership had two partners from its formation until the
effective date of this Agreement, specifically, Management, as general partner
with a 1% interest and Holdings as limited partner with a 99% interest.
C. Management and Holdings as the partners of the Partnership have
approved of the Partnership's election to become a limited liability company
pursuant to Act Section 14-11-212(a) as evidenced by their execution of the
Certificate of Election, attached hereto as Exhibit A and delivered for filing
with the Secretary of State of Georgia; and Management has executed and
delivered for filing with the Secretary of State of Georgia "Articles of
Organization" pursuant to Sections 14-11-212 and 14-11-204, all for the purpose
of causing the Partnership to become a limited liability company.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; CONVERSION; ASSIGNMENT.
The LLC is the successor in interest by conversion (the "Conversion")
to the Partnership effective as of the Effective Time and as of the Effective
Time, Management and Holdings became the initial Members of the LLC. By virtue
of the Conversion, Management's 1% general partner interest in the Partnership
shall
1
<PAGE> 5
be converted into a 1% member Interest in the LLC and Holdings' 99% limited
partner interest in the Partnership shall be converted into a 99% member
Interest in the LLC, with each such member Interest (and the proceeds thereof)
continuing in all respects to be subject to the security interest granted under
Section 3 of the Guarantee and Collateral Agreement (the "Security Interest").
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Holdings
hereby assigns and transfers all of its right, title and interest in and to its
99% member Interest in the LLC to Management, as a capital contribution with
respect to its interest in Management, and shall be deemed to have withdrawn as
a Member of the LLC, all effective 10:01 A.M. Eastern Time, February 7, 1997,
which assignment and transfer shall be in all respects subject to the Security
Interest, with the effect that as of 10:01 A.M. Eastern Time, February 7, 1997,
Management shall hold 100% of the Interests in the LLC, and thus become the sole
member of the LLC, with its entire Interest subject to the Security Interest.
Holdings hereby represents and warrants to the LLC and to Management that, with
the exception of the Security Interest, its Interest in the LLC assigned hereby
is free and clear of all liens, claims, and encumbrances of any nature
whatsoever. Holdings shall cause or take all necessary further action as may be
requested by the LLC or by Management to confirm and ensure the complete
assignment of its Interest as provided herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Articles of Organization attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to perform
the obligations under the Purchase Agreement, (ii) to own and operate the
Business, (iii) to further develop the Business in such areas and under such
terms as provided in the NRTC Agreements, (iv) to manage, maintain, repair,
dispose of and otherwise deal with the Business within such service area, (v) to
mortgage or otherwise encumber all or any part of the assets of the Business,
(vi) to engage in other businesses ancillary to the Business as encompassed in
the NRTC Agreements, and (vii) to conduct such other activities as may be
necessary or incidental to the foregoing, all on the terms and conditions and
subject to the limitations set forth in this Agreement and in the Act. Nothing
in this Agreement shall prohibit any Member from engaging in any business,
investment or other activity in any service area even if such business,
investment or activity is competitive with the Business.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be Douglas S. Holladay, Jr. and the LLC's
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<PAGE> 6
registered office shall be 880 Holcomb Bridge Rd., Bldg. C-200, Roswell, GA
30076. The LLC's registered agent or registered office may be changed as
provided in Act Section 14-11-209, or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the Effective Time with the LLC being the successor in interest by conversion to
the Partnership. The term of the LLC shall continue until it is dissolved, its
affairs are wound up and final liquidating distributions are made pursuant to
this Agreement. Except as otherwise provided herein, the LLC shall have
perpetual existence.
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes (provided that the LLC has not elected on Form
8832 to be treated as a corporation). In all events, however, the LLC shall keep
books and records separate from those of its Member and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member. The LLC
shall enter into and engage in all transactions in its own name and not in the
name of its Member. In furtherance thereof, the LLC shall evidence its execution
of instruments as follows:
Digital Television Services of Kentucky, LLC,
a Georgia limited liability company
By: DTS Management, LLC,
a Georgia limited liability company
Its: Member
By:__________________________________
Title:_______________________________
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member shall
determine in its sole and absolute discretion; provided, however, that any such
3
<PAGE> 7
additional Capital Contributions shall be evidenced in writing and recorded in
the books and records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
4
<PAGE> 8
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Georgia, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the board of managers of the Member shall
determine.
ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by its Member, who
shall have complete authority and exclusive control over the business and
affairs of the LLC.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager,
Member, or member of the board of managers of the Member shall be liable,
responsible, or accountable in damages or otherwise to the LLC or to any Member
or assignee of a Member for any loss, damage, cost, liability, or expense
incurred by reason of or caused by any act or omission performed or omitted by
such manager, Member, or member of the board of managers of the Member, whether
alleged to be based upon or arising from errors in judgment, negligence, or
breach of duty (including alleged breach of any duty of care or duty of loyalty
or other fiduciary duty), except for (i) acts or omissions the manager, Member,
or member of the board of managers of the Member knew at the time of the acts or
omissions were clearly in conflict with the interest of the LLC, or (ii) any
transaction from which the manager, Member, or member of the board of managers
of the Member derived an improper personal benefit, (iii) a willful breach of
this Agreement, or (iv) gross negligence, recklessness, willful misconduct, or
knowing violation of law. Without limiting the foregoing, no manager, Member, or
member of the board of managers of the Member shall in any event be liable for
(A) the failure to take any action not specifically required to be taken by the
manager, Member or member of the board of managers of the Member under the terms
of this Agreement, (B) any action or omission taken or suffered by any other
manager, Member or member of the board of managers of the Member, or (C) any
mistake, misconduct, negligence, dishonesty or bad faith on the part of any
employee or other agent of the LLC appointed in good faith by such manager,
Member or member of the board of managers of the Member. The provisions
regarding the indemnification of certain Persons are set forth in the
Indemnification Exhibit attached hereto as Exhibit C.
5
<PAGE> 9
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC Agreement
the Member may transfer its Interest at such time, in such amount and pursuant
to such terms, in whole or in part, as the Member shall in its sole discretion
determine.
ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the delivery for filing with the Secretary of State of a
Statement of Commencement of Winding Up of the LLC pursuant to Act Section
14-11-606.
(b) The entry of a decree of judicial dissolution under Act Section
14-11-603(a).
SECTION 6.2. WINDING UP. Pursuant to Act Section 14-11-604, upon
dissolution of the LLC the Member shall wind up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the Member in liquidation as provided in the Act by the
Persons charged with winding up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member. The LLC shall prepare
financial statements at least annually, which shall include at least a balance
sheet and income statement prepared in accordance with GAAP, which financial
statements need not be audited, except in connection with any audit that the
Member or the LLC's ultimate parent entity may obtain.
6
<PAGE> 10
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members, and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL OPERATING AGREEMENTS. This
Agreement constitutes the entire agreement with respect to the affairs of the
LLC and the conduct of its business, and supersedes all prior agreements and
understandings, whether oral or written. The LLC shall have no oral operating
agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Georgia shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Member hereby irrevocably consents to the personal jurisdiction of the courts of
the State of Georgia with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
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<PAGE> 11
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
8
<PAGE> 12
EXECUTION PAGE
TO THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF KENTUCKY, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
INITIAL AND CONTINUING MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: President
INITIAL AND WITHDRAWING MEMBER:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC,
a Georgia limited liability company
Its: Manager
By: ______________________
Name: Douglas S. Holladay, Jr.
Title: President
9
<PAGE> 1
EXHIBIT 3.9(a)
ARTICLES OF ORGANIZATION
OF
DIGITAL TELEVISION SERVICES OF NEW MEXICO, LLC
Whereas Digital Television Services of New Mexico, LP, a Georgia
limited partnership, has elected to become a limited liability company pursuant
to Section 14-11-212 of the Georgia Limited Liability Company Act (the "Act"),
the undersigned, pursuant to Act Sections 14-11-212 and 14-11-204, does hereby
certify as follows:
I.
The name of the limited liability company is
DIGITAL TELEVISION SERVICES OF NEW MEXICO, LLC.
II.
These Articles of Organization shall be effective as of 10:00 a.m.
local time in Atlanta, Georgia on February 7, 1997, which effective date and
time is later than the date and time of filing of these Articles of Organization
as evidenced by the Secretary of State's date endorsement on the original
Articles of Organization.
III.
Filed with these Articles of Organization is a Certificate of Election
that is in the form required by Act Section 14-11-212.
IV.
Management of the Company is vested in the Member.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Organization of Digital Television Services of New Mexico, LLC as of February 3,
1997.
MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 1
EXHIBIT 3.9(b)
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF NEW MEXICO, LLC
A GEORGIA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF NEW MEXICO, LLC
A GEORGIA LIMITED LIABILITY COMPANY
RECITALS......................................................................1
ARTICLE I - FORMATION.........................................................1
SECTION 1.1. Formation; Conversion; Assignment.....................1
SECTION 1.2. Name..................................................2
SECTION 1.3. Purposes..............................................2
SECTION 1.4. Registered Agent; Registered Office...................2
SECTION 1.5. Commencement and Term.................................2
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities.......................................3
SECTION 1.7. Title to Assets; Transactions.........................3
ARTICLE II - CAPITAL CONTRIBUTIONS............................................3
SECTION 2.1. Capital Contributions.................................3
SECTION 2.2. Liability of Members ................................3
ARTICLE III - DISTRIBUTIONS...................................................4
SECTION 3.1. Distributions.........................................4
ARTICLE IV - MANAGEMENT.......................................................4
SECTION 4.1. Management............................................4
SECTION 4.2. Limitation of Liability; Indemnification..............4
ARTICLE V - TRANSFER OF INTERESTS ............................................5
SECTION 5.1. Transfer of Interests.................................5
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS............5
SECTION 6.1. Dissolution Triggers..................................5
SECTION 6.2. Winding Up............................................5
SECTION 6.3. Liquidating Distributions.............................5
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<PAGE> 3
ARTICLE VII - BOOKS AND RECORDS...............................................5
SECTION 7.1. Books and Records.....................................5
ARTICLE VIII - MISCELLANEOUS..................................................6
SECTION 8.1. Binding Effect........................................6
SECTION 8.2. Construction..........................................6
SECTION 8.3. Entire Agreement; No Oral Operating Agreements........6
SECTION 8.4. Headings..............................................6
SECTION 8.5. Severability..........................................6
SECTION 8.6. Variation of Pronouns.................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction................6
SECTION 8.8. Counterpart Execution; Facsimile Execution............6
SECTION 8.9. Time of the Essence...................................6
SECTION 8.10. Exhibits..............................................7
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
ii
<PAGE> 4
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF NEW MEXICO, LLC
A GEORGIA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made and entered into as of 10:00 A.M.
Eastern Time, February 7, 1997, (the "Effective Time") by and between Digital
Television Services, LLC, a Delaware limited liability company (formerly
Columbia DBS Holdings, LLC, a Delaware limited liability company (successor by
conversion to DBS Holdings, L.P., a Delaware limited partnership)) (Holdings"),
and DTS Management, LLC (formerly Columbia DBS Management, LLC) a Georgia
limited liability company ("Management"). Unless otherwise indicated,
capitalized words and phrases in this Operating Agreement (the "Agreement")
shall have the meanings set forth in the Glossary of Terms attached hereto as
Exhibit B.
RECITALS
A. Digital Television Services of New Mexico, LP, a Georgia limited
partnership (the "Partnership"), was formed on June 21, 1996.
B. The Partnership had two partners from its formation until the
effective date of this Agreement, specifically, Management, as general partner
with a 1% interest and Holdings as limited partner with a 99% interest.
C. Management and Holdings as the partners of the Partnership have
approved of the Partnership's election to become a limited liability company
pursuant to Act Section 14-11-212(a) as evidenced by their execution of the
Certificate of Election, attached hereto as Exhibit A and delivered for filing
with the Secretary of State of Georgia; and Management has executed and
delivered for filing with the Secretary of State of Georgia "Articles of
Organization" pursuant to Sections 14-11-212 and 14-11-204, all for the purpose
of causing the Partnership to become a limited liability company.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; CONVERSION; ASSIGNMENT.
The LLC is the successor in interest by conversion (the "Conversion")
to the Partnership effective as of the Effective Time and as of the Effective
Time, Management and Holdings became the initial Members of the LLC. By virtue
of the Conversion, Management's 1% general partner interest in the Partnership
shall be converted into a 1% member Interest in the LLC and Holdings' 99%
limited partner interest in the Partnership shall be converted into a 99% member
Interest in the LLC, with each such member Interest (and the proceeds thereof)
1
<PAGE> 5
continuing in all respects to be subject to the security interest granted under
Section 3 of the Guarantee and Collateral Agreement (the "Security Interest").
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Holdings
hereby assigns and transfers all of its right, title and interest in and to its
99% member Interest in the LLC to Management, as a capital contribution with
respect to its interest in Management, and shall be deemed to have withdrawn as
a Member of the LLC, all effective 10:01 A.M. Eastern Time, February 7, 1997,
which assignment and transfer shall be in all respects subject to the Security
Interest, with the effect that as of 10:01 A.M. Eastern Time, February 7, 1997,
Management shall hold 100% of the Interests in the LLC, and thus become the sole
member of the LLC, with its entire Interest subject to the Security Interest.
Holdings hereby represents and warrants to the LLC and to Management that, with
the exception of the Security Interest, its Interest in the LLC assigned hereby
is free and clear of all liens, claims, and encumbrances of any nature
whatsoever. Holdings shall cause or take all necessary further action as may be
requested by the LLC or by Management to confirm and ensure the complete
assignment of its Interest as provided herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Articles of Organization attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to perform
the obligations under the Purchase Agreement, (ii) to own and operate the
Business, (iii) to further develop the Business in such areas and under such
terms as provided in the NRTC Agreements, (iv) to manage, maintain, repair,
dispose of and otherwise deal with the Business within such service area, (v) to
mortgage or otherwise encumber all or any part of the assets of the Business,
(vi) to engage in other businesses ancillary to the Business as encompassed in
the NRTC Agreements, and (vii) to conduct such other activities as may be
necessary or incidental to the foregoing, all on the terms and conditions and
subject to the limitations set forth in this Agreement and in the Act. Nothing
in this Agreement shall prohibit any Member from engaging in any business,
investment or other activity in any service area even if such business,
investment or activity is competitive with the Business.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be Douglas S. Holladay, Jr. and the LLC's registered office shall be
880 Holcomb Bridge Rd., Bldg. C-200, Roswell, GA 30076. The LLC's registered
agent or registered office may be changed as provided in Act Section 14-11-209,
or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the Effective Time with the LLC being the successor in interest by conversion to
the Partnership. The term of the LLC shall continue until it is dissolved, its
affairs are wound up and final liquidating distributions are made pursuant to
this Agreement. Except as otherwise provided herein, the LLC shall have
perpetual existence.
2
<PAGE> 6
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes (provided that the LLC has not elected on Form
8832 to be treated as a corporation). In all events, however, the LLC shall keep
books and records separate from those of its Member and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member. The LLC
shall enter into and engage in all transactions in its own name and not in the
name of its Member. In furtherance thereof, the LLC shall evidence its execution
of instruments as follows:
Digital Television Services of New Mexico, LLC,
a Georgia limited liability company
By: DTS Management, LLC,
a Georgia limited liability company
Its: Member
By:__________________________________
Title:_______________________________
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member shall
determine in its sole and absolute discretion; provided, however, that any such
additional Capital Contributions shall be evidenced in writing and recorded in
the books and records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
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ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Georgia, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the board of managers of the Member shall
determine.
ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by its Member, who
shall have complete authority and exclusive control over the business and
affairs of the LLC.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager,
Member, or member of the board of managers of the Member shall be liable,
responsible, or accountable in damages or otherwise to the LLC or to any Member
or assignee of a Member for any loss, damage, cost, liability, or expense
incurred by reason of or caused by any act or omission performed or omitted by
such manager, Member, or member of the board of managers of the Member, whether
alleged to be based upon or arising from errors in judgment, negligence, or
breach of duty (including alleged breach of any duty of care or duty of loyalty
or other fiduciary duty), except for (i) acts or omissions the manager, Member,
or member of the board of managers of the Member knew at the time of the acts or
omissions were clearly in conflict with the interest of the LLC, or (ii) any
transaction from which the manager, Member, or member of the board of managers
of the Member derived an improper personal benefit, (iii) a willful breach of
this Agreement, or (iv) gross negligence, recklessness, willful misconduct, or
knowing violation of law. Without limiting the foregoing, no manager, Member, or
member of the board of managers of the Member shall in any event be liable for
(A) the failure to take any action not specifically required to be taken by the
manager, Member or member of the board of managers of the Member under the terms
of this Agreement, (B) any action or omission taken or suffered by any other
manager, Member or member of the board of managers of the Member, or (C) any
mistake, misconduct, negligence, dishonesty or bad faith on the part of any
employee or other agent of the LLC appointed in good faith by such manager,
Member or member of the board of managers of the Member. The provisions
regarding the indemnification of certain Persons are set forth in the
Indemnification Exhibit attached hereto as Exhibit C.
4
<PAGE> 8
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC Agreement
the Member may transfer its Interest at such time, in such amount and pursuant
to such terms, in whole or in part, as the Member shall in its sole discretion
determine.
ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the delivery for filing with the Secretary of State of a
Statement of Commencement of Winding Up of the LLC pursuant to Act Section
14-11-606.
(b) The entry of a decree of judicial dissolution under Act Section
14-11-603(a).
SECTION 6.2. WINDING UP. Pursuant to Act Section 14-11-604, upon
dissolution of the LLC the Member shall wind up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the Member in liquidation as provided in the Act by the
Persons charged with winding up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member. The LLC shall prepare
financial statements at least annually, which shall include at least a balance
sheet and income statement prepared in accordance with GAAP, which financial
statements need not be audited, except in connection with any audit that the
Member or the LLC's ultimate parent entity may obtain.
5
<PAGE> 9
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members, and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL OPERATING AGREEMENTS. This
Agreement constitutes the entire agreement with respect to the affairs of the
LLC and the conduct of its business, and supersedes all prior agreements and
understandings, whether oral or written. The LLC shall have no oral operating
agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Georgia shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Member hereby irrevocably consents to the personal jurisdiction of the courts of
the State of Georgia with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
6
<PAGE> 10
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
7
<PAGE> 11
EXECUTION PAGE
TO THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF NEW MEXICO, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
INITIAL AND CONTINUING MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: President
INITIAL AND WITHDRAWING MEMBER:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC,
a Georgia limited liability company
Its: Manager
By: ______________________
Name: Douglas S. Holladay, Jr.
Title: President
8
<PAGE> 1
EXHIBIT 3.10(a)
ARTICLES OF ORGANIZATION
OF
DIGITAL TELEVISION SERVICES OF NEW YORK I, LLC
Whereas Digital Television Services of New York I, LP, a Georgia
limited partnership, has elected to become a limited liability company pursuant
to Section 14-11-212 of the Georgia Limited Liability Company Act (the "Act"),
the undersigned, pursuant to Act Sections 14-11-212 and 14-11-204, does hereby
certify as follows:
I.
The name of the limited liability company is
DIGITAL TELEVISION SERVICES OF NEW YORK I, LLC.
II.
These Articles of Organization shall be effective as of 10:00 a.m.
local time in Atlanta, Georgia on February 7, 1997, which effective date and
time is later than the date and time of filing of these Articles of Organization
as evidenced by the Secretary of State's date endorsement on the original
Articles of Organization.
III.
Filed with these Articles of Organization is a Certificate of Election
that is in the form required by Act Section 14-11-212.
IV.
Management of the Company is vested in the Member.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Organization of Digital Television Services of New York I, LLC as of February 3,
1997.
MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 1
EXHIBIT 3.10(b)
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF NEW YORK I, LLC
A GEORGIA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF NEW YORK I, LLC
A GEORGIA LIMITED LIABILITY COMPANY
RECITALS.......................................................................1
ARTICLE I - FORMATION..........................................................1
SECTION 1.1. Formation; Conversion; Assignment......................1
SECTION 1.2. Name...................................................2
SECTION 1.3. Purposes...............................................2
SECTION 1.4. Registered Agent; Registered Office....................2
SECTION 1.5. Commencement and Term..................................2
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities........................................3
SECTION 1.7. Title to Assets; Transactions..........................3
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................3
SECTION 2.1. Capital Contributions..................................3
SECTION 2.2. Liability of Members .................................3
ARTICLE III - DISTRIBUTIONS....................................................4
SECTION 3.1. Distributions..........................................4
ARTICLE IV - MANAGEMENT........................................................4
SECTION 4.1. Management.............................................4
SECTION 4.2. Limitation of Liability; Indemnification...............4
ARTICLE V - TRANSFER OF INTERESTS .............................................5
SECTION 5.1. Transfer of Interests..................................5
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS.............5
SECTION 6.1. Dissolution Triggers...................................5
SECTION 6.2. Winding Up.............................................5
SECTION 6.3. Liquidating Distributions..............................5
i
<PAGE> 3
ARTICLE VII - BOOKS AND RECORDS................................................5
SECTION 7.1. Books and Records......................................5
ARTICLE VIII - MISCELLANEOUS...................................................6
SECTION 8.1. Binding Effect.........................................6
SECTION 8.2. Construction...........................................6
SECTION 8.3. Entire Agreement; No Oral Operating Agreements.........6
SECTION 8.4. Headings...............................................6
SECTION 8.5. Severability...........................................6
SECTION 8.6. Variation of Pronouns..................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction.................6
SECTION 8.8. Counterpart Execution; Facsimile Execution.............6
SECTION 8.9. Time of the Essence....................................6
SECTION 8.10. Exhibits...............................................7
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
ii
<PAGE> 4
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF NEW YORK I, LLC
A GEORGIA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made and entered into as of 10:00 A.M.
Eastern Time, February 7, 1997, (the "Effective Time") by and between Digital
Television Services, LLC, a Delaware limited liability company (formerly
Columbia DBS Holdings, LLC, a Delaware limited liability company (successor by
conversion to DBS Holdings, L.P., a Delaware limited partnership)) ("Holdings"),
and DTS Management, LLC (formerly Columbia DBS Management, LLC) a Georgia
limited liability company ("Management"). Unless otherwise indicated,
capitalized words and phrases in this Operating Agreement (the "Agreement")
shall have the meanings set forth in the Glossary of Terms attached hereto as
Exhibit B.
RECITALS
A. Digital Television Services of New York I, LP, a Georgia limited
partnership (the "Partnership"), was formed on June 21, 1996.
B. The Partnership had two partners from its formation until the
effective date of this Agreement, specifically, Management, as general partner
with a 1% interest and Holdings as limited partner with a 99% interest.
C. Management and Holdings as the partners of the Partnership have
approved of the Partnership's election to become a limited liability company
pursuant to Act Section 14-11-212(a) as evidenced by their execution of the
Certificate of Election, attached hereto as Exhibit A and delivered for filing
with the Secretary of State of Georgia; and Management has executed and
delivered for filing with the Secretary of State of Georgia "Articles of
Organization" pursuant to Sections 14-11-212 and 14-11-204, all for the purpose
of causing the Partnership to become a limited liability company.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; CONVERSION; ASSIGNMENT.
The LLC is the successor in interest by conversion (the "Conversion")
to the Partnership effective as of the Effective Time and as of the Effective
Time, Management and Holdings became the initial Members of the LLC. By virtue
of the Conversion, Management's 1% general partner interest in the Partnership
shall be converted into a 1% member Interest in the LLC and Holdings' 99%
limited partner interest in the Partnership shall be converted into a 99% member
Interest in the LLC, with each such member Interest (and the proceeds thereof)
1
<PAGE> 5
continuing in all respects to be subject to the security interest granted under
Section 3 of the Guarantee and Collateral Agreement (the "Security Interest").
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Holdings
hereby assigns and transfers all of its right, title and interest in and to its
99% member Interest in the LLC to Management, as a capital contribution with
respect to its interest in Management, and shall be deemed to have withdrawn as
a Member of the LLC, all effective 10:01 A.M. Eastern Time, February 7, 1997,
which assignment and transfer shall be in all respects subject to the Security
Interest, with the effect that as of 10:01 A.M. Eastern Time, February 7, 1997,
Management shall hold 100% of the Interests in the LLC, and thus become the sole
member of the LLC, with its entire Interest subject to the Security Interest.
Holdings hereby represents and warrants to the LLC and to Management that, with
the exception of the Security Interest, its Interest in the LLC assigned hereby
is free and clear of all liens, claims, and encumbrances of any nature
whatsoever. Holdings shall cause or take all necessary further action as may be
requested by the LLC or by Management to confirm and ensure the complete
assignment of its Interest as provided herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Articles of Organization attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to perform
the obligations under the Purchase Agreement, (ii) to own and operate the
Business, (iii) to further develop the Business in such areas and under such
terms as provided in the NRTC Agreements, (iv) to manage, maintain, repair,
dispose of and otherwise deal with the Business within such service area, (v) to
mortgage or otherwise encumber all or any part of the assets of the Business,
(vi) to engage in other businesses ancillary to the Business as encompassed in
the NRTC Agreements, and (vii) to conduct such other activities as may be
necessary or incidental to the foregoing, all on the terms and conditions and
subject to the limitations set forth in this Agreement and in the Act. Nothing
in this Agreement shall prohibit any Member from engaging in any business,
investment or other activity in any service area even if such business,
investment or activity is competitive with the Business.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be Douglas S. Holladay, Jr. and the LLC's registered office shall be
880 Holcomb Bridge Rd., Bldg. C-200, Roswell, GA 30076. The LLC's registered
agent or registered office may be changed as provided in Act Section 14-11-209,
or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the Effective Time with the LLC being the successor in interest by conversion to
the Partnership. The term of the LLC shall continue until it is dissolved, its
affairs are wound up and final liquidating distributions are made pursuant to
this Agreement. Except as otherwise provided herein, the LLC shall have
perpetual existence.
2
<PAGE> 6
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes (provided that the LLC has not elected on Form
8832 to be treated as a corporation). In all events, however, the LLC shall keep
books and records separate from those of its Member and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member. The LLC
shall enter into and engage in all transactions in its own name and not in the
name of its Member. In furtherance thereof, the LLC shall evidence its execution
of instruments as follows:
Digital Television Services of New York I, LLC,
a Georgia limited liability company
By: DTS Management, LLC,
a Georgia limited liability company
Its: Member
By:__________________________________
Title:_______________________________
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member shall
determine in its sole and absolute discretion; provided, however, that any such
additional Capital Contributions shall be evidenced in writing and recorded in
the books and records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
3
<PAGE> 7
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Georgia, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the board of managers of the Member shall
determine.
ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by its Member, who
shall have complete authority and exclusive control over the business and
affairs of the LLC.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager,
Member, or member of the board of managers of the Member shall be liable,
responsible, or accountable in damages or otherwise to the LLC or to any Member
or assignee of a Member for any loss, damage, cost, liability, or expense
incurred by reason of or caused by any act or omission performed or omitted by
such manager, Member, or member of the board of managers of the Member, whether
alleged to be based upon or arising from errors in judgment, negligence, or
breach of duty (including alleged breach of any duty of care or duty of loyalty
or other fiduciary duty), except for (i) acts or omissions the manager, Member,
or member of the board of managers of the Member knew at the time of the acts or
omissions were clearly in conflict with the interest of the LLC, or (ii) any
transaction from which the manager, Member, or member of the board of managers
of the Member derived an improper personal benefit, (iii) a willful breach of
this Agreement, or (iv) gross negligence, recklessness, willful misconduct, or
knowing violation of law. Without limiting the foregoing, no manager, Member, or
member of the board of managers of the Member shall in any event be liable for
(A) the failure to take any action not specifically required to be taken by the
manager, Member or member of the board of managers of the Member under the terms
of this Agreement, (B) any action or omission taken or suffered by any other
manager, Member or member of the board of managers of the Member, or (C) any
mistake, misconduct, negligence, dishonesty or bad faith on the part of any
employee or other agent of the LLC appointed in good faith by such manager,
Member or member of the board of managers of the Member. The provisions
regarding the indemnification of certain Persons are set forth in the
Indemnification Exhibit attached hereto as Exhibit C.
4
<PAGE> 8
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC Agreement
the Member may transfer its Interest at such time, in such amount and pursuant
to such terms, in whole or in part, as the Member shall in its sole discretion
determine.
ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the delivery for filing with the Secretary of State of a
Statement of Commencement of Winding Up of the LLC pursuant to Act Section
14-11-606.
(b) The entry of a decree of judicial dissolution under Act Section
14-11-603(a).
SECTION 6.2. WINDING UP. Pursuant to Act Section 14-11-604, upon
dissolution of the LLC the Member shall wind up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the Member in liquidation as provided in the Act by the
Persons charged with winding up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member. The LLC shall prepare
financial statements at least annually, which shall include at least a balance
sheet and income statement prepared in accordance with GAAP, which financial
statements need not be audited, except in connection with any audit that the
Member or the LLC's ultimate parent entity may obtain.
5
<PAGE> 9
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members, and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL OPERATING AGREEMENTS. This
Agreement constitutes the entire agreement with respect to the affairs of the
LLC and the conduct of its business, and supersedes all prior agreements and
understandings, whether oral or written. The LLC shall have no oral operating
agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Georgia shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Member hereby irrevocably consents to the personal jurisdiction of the courts of
the State of Georgia with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
6
<PAGE> 10
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
7
<PAGE> 11
EXECUTION PAGE
TO THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF NEW YORK I, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
INITIAL AND CONTINUING MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: President
INITIAL AND WITHDRAWING MEMBER:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC,
a Georgia limited liability company
Its: Manager
By: ______________________
Name: Douglas S. Holladay, Jr.
Title: President
8
<PAGE> 1
EXHIBIT 3.11(a)
ARTICLES OF ORGANIZATION
OF
DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA I, LLC
Whereas Digital Television Services of South Carolina I, LP, a Georgia
limited partnership, has elected to become a limited liability company pursuant
to Section 14-11-212 of the Georgia Limited Liability Company Act (the "Act"),
the undersigned, pursuant to Act Sections 14-11-212 and 14-11-204, does hereby
certify as follows:
I.
The name of the limited liability company is
DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA I, LLC.
II.
These Articles of Organization shall be effective as of 10:00 a.m.
local time in Atlanta, Georgia on February 7, 1997, which effective date and
time is later than the date and time of filing of these Articles of Organization
as evidenced by the Secretary of State's date endorsement on the original
Articles of Organization.
III.
Filed with these Articles of Organization is a Certificate of Election
that is in the form required by Act Section 14-11-212.
IV.
Management of the Company is vested in the Member.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Organization of Digital Television Services of South Carolina I, LLC as of
February 3, 1997.
MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 1
EXHIBIT 3.11(b)
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA I, LLC
A GEORGIA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA I, LLC
A GEORGIA LIMITED LIABILITY COMPANY
RECITALS.......................................................................1
ARTICLE I - FORMATION..........................................................1
SECTION 1.1. Formation; Conversion; Assignment......................1
SECTION 1.2. Name...................................................2
SECTION 1.3. Purposes...............................................2
SECTION 1.4. Registered Agent; Registered Office....................2
SECTION 1.5. Commencement and Term..................................2
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities........................................3
SECTION 1.7. Title to Assets; Transactions..........................3
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................3
SECTION 2.1. Capital Contributions..................................3
SECTION 2.2. Liability of Members .................................3
ARTICLE III - DISTRIBUTIONS....................................................4
SECTION 3.1. Distributions..........................................4
ARTICLE IV - MANAGEMENT........................................................4
SECTION 4.1. Management.............................................4
SECTION 4.2. Limitation of Liability; Indemnification...............4
ARTICLE V - TRANSFER OF INTERESTS .............................................5
SECTION 5.1. Transfer of Interests..................................5
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS.............5
SECTION 6.1. Dissolution Triggers...................................5
SECTION 6.2. Winding Up.............................................5
SECTION 6.3. Liquidating Distributions..............................5
i
<PAGE> 3
ARTICLE VII - BOOKS AND RECORDS................................................5
SECTION 7.1. Books and Records......................................5
ARTICLE VIII - MISCELLANEOUS...................................................6
SECTION 8.1. Binding Effect.........................................6
SECTION 8.2. Construction...........................................6
SECTION 8.3. Entire Agreement; No Oral Operating Agreements.........6
SECTION 8.4. Headings...............................................6
SECTION 8.5. Severability...........................................6
SECTION 8.6. Variation of Pronouns..................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction.................6
SECTION 8.8. Counterpart Execution; Facsimile Execution.............6
SECTION 8.9. Time of the Essence....................................6
SECTION 8.10. Exhibits...............................................7
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
ii
<PAGE> 4
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA I, LLC
A GEORGIA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made and entered into as of 10:00 A.M.
Eastern Time, February 7, 1997, (the "Effective Time") by and between Digital
Television Services, LLC, a Delaware limited liability company (formerly
Columbia DBS Holdings, LLC, a Delaware limited liability company (successor by
conversion to DBS Holdings, L.P., a Delaware limited partnership)) ("Holdings"),
and DTS Management, LLC (formerly Columbia DBS Management, LLC) a Georgia
limited liability company ("Management"). Unless otherwise indicated,
capitalized words and phrases in this Operating Agreement (the "Agreement")
shall have the meanings set forth in the Glossary of Terms attached hereto as
Exhibit B.
RECITALS
A. Digital Television Services of South Carolina I, LP, a Georgia
limited partnership (the "Partnership"), was formed on October 4, 1996.
B. The Partnership had two partners from its formation until the
effective date of this Agreement, specifically, Management, as general partner
with a 1% interest and Holdings as limited partner with a 99% interest.
C. Management and Holdings as the partners of the Partnership have
approved of the Partnership's election to become a limited liability company
pursuant to Act Section 14-11-212(a) as evidenced by their execution of the
Certificate of Election, attached hereto as Exhibit A and delivered for filing
with the Secretary of State of Georgia; and Management has executed and
delivered for filing with the Secretary of State of Georgia "Articles of
Organization" pursuant to Sections 14-11-212 and 14-11-204, all for the purpose
of causing the Partnership to become a limited liability company.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; CONVERSION; ASSIGNMENT.
The LLC is the successor in interest by conversion (the "Conversion")
to the Partnership effective as of the Effective Time and as of the Effective
Time, Management and Holdings became the initial Members of the LLC. By virtue
of the Conversion, Management's 1% general partner interest in the Partnership
shall be converted into a 1% member Interest in the LLC and Holdings' 99%
limited partner interest in the Partnership shall be converted into a 99% member
Interest in the LLC, with each such member Interest (and the proceeds thereof)
1
<PAGE> 5
continuing in all respects to be subject to the security interest granted under
Section 3 of the Guarantee and Collateral Agreement (the "Security Interest").
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Holdings
hereby assigns and transfers all of its right, title and interest in and to its
99% member Interest in the LLC to Management, as a capital contribution with
respect to its interest in Management, and shall be deemed to have withdrawn as
a Member of the LLC, all effective 10:01 A.M. Eastern Time, February 7, 1997,
which assignment and transfer shall be in all respects subject to the Security
Interest, with the effect that as of 10:01 A.M. Eastern Time, February 7, 1997,
Management shall hold 100% of the Interests in the LLC, and thus become the sole
member of the LLC, with its entire Interest subject to the Security Interest.
Holdings hereby represents and warrants to the LLC and to Management that, with
the exception of the Security Interest, its Interest in the LLC assigned hereby
is free and clear of all liens, claims, and encumbrances of any nature
whatsoever. Holdings shall cause or take all necessary further action as may be
requested by the LLC or by Management to confirm and ensure the complete
assignment of its Interest as provided herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Articles of Organization attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to perform
the obligations under the Purchase Agreement, (ii) to own and operate the
Business, (iii) to further develop the Business in such areas and under such
terms as provided in the NRTC Agreements, (iv) to manage, maintain, repair,
dispose of and otherwise deal with the Business within such service area, (v) to
mortgage or otherwise encumber all or any part of the assets of the Business,
(vi) to engage in other businesses ancillary to the Business as encompassed in
the NRTC Agreements, and (vii) to conduct such other activities as may be
necessary or incidental to the foregoing, all on the terms and conditions and
subject to the limitations set forth in this Agreement and in the Act. Nothing
in this Agreement shall prohibit any Member from engaging in any business,
investment or other activity in any service area even if such business,
investment or activity is competitive with the Business.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be Douglas S. Holladay, Jr. and the LLC's registered office shall be
880 Holcomb Bridge Rd., Bldg. C-200, Roswell, GA 30076. The LLC's registered
agent or registered office may be changed as provided in Act Section 14-11-209,
or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the Effective Time with the LLC being the successor in interest by conversion to
the Partnership. The term of the LLC shall continue until it is dissolved, its
affairs are wound up and final liquidating distributions are made pursuant to
this Agreement. Except as otherwise provided herein, the LLC shall have
perpetual existence.
2
<PAGE> 6
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes (provided that the LLC has not elected on Form
8832 to be treated as a corporation). In all events, however, the LLC shall keep
books and records separate from those of its Member and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member. The LLC
shall enter into and engage in all transactions in its own name and not in the
name of its Member. In furtherance thereof, the LLC shall evidence its execution
of instruments as follows:
Digital Television Services of South Carolina I, LLC,
a Georgia limited liability company
By: DTS Management, LLC,
a Georgia limited liability company
Its: Member
By:__________________________________
Title:_______________________________
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member shall
determine in its sole and absolute discretion; provided, however, that any such
additional Capital Contributions shall be evidenced in writing and recorded in
the books and records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
3
<PAGE> 7
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Georgia, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the board of managers of the Member shall
determine.
ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by its Member, who
shall have complete authority and exclusive control over the business and
affairs of the LLC.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager,
Member, or member of the board of managers of the Member shall be liable,
responsible, or accountable in damages or otherwise to the LLC or to any Member
or assignee of a Member for any loss, damage, cost, liability, or expense
incurred by reason of or caused by any act or omission performed or omitted by
such manager, Member, or member of the board of managers of the Member, whether
alleged to be based upon or arising from errors in judgment, negligence, or
breach of duty (including alleged breach of any duty of care or duty of loyalty
or other fiduciary duty), except for (i) acts or omissions the manager, Member,
or member of the board of managers of the Member knew at the time of the acts or
omissions were clearly in conflict with the interest of the LLC, or (ii) any
transaction from which the manager, Member, or member of the board of managers
of the Member derived an improper personal benefit, (iii) a willful breach of
this Agreement, or (iv) gross negligence, recklessness, willful misconduct, or
knowing violation of law. Without limiting the foregoing, no manager, Member, or
member of the board of managers of the Member shall in any event be liable for
(A) the failure to take any action not specifically required to be taken by the
manager, Member or member of the board of managers of the Member under the terms
of this Agreement, (B) any action or omission taken or suffered by any other
manager, Member or member of the board of managers of the Member, or (C) any
mistake, misconduct, negligence, dishonesty or bad faith on the part of any
employee or other agent of the LLC appointed in good faith by such manager,
Member or member of the board of managers of the Member. The provisions
regarding the indemnification of certain Persons are set forth in the
Indemnification Exhibit attached hereto as Exhibit C.
4
<PAGE> 8
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC Agreement
the Member may transfer its Interest at such time, in such amount and pursuant
to such terms, in whole or in part, as the Member shall in its sole discretion
determine.
ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the delivery for filing with the Secretary of State of a
Statement of Commencement of Winding Up of the LLC pursuant to Act Section
14-11-606.
(b) The entry of a decree of judicial dissolution under Act Section
14-11-603(a).
SECTION 6.2. WINDING UP. Pursuant to Act Section 14-11-604, upon
dissolution of the LLC the Member shall wind up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the Member in liquidation as provided in the Act by the
Persons charged with winding up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member. The LLC shall prepare
financial statements at least annually, which shall include at least a balance
sheet and income statement prepared in accordance with GAAP, which financial
statements need not be audited, except in connection with any audit that the
Member or the LLC's ultimate parent entity may obtain.
5
<PAGE> 9
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members, and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL OPERATING AGREEMENTS. This
Agreement constitutes the entire agreement with respect to the affairs of the
LLC and the conduct of its business, and supersedes all prior agreements and
understandings, whether oral or written. The LLC shall have no oral operating
agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Georgia shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Member hereby irrevocably consents to the personal jurisdiction of the courts of
the State of Georgia with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
6
<PAGE> 10
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
7
<PAGE> 11
EXECUTION PAGE
TO THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA I, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
INITIAL AND CONTINUING MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: President
INITIAL AND WITHDRAWING MEMBER:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC,
a Georgia limited liability company
Its: Manager
By: ______________________
Name: Douglas S. Holladay, Jr.
Title: President
8
<PAGE> 1
EXHIBIT 3.12(a)
ARTICLES OF ORGANIZATION
OF
DIGITAL TELEVISION SERVICES OF VERMONT, LLC
Whereas Digital Television Services of Vermont, LP, a Georgia limited
partnership, has elected to become a limited liability company pursuant to
Section 14-11-212 of the Georgia Limited Liability Company Act (the "Act"), the
undersigned, pursuant to Act Sections 14-11-212 and 14-11-204, does hereby
certify as follows:
I.
The name of the limited liability company is
DIGITAL TELEVISION SERVICES OF VERMONT, LLC.
II.
These Articles of Organization shall be effective as of 10:00 a.m.
local time in Atlanta, Georgia on February 7, 1997, which effective date and
time is later than the date and time of filing of these Articles of Organization
as evidenced by the Secretary of State's date endorsement on the original
Articles of Organization.
III.
Filed with these Articles of Organization is a Certificate of Election
that is in the form required by Act Section 14-11-212.
IV.
Management of the Company is vested in the Member.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Organization of Digital Television Services of Vermont, LLC as of February 3,
1997.
MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 1
EXHIBIT 3.12(b)
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF VERMONT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
OF THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF VERMONT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
RECITALS.......................................................................1
ARTICLE I - FORMATION..........................................................1
SECTION 1.1. Formation; Conversion; Assignment......................1
SECTION 1.2. Name...................................................2
SECTION 1.3. Purposes...............................................2
SECTION 1.4. Registered Agent; Registered Office....................2
SECTION 1.5. Commencement and Term..................................2
SECTION 1.6. Tax Classification; Requirement of Separate
Books and Records and Segregation of Assets
and Liabilities........................................3
SECTION 1.7. Title to Assets; Transactions..........................3
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................3
SECTION 2.1. Capital Contributions..................................3
SECTION 2.2. Liability of Members .................................3
ARTICLE III - DISTRIBUTIONS....................................................4
SECTION 3.1. Distributions..........................................4
ARTICLE IV - MANAGEMENT........................................................4
SECTION 4.1. Management.............................................4
SECTION 4.2. Limitation of Liability; Indemnification...............4
ARTICLE V - TRANSFER OF INTERESTS .............................................5
SECTION 5.1. Transfer of Interests..................................5
ARTICLE VI - DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS.............5
SECTION 6.1. Dissolution Triggers...................................5
SECTION 6.2. Winding Up.............................................5
SECTION 6.3. Liquidating Distributions..............................5
i
<PAGE> 3
ARTICLE VII - BOOKS AND RECORDS................................................5
SECTION 7.1. Books and Records......................................5
ARTICLE VIII - MISCELLANEOUS...................................................6
SECTION 8.1. Binding Effect.........................................6
SECTION 8.2. Construction...........................................6
SECTION 8.3. Entire Agreement; No Oral Operating Agreements.........6
SECTION 8.4. Headings...............................................6
SECTION 8.5. Severability...........................................6
SECTION 8.6. Variation of Pronouns..................................6
SECTION 8.7. Governing Law; Consent to Jurisdiction.................6
SECTION 8.8. Counterpart Execution; Facsimile Execution.............6
SECTION 8.9. Time of the Essence....................................6
SECTION 8.10. Exhibits...............................................7
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
ii
<PAGE> 4
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF VERMONT, LLC
A GEORGIA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made and entered into as of 10:00 A.M.
Eastern Time, February 7, 1997, (the "Effective Time") by and between Digital
Television Services, LLC, a Delaware limited liability company (formerly
Columbia DBS Holdings, LLC, a Delaware limited liability company (successor by
conversion to DBS Holdings, L.P., a Delaware limited partnership)) ("Holdings"),
and DTS Management, LLC (formerly Columbia DBS Management, LLC) a Georgia
limited liability company ("Management"). Unless otherwise indicated,
capitalized words and phrases in this Operating Agreement (the "Agreement")
shall have the meanings set forth in the Glossary of Terms attached hereto as
Exhibit B.
RECITALS
A. Digital Television Services of Vermont, LP, a Georgia limited
partnership (the "Partnership"), was formed on December 10, 1996.
B. The Partnership had two partners from its formation until the
effective date of this Agreement, specifically, Management, as general partner
with a 1% interest and Holdings as limited partner with a 99% interest.
C. Management and Holdings as the partners of the Partnership have
approved of the Partnership's election to become a limited liability company
pursuant to Act Section 14-11-212(a) as evidenced by their execution of the
Certificate of Election, attached hereto as Exhibit A and delivered for filing
with the Secretary of State of Georgia; and Management has executed and
delivered for filing with the Secretary of State of Georgia "Articles of
Organization" pursuant to Sections 14-11-212 and 14-11-204, all for the purpose
of causing the Partnership to become a limited liability company.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
FORMATION
SECTION 1.1. FORMATION; CONVERSION; ASSIGNMENT.
The LLC is the successor in interest by conversion (the "Conversion")
to the Partnership effective as of the Effective Time and as of the Effective
Time, Management and Holdings became the initial Members of the LLC. By virtue
of the Conversion, Management's 1% general partner interest in the Partnership
shall be converted into a 1% member Interest in the LLC and Holdings' 99%
limited partner interest in the Partnership shall be converted into a 99% member
Interest in the LLC, with each such member Interest (and the proceeds thereof)
1
<PAGE> 5
continuing in all respects to be subject to the security interest granted under
Section 3 of the Guarantee and Collateral Agreement (the "Security Interest").
By virtue of its execution of this Agreement and without the necessity
of the execution or delivery of any other document or instrument, Holdings
hereby assigns and transfers all of its right, title and interest in and to its
99% member Interest in the LLC to Management, as a capital contribution with
respect to its interest in Management, and shall be deemed to have withdrawn as
a Member of the LLC, all effective 10:01 A.M. Eastern Time, February 7, 1997,
which assignment and transfer shall be in all respects subject to the Security
Interest, with the effect that as of 10:01 A.M. Eastern Time, February 7, 1997,
Management shall hold 100% of the Interests in the LLC, and thus become the sole
member of the LLC, with its entire Interest subject to the Security Interest.
Holdings hereby represents and warrants to the LLC and to Management that, with
the exception of the Security Interest, its Interest in the LLC assigned hereby
is free and clear of all liens, claims, and encumbrances of any nature
whatsoever. Holdings shall cause or take all necessary further action as may be
requested by the LLC or by Management to confirm and ensure the complete
assignment of its Interest as provided herein.
The rights and obligations of the Members and the terms and conditions
of the LLC shall be governed by the Act and this Agreement, including all the
Exhibits to this Agreement. To the extent the Act and this Agreement are
inconsistent with respect to any subject matter covered in this Agreement, this
Agreement shall govern, but only to the extent permitted by law.
SECTION 1.2. NAME. The name of the LLC shall be as set forth in the
Articles of Organization attached hereto as Exhibit A.
SECTION 1.3. PURPOSES. The purposes of the LLC shall be (i) to perform
the obligations under the Purchase Agreement, (ii) to own and operate the
Business, (iii) to further develop the Business in such areas and under such
terms as provided in the NRTC Agreements, (iv) to manage, maintain, repair,
dispose of and otherwise deal with the Business within such service area, (v) to
mortgage or otherwise encumber all or any part of the assets of the Business,
(vi) to engage in other businesses ancillary to the Business as encompassed in
the NRTC Agreements, and (vii) to conduct such other activities as may be
necessary or incidental to the foregoing, all on the terms and conditions and
subject to the limitations set forth in this Agreement and in the Act. Nothing
in this Agreement shall prohibit any Member from engaging in any business,
investment or other activity in any service area even if such business,
investment or activity is competitive with the Business.
SECTION 1.4. REGISTERED AGENT; REGISTERED OFFICE. The LLC's registered
agent shall be Douglas S. Holladay, Jr. and the LLC's registered office shall be
880 Holcomb Bridge Rd., Bldg. C-200, Roswell, GA 30076. The LLC's registered
agent or registered office may be changed as provided in Act Section 14-11-209,
or successor provision.
SECTION 1.5. COMMENCEMENT AND TERM. The term of the LLC commenced at
the Effective Time with the LLC being the successor in interest by conversion to
the Partnership. The term of the LLC shall continue until it is dissolved, its
affairs are wound up and final liquidating distributions are made pursuant to
this Agreement. Except as otherwise provided herein, the LLC shall have
perpetual existence.
2
<PAGE> 6
SECTION 1.6. TAX CLASSIFICATION; REQUIREMENT OF SEPARATE BOOKS AND
RECORDS AND SEGREGATION OF ASSETS AND LIABILITIES. The parties acknowledge that
because the LLC will have a single Member pursuant to Treasury Regulations
Section 301.7701-3, the LLC shall be disregarded as an entity separate from its
owner for federal income tax purposes until the effective date of any election
it may make (but only as may be permitted under the Parent LLC Agreement) to
change its classification for federal income tax purposes to that of a
corporation by filing IRS Form 8832, Entity Classification Election or until the
LLC has more than one Member in which case it would be treated as a partnership
for federal income tax purposes (provided that the LLC has not elected on Form
8832 to be treated as a corporation). In all events, however, the LLC shall keep
books and records separate from those of its Member and shall at all times
segregate and account for all of its assets and liabilities separately from
those of its sole Member.
SECTION 1.7. TITLE TO ASSETS; TRANSACTIONS. The LLC shall keep title to
all of its assets in its own name and not in the name of its Member. The LLC
shall enter into and engage in all transactions in its own name and not in the
name of its Member. In furtherance thereof, the LLC shall evidence its execution
of instruments as follows:
Digital Television Services of Vermont, LLC,
a Georgia limited liability company
By: DTS Management, LLC,
a Georgia limited liability company
Its: Member
By:__________________________________
Title:_______________________________
ARTICLE II
CAPITAL CONTRIBUTIONS
SECTION 2.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Member
has made Capital Contributions to the LLC on the dates and equal to the amounts
reflected in the books and records of the LLC. The Member shall make additional
Capital Contributions in such form and at such time as the Member shall
determine in its sole and absolute discretion; provided, however, that any such
additional Capital Contributions shall be evidenced in writing and recorded in
the books and records of the LLC.
SECTION 2.2. LIABILITY OF MEMBERS. No Member shall be liable for any
debts or losses of capital or profits of the LLC or be required to contribute or
lend funds to the LLC.
3
<PAGE> 7
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. DISTRIBUTIONS. Subject only to (i) the laws of fraudulent
conveyance of the State of Georgia, (ii) any and all restrictions in the Parent
LLC Agreement, and (iii) any and all other contractual restrictions agreed to by
the LLC or its Member in writing, the Member shall have authority to cause the
LLC to distribute cash or property to the Member, in such amounts, at such times
and as of such record dates as the board of managers of the Member shall
determine.
ARTICLE IV
MANAGEMENT
SECTION 4.1. MANAGEMENT. The LLC shall be managed by its Member, who
shall have complete authority and exclusive control over the business and
affairs of the LLC.
SECTION 4.2. LIMITATION OF LIABILITY; INDEMNIFICATION. Notwithstanding
any other provision to the contrary contained in this Agreement, no manager,
Member, or member of the board of managers of the Member shall be liable,
responsible, or accountable in damages or otherwise to the LLC or to any Member
or assignee of a Member for any loss, damage, cost, liability, or expense
incurred by reason of or caused by any act or omission performed or omitted by
such manager, Member, or member of the board of managers of the Member, whether
alleged to be based upon or arising from errors in judgment, negligence, or
breach of duty (including alleged breach of any duty of care or duty of loyalty
or other fiduciary duty), except for (i) acts or omissions the manager, Member,
or member of the board of managers of the Member knew at the time of the acts or
omissions were clearly in conflict with the interest of the LLC, or (ii) any
transaction from which the manager, Member, or member of the board of managers
of the Member derived an improper personal benefit, (iii) a willful breach of
this Agreement, or (iv) gross negligence, recklessness, willful misconduct, or
knowing violation of law. Without limiting the foregoing, no manager, Member, or
member of the board of managers of the Member shall in any event be liable for
(A) the failure to take any action not specifically required to be taken by the
manager, Member or member of the board of managers of the Member under the terms
of this Agreement, (B) any action or omission taken or suffered by any other
manager, Member or member of the board of managers of the Member, or (C) any
mistake, misconduct, negligence, dishonesty or bad faith on the part of any
employee or other agent of the LLC appointed in good faith by such manager,
Member or member of the board of managers of the Member. The provisions
regarding the indemnification of certain Persons are set forth in the
Indemnification Exhibit attached hereto as Exhibit C.
4
<PAGE> 8
ARTICLE V
TRANSFER OF INTERESTS
SECTION 5.1. TRANSFER OF INTERESTS. Subject to the Parent LLC Agreement
the Member may transfer its Interest at such time, in such amount and pursuant
to such terms, in whole or in part, as the Member shall in its sole discretion
determine.
ARTICLE VI
DISSOLUTION, WINDING UP AND LIQUIDATING DISTRIBUTIONS
SECTION 6.1. DISSOLUTION TRIGGERS. The LLC shall dissolve only upon the
first to occur of any of the following events:
(a) Upon the delivery for filing with the Secretary of State of a
Statement of Commencement of Winding Up of the LLC pursuant to Act Section
14-11-606.
(b) The entry of a decree of judicial dissolution under Act Section
14-11-603(a).
SECTION 6.2. WINDING UP. Pursuant to Act Section 14-11-604, upon
dissolution of the LLC the Member shall wind up the LLC's affairs.
SECTION 6.3. LIQUIDATING DISTRIBUTIONS. Following the dissolution of
the LLC, the assets of the LLC shall be applied to satisfy claims of creditors
and distributed to the Member in liquidation as provided in the Act by the
Persons charged with winding up the affairs of the LLC.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS. The LLC shall keep books and records at
its principal place of business, which shall set forth an accurate account of
all transactions of the LLC and which shall enable the LLC to comply with the
requirement under Section 1.6 above that it segregate and account for its assets
and liabilities separately from those of the Member. The LLC shall prepare
financial statements at least annually, which shall include at least a balance
sheet and income statement prepared in accordance with GAAP, which financial
statements need not be audited, except in connection with any audit that the
Member or the LLC's ultimate parent entity may obtain.
5
<PAGE> 9
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members, and their successors,
transferees, and assigns.
SECTION 8.2. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
SECTION 8.3. ENTIRE AGREEMENT; NO ORAL OPERATING AGREEMENTS. This
Agreement constitutes the entire agreement with respect to the affairs of the
LLC and the conduct of its business, and supersedes all prior agreements and
understandings, whether oral or written. The LLC shall have no oral operating
agreements.
SECTION 8.4. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 8.5. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 8.6. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 8.7. GOVERNING LAW; CONSENT TO JURISDICTION. The laws of the
State of Georgia shall govern the validity of this Agreement, the construction
and interpretation of its terms, and organization and internal affairs of the
LLC and the limited liability of its managers, Members, and other owners. The
Member hereby irrevocably consents to the personal jurisdiction of the courts of
the State of Georgia with respect to matters arising out of or related to the
enforcement of the provisions of this Agreement.
SECTION 8.8. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts with the same effect as if all of
the Members had signed the same document. Such executions may be transmitted to
the LLC and/or any other Member by facsimile and such facsimile execution shall
have the full force and effect of an original signature. All fully executed
counterparts, whether original executions or facsimile executions or a
combination, shall be construed together and shall constitute one and the same
agreement.
SECTION 8.9. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
6
<PAGE> 10
SECTION 8.10. EXHIBITS. The Exhibits to this Agreement, each of which
are incorporated by reference, are:
EXHIBIT A: Certificate of Election and Articles of Organization.
EXHIBIT B: Glossary of Terms.
EXHIBIT C: Indemnification Exhibit.
IN WITNESS WHEREOF, the Members have executed this Agreement on the
following execution page, to be effective as of the date described in Article I.
7
<PAGE> 11
EXECUTION PAGE
TO THE
OPERATING AGREEMENT
OF
DIGITAL TELEVISION SERVICES OF VERMONT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
INITIAL AND CONTINUING MEMBER:
DTS MANAGEMENT, LLC,
A GEORGIA LIMITED LIABILITY COMPANY
By: ___________________________
Name: Douglas S. Holladay, Jr.
Title: President
INITIAL AND WITHDRAWING MEMBER:
(Signing solely for the purpose
of acknowledging and consenting
to the provisions of Section 1.1.)
DIGITAL TELEVISION SERVICES, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: DTS Management, LLC,
a Georgia limited liability company
Its: Manager
By: ______________________
Name: Douglas S. Holladay, Jr.
Title: President
8
<PAGE> 1
EXHIBIT 3.13(a)
ARTICLES OF INCORPORATION
OF
CABLENET, INC.
KNOW ALL MEN BY THESE PRESENTS: That the undersigned has this day
voluntarily formed a corporation under and pursuant to the laws of the State of
New Mexico, and does hereby certify:
ARTICLE I
That the name of said corporation shall be: CABLENET, INC.
ARTICLE II
That the initial registered office of said corporation shall be 1404
Luisa, Suite A, Santa Fe, New Mexico 87501.
ARTICLE III
That Charles E. Botefuhr, whose address is 1404 Luisa, Suite A, Santa
Fe, New Mexico 87501 is designated as the initial registred agent therein and in
charge thereof upon whom process against the corporation may be served.
ARTICLE IV
That the purposes for which said corporation is formed are:
To engage in the general marketing sales and telecasting of media
advertising of all manner and kind, including advertising insertion and video
production services related thereto.
To engage in any business not prohibited by law.
To engage in the general business of investing or offering to invest
money or property in any venture, business or endeavor of any type whatsoever
which appears profitable to the corporation.
To enter into, make, perform contracts of every kind, with any person,
firm, association or corporation, municipality, country, county, territory,
state or government and without limit as to amount, and draw, make, accept,
endorse, discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures and other negotiable or transferrable
instruments and evidences in indebtedness, whether secured by mortgage, or
otherwise, so far as may be permitted by the applicable laws.
To carry on a financing service for the purpose of financing any
customer who would need or require said financing service in connection with the
other phases of the business as set forth herein.
<PAGE> 2
To do any and all of the things therein set forth to the same extent as
natural persons might or could do as principals, agents, contractors, trustees
or otherwise, and whether alone, or in the company of others.
The company shall have all the powers given, granted or conferred by
virtue of the laws of the State of New Mexico, including all powers necessary to
carry out the purposes of said company or which are incident thereto.
To conduct in any lawful manner, the whole, or any part of the business
described herein and to exercise all the powers necessary or convenient in and
about the conduct and management of such business.
To own and deal in all property necessary or convenient for any of the
above-named purposes, whether such property shall be real, personal or mixed and
the term "deal in" is construed as including acquisition, ownership, holding,
leasing, selling or exchanging any or all of the above described properties, in
accordance with the needs of the corporation.
To do any and all other acts, things, business or businesses in any
manner connected or calculated directly or indirectly to promote the interests
of the corporation.
And in carrying on its purposes for the purpose of obtaining or
furthering any of its business, to do any and all acts and things and to
exercise any and all other powers which natural persons could do as principals,
agents, contractors, trustees or otherwise, whether alone or in the company of
others or exercise and which now or hereafter may be authorized by law in part
or in whole.
Where not forbidden by law, to conduct any of the above described
businesses or activities in other states or in foreign countries and have one or
more offices out of this state and to hold, purchase, mortgage and convey real
and personal property out of this state.
The several clauses contained in this statement of purposes shall be
construed as both purposes and powers and the statements contained in each
clause shall be in no way limited or restricted by reference to or inference
from the terms of any other clause, but shall be regarded as independent
purposes and powers; and no recitation, expression or declaration of specific or
special powers or purposes herein outlined shall be deemed to be exclusive; but
it is hereby expressly declared that all other lawful powers not inconsistent
herewith are hereby included.
ARTICLE V
The total authorized capital stock of the corporation shall be 50,000
shares of common stock with no par value and said shares, being common stock, to
be one class only and each share shall carry full voting power and being
unrestricted as to ownership, but subject to limitations upon transfer as set
forth in the Bylaws of the corporation.
ARTICLE VI
The Corporation will not commence business until consideration of the
value of at least One Thousand Dollars ($1,000.00) has been received for the
issuance of its shares.
<PAGE> 3
ARTICLE VII
The name and post office address of the incorporator is:
Charles E. Botefuhr
1404 Luisa, Suite A
Santa Fe, New Mexico 87501
ARTICLE VIII
The period limited for the duration of said corporation shall be
perpetual.
ARTICLE IX
The directors to serve until the first annual meeting shall not be less
than one (1) in number, which number may be increased as provided in the Bylaws,
and the names and post office addresses of the said first directors thereof, who
shall hold office until their successors are chosen or appointed are:
Charles E. Botefuhr, 1404 Luisa, Suite A, Santa Fe, New Mexico 87501;
An affidavit signed by each director consenting to being a director is
on file with the Corporation. It is specifically provided that the directors of
this corporation do not have to be stockholders.
IN WITNESS WHEREOF, the incorporator has hereunto set his hand and seal
this 12th day of November, 1992.
---------------------------
CHARLES E. BOTEFUHR
3
<PAGE> 1
EXHIBIT 3.13(b)
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CABLENET, INC. 1589357
- --------------------------------------------------------------------------------
CORPORATE NAME AND NMSCC CERTIFICATE OF INCORPORATION NUMBER
Pursuant to the provisions of Section 53-13-4, NMSA 1978, the undersigned
corporation adopts the following Articles of Amendment to its Articles of
Incorporation:
FIRST: (Note 1) The coporate name of the corporation is CABLENET, INC.
SECOND: (Note 2) The following amendment to the Articles of Incorporation was
adopted by the officers/stockholders of the corporation on November 15, 1993
in the manner prescribed by the New Mexico Business Corporation Act:
(INSERT AMENDMENT OR ATTACH SCHEDULE, IF NEEDED, AN INDICATION SHOULD BE GIVEN
TO REFLECT WHICH ARTICLE NUMBER HAS BEEN AMENDED)
Amend Article 1 to change corporate name to SPACENET, INC.
THIRD: (Note 3) The number of shares of the corporation outstanding at the time
of such adoption was 100 and the number of shares entitled to vote thereon was
100.
FOURTH: (Note 4) The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows:
CLASS NUMBER OF SHARES
A. COMMON 100
FIFTH: (Note 3) The number of shares voting for such amendment was 100 and the
number of shares voting against such amendment was -0-
SIXTH: (Note 4) The number of shares of each class entitled to vote thereon as a
class voted for and against such amendment, respectively, was:
<PAGE> 2
CLASS NUMBER OF SHARES VOTING
A. COMMON FOR AGAINST
100 -0-
SEVENTH: (Note 5) The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows:
NOT APPLICABLE
DATED: November 15, 1993
CABLENET, INC.
-----------------------------------------
(Note 1) CORPORATE NAME
By
------------------------------------
(Note 6) Its President/Vice President
And
------------------------------------
(Note 6) Its Secretary/Asst. Secretary
Under penalty of perjury, the undersigned declares that the foregoing document
executed by the corporation and that the statements contained therein are true
and correct to the best of my knowledge.
---------------------------------
(One of the above officers signs)
<PAGE> 1
EXHIBIT 3.13(c)
BYLAWS
OF
CABLENET, INC.
ARTICLE 1. OFFICES
The principal office of the corporation in the State of New Mexico
shall be located in the City of Santa Fe, County of Santa Fe. The corporation
may have such other offices, either within or without the State of New Mexico,
as the Board of Directors may designate or as the business of the corporation
may require from time to time.
ARTICLE 2. SHAREHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the shareholders
shall be held on the 14th day of June in each year beginning with the year 1995
upon the date and at the hour designated by the Board of Directors by notice to
the shareholders, for the purpose of electing directors and for the transaction
of such other business as may come before the meeting. If the election of
directors shall not be held on the day, designated herein for any annual meeting
of the shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders as soon
thereafter as such special meeting can be conveniently scheduled.
SECTION 2. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of directors, and shall be called by the
President at the request of the holders of not less than 10% of all the
outstanding shares of the corporation entitled to vote at the meeting.
SECTION 3. Place of Meetings. The Board of Directors may designate any
place, either within or without the State of New Mexico, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of New
Mexico, unless otherwise prescribed by statute, as the place for the holding of
such meeting. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the corporation in
the State of New Mexico.
SECTION 4. Notice of Meetings. Written or printed notice of stating the
place, day and hour of the meeting and, in case of special meeting, the purpose
or purposes for which the meeting is called, shall (unless otherwise prescribed
by statute) be delivered not more than 60 days and not less than 10 days before
the date of the meeting either personally or by mail, at the direction of the
President, the Secretary or the persons calling the meeting, to each shareholder
of record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, addressed to
the Shareholder at his/her address as it appears on the stock transfer books of
the corporation, with postage thereon prepaid. Attendance of a shareholder in
person or by proxy as a meeting constitutes a waiver
<PAGE> 2
of notice of the meeting, except where a shareholder attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called for convened.
SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive a distribution by the corporation (other than a distribution involving a
purchase or redemption by the corporation of any of its own shares) or a share
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the corporation may provide that the
stock transfer books shall be closed for a stated period but not exceed, in any
case, 60 days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least 10 days immediately
preceding such meeting. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholders, not less than 10 days before the date on which
the particular action, requiring such determination of shareholders, is to be
taken. If the stock transfer books are not closed and no record date is fixed
for the determination of shareholder, or shareholders entitled to receive
payment of a distribution (other than a distribution involving a purchase or
redemption by the corporation of any of its own shares) or a share dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such distribution or share
dividend is adopted, as the case may be, shall be the record date for such
determination of shareholder. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make, at least 10 days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at each meeting, or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of 10 days before such meeting, shall be kept on file
at the registered office of the corporation and shall be subject to inspection
by any shareholder at any time and place of the meeting and shall be subject to
the inspection of any shareholder during the whole time of the meeting. The
original stock transfer book shall be prima facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of the shareholders.
SECTION 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
2
<PAGE> 3
SECTION 8. Manner of Acting. The vote of the holders of a majority of
the shares entitled to vote and thus represented at such meeting once a quorum
is present shall be the act of the shareholder's meeting unless the vote of a
greater number is required by law, the Articles of Incorporation or these
Bylaws.
SECTION 9. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
11 months from the date of its execution, unless provided in the proxy. Each
proxy shall be revocable unless the proxy form conspicuously states that the
proxy is irrevocable and the proxy is coupled with an interest.
SECTION 10. Voting of Shares. Subject to the provisions of Section 13
of this Article 2, each outstanding share entitled to vote shall be entitled to
one vote upon each matter submitted to a vote at a meeting of the shareholders.
SECTION 11. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribed, or, in the absence of such
provisions, as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee shall be entitled to
vote shares held by him without a transfer of such shares into the name of the
trust.
Shares standing in the name of a receiver or bankruptcy trustee may be
voted by such receiver or bankruptcy trustee, and shares held by or under the
control of a receiver or bankruptcy trustee may be voted by such receiver or
bankruptcy trustee without the transfer thereof into his name if authority so to
do be contained in an appropriate order of the court by which such receiver or
bankruptcy trustee was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation shall not be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
SECTION 12. Informal Action by Shareholders. Unless otherwise provided
by law, any action required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders, may be taken
without a meeting if consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. Meetings of shareholders by use of conference telephone
or similar communications equipment may also be held as more specifically
described in Section 9 of Article 3 of these Bylaws.
3
<PAGE> 4
SECTION 13. Cumulative Voting Prohibited. At each election for
directors, every shareholder entitled to vote at such election shall have the
right to vote, in person or by proxy, the number of shares owned by him for as
many persons as there are directors to be elected and for whose election he has
a right to vote, cumulative voting is expressly prohibited.
ARTICLE 3. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors. Directors need not be residents of
this state or shareholders of the corporation.
SECTION 2. Number, Tenure and Qualifications. The number of directors
of the corporation shall be one or more, as determined from time to time by the
Bylaws of the Corporation, but no change in the number of directors may reduce
the term of the then incumbent directors. Each director shall hold office until
the next annual meeting of the shareholders and until his successors shall have
been elected and qualified.
SECTION 3. Resignation. Any director may resign by giving written
notice to the President or the Secretary. The resignation shall take effect at
the time specified therein. The acceptance of such resignation shall not be
necessary to make it effective.
SECTION 4. Regular Meetings. A regular meeting of the Board of
Directors shall be held (without other notice than this Bylaw) immediately
after, and at the same place as, the annual meeting of shareholders. The Board
of Directors may provide, by resolution, the time and place for the holder of
additional regular meetings without other notice than such resolution.
SECTION 5. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix the place for holding any special meeting of the Board of Directors
called by them.
SECTION 6. Notice. Notice of any special meeting shall be given at
least 1 day previously thereto by written notice delivered personally or mailed
to each director at his business address, or by telegram or telephone. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any director may waive notice of any
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction or any business because the
meeting is not lawfully called or convened.
SECTION 7. Quorum. A majority of the number of directors then fixed by
the shareholders shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
4
<PAGE> 5
SECTION 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 9. Action Without a Meeting, Consent in Writing and Conference
Telephone Call. Any action that may be taken by the Board of Directors at a
meeting may be taken without a meeting if consent in writing, setting forth the
action so taken, shall be signed by all of the directors. Subject to the
provisions of these Bylaws for notice of meetings, members of the Board of
Directors, members of any committee designated by the board or shareholders may
participate in and hold a meeting of such Board, committee or shareholders by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
SECTION 10. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors, unless otherwise provided
by law. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors shall be filled by election at an annual
meeting or at a special meeting of the shareholders called for that purpose
continuing only until the next election of directors.
SECTION 11. Compensation. By resolution of the Board of Directors, each
director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 12. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the Secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the Secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a Director who voted in favor of such action.
SECTION 13. Removal. Any director or the entire Board of Directors may
be removed, with or without cause, at any meeting of the shareholders called
expressly for that purpose, by a vote of the holders of a majority of the shares
then entitled to vote at an election of directs. In the event cumulative voting
is permitted by these Bylaws at any time, if less than the entire Board is to be
removed, no one of the directors may be removed if the votes cast against his
removal would be sufficient to elect him if then cumulatively voted at an
election of the entire Board of Directors, or if there be classes of directors,
at an election of the class of directors of which he is a part.
5
<PAGE> 6
SECTION 14. Committees. The Board of Directors, by resolution adopted
by a majority of the full Board of Directors, may designate from among its
members one or more committees, including an executive committee. Each committee
shall have and may exercise such authority of the Board of Directors as is set
forth in the resolution creating the committee, except that if an executive
committee is appointed, it shall have and may exercise lawfully delegated
authority of the Board of Directors, except as specifically prohibited in the
resolution or in this Section of the Bylaws. In no event, however, shall any
such committee have the authority of the Board of Directors in reference to
amending the Articles of Incorporation, approving a plan of merger or
consolidation, recommending to the shareholders the sale, lease or exchange of
all or substantially all of the property and assets of the corporation otherwise
than in the usual and regular course of its business, recommending to the
shareholders a voluntary dissolution of the corporation or a revocation thereof,
amending, altering or repealing the Bylaws or adopting new Bylaws, filling
vacancies or in removing members of the Board of Directors or any such
committee, electing or removing officers, fixing the compensation of any member
of such committee or altering or repealing any resolution of the Board of
Directors which by its terms provides that it shall not be so amendable or
repealable; and no such committee shall have the power or authority to declare a
dividend or distribution or to authorize the issuance of shares of the
corporation or to authorize or approve through reacquisition of shares of the
corporation unless pursuant to general formula or method specified by the Board
of Directors, or to approve or recommend to shareholders actions or proposals
required by law to be approved by shareholders of the corporation. Any
resignation of such committee and the delegation to such committee of authority
shall not operate to relieve the Board of Directors, or any member thereof, of
any responsibility imposed by laws.
SECTION 15. Interested Directors.
(A) If paragraph (b) of this Section 15 is satisfied, no
contract or other transaction between the corporation and any of its
directors (or any corporation or firm in which any of them are directly
or indirectly interested) shall be invalid solely because of this
relationship or because of the presence of such director, at the
meeting authorizing such contract or transaction, or his participation
in such meeting or authorization;
(B) Paragraph (A) of this Section 15 shall apply only if:
(1) The material facts of the relationship or
interest of each such director are known or disclosed:
(a) To the Board of Directors or a committee
and the Board or committee nevertheless authorizes or
ratifies the contract or transaction by a majority of
the directors present, each such interested director
to be counted in determining whether a quorum is
present but not in calculating the majority necessary
to carry the vote; or
(b) To the shareholders and they
nevertheless authorize or ratify the contract or
transaction by a majority of the shares present, each
such interested person to be counted for quorum and
voting purposes (however, no shares owned or voted
under the control of a director who has a direct
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<PAGE> 7
or indirect interest in the transaction or who is a
director of another entity controlling such shares
has a direct or indirect interest in the transaction
or who is a director of another entity controlling
such shares shall be counted in the vote); or
(C) This provision shall not be construed to invalidate a
contract or transaction which would be valid in the
absence of this provision.
ARTICLE 4. OFFICERS
SECTION 1. Officers. The corporation shall have a President and a
Secretary. The corporation may have a Vice-President, a Treasurer and such other
officers (including a Chairman of the Board and additional Vice Presidents) and
assistant officers and agents, as the Board of Directors may think necessary.
Any two or more offices may be held by the held by the same person except the
offices of president and secretary.
SECTION 2. Election and Term of Office. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors held after each annual meeting of the shareholders. If the election
of officers shall not be held at such meeting, such election shall be held at a
special meeting as soon as such meeting can be conveniently scheduled. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided.
SECTION 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
SECTION 4. Resignation. Any officer may resign by giving written notice
to the President or the Secretary. The resignation shall take effect at the time
specified therein. The acceptance of such resignation shall not be necessary to
make it effective.
SECTION 5. Vacancies. A vacancy in any office be cause of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 6. Chairman of the Board. The Chairman of the board, if such an
officer has been elected by the Board of Directors, shall, if present, preside
at all meetings of the Board of Directors and exercise and perform such other
powers and duties as from time to time may be assigned to him by the Board of
Directors or prescribed by these Bylaws.
SECTION 7. President. Subject to such supervisory and executive powers,
if any, which may be given by the Board of Directors to the Chairman of the
Board, if the Board of Directors has elected a Chairman of the Board, the
President shall be the Chief Executive officer of the corporation and, subject
to the control of the Board of Directors, shall in general supervise and control
all of the business and affairs of the corporation. The President may sign,
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<PAGE> 8
with the Secretary or any other proper officer of the corporation thereunto
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as from time to
time may be assigned to him by the Board of Directors.
SECTION 8. Vice-President. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice-President (or in the
event there be more than on Vice-President, the Vice Presidents in the order
designated by the Board, or in the absence of any designation, then in the order
of their election) shall perform the duties of the President, and when so
acting, shall have all the powers of, and be subject to, all the restrictions
upon the President. The Vice-Presidents shall perform such other duties as from
time to time may be assigned to them by the Board of Directors or by the
President.
SECTION 9. Secretary and Assistant Secretaries. The Secretary shall
attend all meetings of the Board and all meetings of the shareholders and shall
record all votes and the minutes of all proceedings and shall perform like
duties for the standing committees when required. He shall give or cause to be
given notice of all meetings of the shareholders and all meetings of the Board
of Directors and shall perform such other duties as may be prescribed by the
Board. He shall keep in safe custody the seal, if any, of the corporation, and
when authorized by the Board, affix the same to any instrument requiring it, and
when so affixed, it shall be attested by his signature or by the signature of an
Assistant Secretary. The Secretary shall perform such other duties as from time
to time may be assigned by the Board of Directors or by the President.
The Assistant Secretaries in the order of their seniority as determined
by the order of their election shall, in the absence or disability of the
Secretary, perform all the duties and exercise the powers of the Secretary, and
they shall perform such other duties as from time to time may be assigned to
them by the Board of Directors or by the President.
In the absence of the Secretary or an Assistant Secretary, the minutes
of all meetings of the Board and shareholders shall be recorded by such person
as shall be designated by the Board of Directors or by the President.
SECTION 10. Treasurer and Assistant Treasurers. The Treasurer shall
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books and belonging to the
corporation and shall deposit all monies and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the Board of Directors. The Treasurer shall disburse the funds of the
corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements. He shall keep and maintain the corporation's books of
account and shall render to the President and directors an account of all of his
transactions as Treasurer and of the financial condition of the corporation and
exhibit his books, records and accounts to the President or directors at any
time. He shall disburse funds for capital expenditures as authorized by the
Board of Directors and in accordance with the orders of the President, and
present to the President for his attention any requests for disbursing funds if
in the judgment of the Treasurer shall perform such other
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<PAGE> 9
duties as from time to time may be assigned to him by the board of Directors or
by the President.
If required by the Board of Directors, the Treasurer shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board for the faithful performance of the duties of his
office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
The Assistant Treasurers in the order of their seniority as determined
by the order of their election shall, in the absence or disability of the
Treasurer, perform all the duties and exercise the powers of the Treasurer, and
they shall perform such other duties as from time to time may be assigned to
them by the Board of Directors or by the President.
SECTION 11. Compensation. The salaries of the officers shall be
determined from time to time by the Board of Directors, but no formal action of
the directors shall be required in determining such salaries. No officer shall
be prevented from receiving such salary by reason of the fact that he is also a
director of the corporation.
ARTICLE 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. Definitions. In this Article:
(A) "Indemnitee" means (1) any present or former director,
advisory director or officer of the corporation, (2) any person who
while serving in any of the capacities referred to in clause (1) hereof
served at the corporation's request as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary
of another foreign, or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, and (3) any
person nominated or designated by (or pursuant to authority granted by)
the Board of Directors or any committee thereof to serve in any of the
capacities referred to in clauses (1) and (2) hereof.
(B) "Official Capacity" means (1) when used with respect to a
director, the office of director of the corporation, and (2) when used
with respect to a person other than a director, the elective or
appointive office of the corporation held by such person or the
employment or agency relationship undertaken by such person on behalf
of the corporation, or nonprofit corporation or any partnership,
cooperative, joint venture, trust, incorporated or unincorporated
enterprise, employee benefit plan or other enterprise.
(C) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative
arbitrative or investigative.
SECTION 2. Indemnification. The corporation shall indemnify every
Indemnitee against all judgments, penalties (including excise and similar
taxes), fines, amounts paid in settlements and reasonable expenses actually
incurred by the Indemnitee in connection with any Proceeding to which he was, is
or is threatened to be named defendant or respondent, or in which he was
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<PAGE> 10
or is a witness without being named a defendant or respondent, by reason, in
whole or in part, of his serving or having served, or having been nominated or
designated to serve, in any of the capacities referred to in Section 1(A) of
this Article 5, if it is determined in accordance with Section 4 that the
Indemnitee: (a) conducted himself in good faith, (b) reasonably believed, in the
case of conduct in his Official Capacity, that his conduct was in the
corporation's best interests and, in all other cases, that his conduct was at
lease not opposed to the corporation's best interests, and (c) in the case of
any criminal proceeding, had no reasonable cause to believe that his conduct was
unlawful. No indemnifications shall be made under this Section 2 in respect of
any judgment, penalty, fine, or amount paid in settlement in connection with any
Proceeding in which such Indemnitee shall have been found liable on the basis
that personal benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the Indemnitee's Official Capacity, or found
liable to the corporation. However, if the Indemnitee is found liable on the
basis that personal benefit was improperly received by him, or is found liable
to the corporation, the Indemnitee shall be entitled to reasonable expenses
actually incurred by him in connection with the Proceeding unless he has been
found liable for termination of any Proceeding by judgment, order, settlement or
conviction, or on a plea of nolo contendere or its equivalent, is not of itself
determinative that the Indemnitee did not meet the requirements set forth in
clauses (a), (b) or (c) in the first sentence of this Section 2. An Indemnitee
shall be deemed to have been found liable in respect of any claim, issue or
matter only after the person shall have been so adjudged by a court of competent
jurisdiction after exhaustion of all appeals therefrom.
SECTION 3. Successful Defense. Without limitation of Section 2 of this
Article 5 and in addition to the indemnification provided for in Section 2 of
this Article 5, the corporation shall indemnify every Indemnitee against
reasonable expenses incurred by such person in connection with any Proceeding in
which he is a witness or a named defendant or respondent because he served in
any of the capacities referred to in Section 1(A) of this Article 5, if such
person has been wholly successful, on the merits or otherwise, in defense of the
Proceeding.
SECTION 4. Determinations. Any indemnification (unless ordered by a
court of competent jurisdiction) shall be made by the corporation only upon a
determination that indemnification of the Indemnitee is proper in the
circumstances because he has met the applicable standard of conduct. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who, at the time of such vote, are not named
defendants or respondents in the Proceeding; (b) if such a quorum cannot be
obtained, then by a majority vote of a committee of the Board of Directors, duly
designated to act in the matter by a majority vote of all designated to act in
the matter by a majority vote of all directors (in which designation directors
who are named defendants or respondents in the Proceeding may participate), such
committee to consist solely of two or more directors who, at the time of the
committee vote, are not named defendants or respondents in the Proceeding; (c)
by special legal counsel selected by the Board of Directors or a committee
thereof by vote as set forth in clauses (a) or (b) of this Section 4 or, if the
requisite quorum of all of the directors cannot be obtained therefor, and such
committee cannot be established; by a majority vote of all of the directors (in
which directors who are named defendants or respondents in the Proceeding may
participate) or (d) by the shareholders in a vote that excludes the shares held
by directors that are named defendants or respondents in the Proceeding.
Authorization of indemnification and determination as to reasonableness of
expenses must be made in the same manner as the determination that
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<PAGE> 11
indemnification is permissible, except that if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses must be
made in the manner specified in clause (c) of the preceding sentence for the
selection of a special legal counsel. In the event a determination is made under
this Section 4 that the director or officer has met the applicable standard of
conduct as to some matters but not as to others, amounts to be indemnified may
be reasonably prorated.
SECTION 5. Advancement of Expenses. Reasonable expenses (including
court costs and attorneys' fees) incurred by an Indemnitee who was or is a
witness or was, is or is threatened to be made a named defendant or respondent
in a Proceeding shall be paid or reimbursed by the corporation in advance of the
final disposition of such Proceeding and without any of the determinations
specified in Section 4 of this Article 5, after the corporation receives a
written affirmation by such Indemnitee of his good faith belief that he has met
the standard of conduct necessary for indemnification by the corporation under
this Article and a written undertaking by or on behalf of such Indemnitee to
repay the amount paid or reimbursed by the corporation as authorized in this
Article. Such written undertaking shall be an unlimited of financial ability to
make repayment. Notwithstanding any other provision of this Article, the
corporation shall pay or reimburse expenses incurred by an Indemnitee in
connection with his appearance as a witness or other participation in a
Proceeding at a time when he is not named a defendant or respondent in the
Proceeding.
SECTION 6. Employee Benefit Plans. For purposes of this Article, the
corporation shall be deemed to have requested an Indemnitee to serve an employee
benefit plan whenever the performance by him of his duties to the corporation
also imposes duties on or otherwise involves services by him to the plan or
participants or beneficiaries of the plan. Excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall be deemed fines. Action taken or omitted by an Indemnitee with respect to
an employee benefit plan in the performance of his duties for a purpose
reasonably believed by him to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
SECTION 7. Other Indemnification and Insurance. The indemnification
provided by this Article shall: (a) not be deemed exclusive of, or to preclude,
any other rights to which those seeking indemnification may at any time be
entitled under the corporation's Articles of Incorporation, any law, agreement
or vote of shareholders or disinterested directors, or otherwise, or under any
policy or policies of insurance or other arrangement purchased or maintained by
the corporation on behalf of an Indemnitee, both as to his action in his
Official Capacity and as to action in any other capacity, (b) continue as to a
person who has ceased to be in the capacity by reason of which he was an
indemnitee with respect to matters arising during the period he was in such
capacity, and (c) inure to the benefit of the heirs, executors and
administrators of such a person.
SECTION 8. Notice. Any indemnification of or advance of expenses to a
present or former director of the corporation in accordance with this Article
shall be reported in writing to the shareholders of the corporation with or
before the notice or waiver of notice of the next shareholders' meeting or with
or before the next submission to shareholders of a consent to
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action without a meeting and, in any case, within the 12-month period following
the date of the indemnification or advance.
SECTION 9. Construction. The indemnification provided by this Article
shall be subject to all valid and applicable laws, including without limitation,
Section 53-11-4.1 of the New Mexico Business Corporation Act, and, in the event
this Article or any of the provisions hereof or the indemnification contemplated
hereby are found to be inconsistent with or contrary to any such valid laws, the
latter shall be deemed to control and this Article shall be regarded as modified
accordingly, and, as modified, to continue in full force and effect.
SECTION 10. Continuing Offer. Reliance. The provisions of this Article
(a) are for the benefit of, and may be enforced by, each director and officer of
the corporation, the same as if set forth in their entirety in a written
instrument duly executed and delivered by the corporation and such director or
officer and (b) constitute a continuing offer to all present and future
directors and officer of the corporation. The corporation, by its adoption of
these Bylaws, acknowledges and agrees that each present and future director and
officer of the corporation has relied upon and will continue to rely upon the
provisions of this Article in accepting and serving in any of the capacities
referred to in Section 1(A) of this Article, waives reliance upon, and all
notice of acceptance of such provisions by such directors and officers and
acknowledges and agrees that no present or future directors or officers of the
corporation shall be prejudiced in his right to enforce the provisions of this
Article in accordance with their terms by any act or failure to act on the part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
ARTICLE 6. CONTRACT, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer
or officers or agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks and Orders for Payment. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or officers or
agent or agents of the corporation and in such manner as shall from time to time
be determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE 7. CERTIFICATES FOR SHARES AND THEIR TRANSFER
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SECTION 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and corporate seal. All
certificates for shares shall be consecutively numbered or otherwise issued,
with the number of shares and date of issue, shall be entered on the stock
transfer shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled, except that in case
of a lost, destroyed or mutilated certificate, a new one may be issued therefore
upon such terms and indemnity to the corporation as the Board of Directors may
prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the corporation shall be deemed by
the corporation to be the owner thereof for all purposes.
ARTICLE 8. BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders and Board
of Directors, and shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
shareholders giving the names and addresses of all shareholders and the number
and class of the shares held by each.
ARTICLE 9. FISCAL YEAR
The fiscal year of the corporation shall be determined and fixed by the
Board of Directors of the corporation.
ARTICLE 10. DISTRIBUTIONS
The Board of Directors may from time to time declare, and the
corporation may pay, distributions on its outstanding shares in the manner and
upon the terms and conditions provided by law and the corporation's Articles of
Incorporation.
ARTICLE 11. CORPORATION SEAL
The Board of Directors shall provide a corporate seal which may be
circular in form and shall have inscribed thereon the name of the corporation
and such other description as the directors may approve.
ARTICLE 12. WAIVER OF NOTICE
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Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the corporation under the provisions of
these Bylaws or under the provisions of the Articles of Incorporation or under
the provisions of the New Mexico Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE 13. AMENDMENT
These Bylaws may be altered, amended or repealed, and new bylaws may be
adopted, at any meeting of the Board of Directors of the corporation my a
majority vote by the directors.
ARTICLE 14. RESTRICTIONS ON TRANSFER OF STOCK
The shares of stock of the Corporation shall not be transferable
(including by reason of gift or death) or the subject of sale, assignment,
mortgage, pledge or transfer until first offered to the Corporation at the value
agreed upon by all of the stockholders at their annual meeting each year, or as
often as the stockholders so desire and agree to in writing. In the event the
stockholders fail to agree on said price or any agreed price is over one year
old, then said stock shall be offered to the Corporation at its fair market
value, with said fair market value, unless otherwise agreed, to be determined by
two appraisers with one each chosen by the transferring stockholder and the
non-transferring stockholders respectively and in the event said two appraisers
cannot agree, then said appraisers shall select a third appraiser and the
opinion of any two appraisers shall be binding upon the Corporation, and the
transferring stockholder. In the event the offer of the transferring
stockholder. In the event the offer of the transferring stockholder as above
described is refused by the Corporation, then said stock shall be offered to the
non-transferring stockholders, and if necessary, to those stockholders or such
of them as desire to purchase the same, with each purchasing stockholder to be
able to purchase that amount of shares in equal proportion to the total number
of shares held by the purchasing stockholder in the Corporation over the total
number of shares held by all of the purchase stockholders, times the total
number of shares being offered, all in accordance with the terms and conditions
applicable to the Corporation as above described.
In each of the foregoing cases, any offer to sell the stock must be
accepted by the party receiving the offer within 30 days from the date said
offer is communicated in writing to the offeree. Moreover, if the offer is
accepted, the purchasing party or parties shall have a reasonable time within
which to arrange for the payment of said stock. In addition, in each of the
foregoing cases, if such offer shall be made and refused by the Corporation and
then all of the stockholders, the share so offered shall be subject to sale,
assignment, mortgage, pledge or transfer on the terms offered to the Corporation
and the stockholders, but not otherwise unless agreed by all of the stockholders
in writing. The shares, if any, so purchased by the Corporation may be resold by
it upon such terms as the Board of Directors may determine, by all remaining
shareholders who desire to purchase said shares shall be first entitled to
participate in the purchasing in proportion to the total number of shares owned
by said purchasing stockholder over the total number of shares owned by all
stockholders desiring to purchase said stock times the total number of shares
being resold by the Corporation.
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In no case shall any share be sold, assigned, mortgaged, pledged or
transferred until after offer to the Corporation and refusal by it, and
subsequent offer and refusal by the stockholders to purchase as aforesaid, and
in the event any stockholder violates any of the terms of this provision, then
in that event, his or her stock shall immediately be offered to the Corporation,
and then to the stockholders upon the terms and conditions above described.
However, notwithstanding anything contained in this section to the contrary, the
above restrictions on the sale, assignment, mortgage, pledge or transfer of
stocks shall not apply in cases where all of the non-transferring stockholders
agree in writing to a sale, assignment, mortgage, pledge or transfer of stock.
In the event any of the stockholders shall have died, then in all cases
referred to herein, said stockholder's personal representative (that is his or
her Executor or Administrator, or in the event that no Executor or Administrator
had been appointed, his or her surviving spouse) shall act for him in offering
his or her stock for sale under the above terms and conditions.
ARTICLE 15. GENERAL PROVISIONS
SECTION 1. Construction. Whenever the context so requires, the
masculine shall include the feminine and neuter, and the singular shall include
the plural, and conversely. If any portion of these Bylaws shall be invalid or
inoperative, then, so far as is reasonable and possible:
(A) The remainder of these Bylaws shall be considered valid
and operative;
and
(B) Effect shall be given to the intent manifested by the
portion held invalid or inoperative.
SECTION 2. Headings. The headings are for organization, convenience and
clarity. In interpreting these Bylaws, they shall be subordinated in importance
to the other written material.
----------------------------------------
President
ATTEST:
- --------------------------
Secretary
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CERTIFICATE OF SECRETARY
The undersigned, Secretary of CABLENET, INC., does hereby certify that
the foregoing Bylaws were duly adopted by the Board of Directors on __________,
1994.
-----------------------------------
Secretary
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<PAGE> 1
EXHIBIT 4.1
================================================================================
INDENTURE
Dated as of July 30, 1997
Between
DIGITAL TELEVISION SERVICES, LLC
and
DTS CAPITAL, INC., as Issuers,
and
THE GUARANTORS SIGNATORY HERETO, as Guarantors
and
THE BANK OF NEW YORK, as Trustee
------------------
$155,000,000
12 1/2% Senior Subordinated Notes due 2007, Series A
12 1/2% Senior Subordinated Notes due 2007, Series B
================================================================================
<PAGE> 2
INDENTURE dated as of July 30, 1997, between Digital
Television Services, LLC, a Delaware limited liability company (the "Company"),
and DTS Capital, Inc., a Delaware corporation ("Capital") (each an "Issuer" and
collectively, the "Issuers"), each of the Guarantors (as defined herein) and The
Bank of New York, a New York banking corporation, as trustee.
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accredited Investor Global Security" see Section 2.01.
"Acquired Indebtedness" means Indebtedness of a Person (a)
assumed in connection with an Acquisition from such Person or (b) existing at
the time such Person becomes a Restricted Subsidiary or is merged or
consolidated with or into the Company or any Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person,
any other Person that merges with or into or becomes a Subsidiary of such
specified Person.
"Acquisition" means (i) any 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 to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated or merged with or into the
Company or any Restricted Subsidiary or (ii) any acquisition by the Company or
any Restricted Subsidiary of the assets of any Person which constitute
substantially all of an operating unit or line of business of such Person or
which is otherwise outside of the ordinary course of business.
"Additional Interest" has the meaning provided in Section 4(a)
of the Registration Rights Agreement.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of
<PAGE> 3
voting securities, by agreement or otherwise; provided, however, that (i)
beneficial ownership of 10.0% or more of the voting power of the then
outstanding voting securities of a Person shall be deemed to be control; and
(ii) no individual, other than a manager or director of the Company or an
officer of the Company with a policy making function, shall be deemed an
Affiliate of the Company or any of the Company's Subsidiaries, solely by reason
of such individual's employment, position or responsibilities by or with respect
to the Company or any of the Company's Subsidiaries.
"Affiliate Transaction" see Section 4.03.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means any direct or indirect sale, conveyance,
transfer, lease (that has the effect of a disposition) or other disposition
(including, without limitation, any merger, consolidation or sale-leaseback
transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary, in one transaction or a series of related transactions, of (i) any
Equity Interest of any Restricted Subsidiary; (ii) any material license,
franchise or other authorization of the Company or any Restricted Subsidiary;
(iii) any assets of the Company or any Restricted Subsidiary that constitute
substantially all of an operating unit or line of business of the Company or any
Restricted Subsidiary; or (iv) any other property or asset of the Company or any
Restricted Subsidiary outside of the ordinary course of business (including the
receipt of proceeds paid on account of the loss of or damage to any property or
asset and awards of compensation for any asset taken by condemnation, eminent
domain or similar proceedings). The term "Asset Sale" shall not include (a) any
transaction consummated in compliance with Section 5.01 and the creation of any
Lien not prohibited by Section 4.18; provided, however, that any transaction
consummated in compliance with Section 5.01 involving a sale, conveyance,
assignment, transfer, lease or other disposal of less than all of the properties
or assets of the Company and the Restricted Subsidiaries shall be deemed to be
an Asset Sale with respect to the properties or assets of the Company and
Restricted Subsidiaries that are not so sold, conveyed, assigned, transferred,
leased or otherwise disposed of in such transaction; (b) sales 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; (c) any transaction consummated in compliance
with Section 4.06; and (d) sales of accounts receivable for cash at fair market
value. In addition, solely for purposes of Section 4.05, any sale, conveyance,
transfer, lease or other disposition of any property or asset, whether in one
transaction or a series of related transactions, involving assets with a Fair
Market Value not in excess of $500,000, and not in the aggregate, together with
all other such sales, conveyances, transfers, leases or dispositions after the
Issue Date, exceeding $2.0 million shall be deemed not to be an Asset Sale.
"Bankruptcy Law" see Section 6.01.
"Board of Directors" means (i) in the case of a Person that is
a corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors, board of managers, management committee or
similar governing body of such Person (or in the case of a limited partnership,
of such Person's general partner, or in the case of a limited
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<PAGE> 4
liability company, of such Person's manager), or any authorized committee
thereof responsible for the management of the business and affairs of such
Person.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"Business Day" means a day (other than a Saturday or Sunday)
on which the Depository and banks in New York are open for business.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be so required to be capitalized on the
balance sheet in accordance with GAAP.
"Cash Equivalents" means: (a) U.S. dollars; (b) securities
issued or directly and fully guaranteed or insured by the U.S. government or any
agency or instrumentality thereof having maturities of not more than six months
from the date of acquisition; (c) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million; (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) entered into with any financial institution meeting the
qualifications specified in clause (c) above; and (e) commercial paper rated
P-1, A-1 or the equivalent thereof by Moody's Investors Service, Inc. or
Standard & Poor's, respectively, and in each case maturing within six months
after the date of acquisition.
"Change of Control" shall mean the occurrence of any of the
following events (whether or not approved by the Board of Directors of the
Company): (a) any "person" or "group" (as such terms are used in Section 13(d)
and 14(d) of the Exchange Act or any successor provision to either of the
foregoing, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under 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 upon the happening of an event or
otherwise), directly or indirectly, of more than 45% of the total voting power
of the then outstanding Equity Interests of the Company; (b) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new members
of the Board of Directors whose election by the Board of Directors of the
Company or whose nomination for election by the members or stockholders of the
Company was approved by a vote of at least a majority of the members of the
Board of Directors then still in office who were either such members at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason (other than by action of the
Permitted Holders) to constitute a majority of the Board of Directors of the
Company then in office; or (c) the liquidation or dissolution of the Company;
provided, however, that a Corporate Conversion shall not be a Change of Control
except that, in such case, the surviving corporation in such Corporate
Conversion shall be substituted for the
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<PAGE> 5
Company for purposes of clauses (a) and (b) of this paragraph; provided further,
that a Change of Control will be deemed not to occur pursuant to clauses (a) or
(b) above if either (x) the acquiring "person" is a corporation engaged in the
telecommunications business with outstanding senior, unsecured corporate debt
securities having a maturity at original issuance of at least one year and such
debt securities are rated Investment Grade (without giving effect to any
third-party credit support or enhancement) by Standard & Poor's or Moody's
Investors Service, Inc. for a period of at least 90 consecutive days, beginning
on the date of such event (which period will be extended up to 90 additional
days for as long as the rating of such debt securities is under publicly
announced consideration for possible downgrading by the applicable rating
agency), or (y) in the event that the acquiring "person" is a corporation that
either (1) does not have any outstanding senior, unsecured corporate debt
securities that are rated by Standard & Poor's or Moody's Investors Service,
Inc. at any time during a period of 90 consecutive days beginning on the date of
such event (which period will be extended up to an additional 90 days for as
long as any such rating agency has publicly announced that such debt securities
will be rated), or (2) after the date of such event but during such 90 day
period, has outstanding senior, unsecured corporate debt securities having a
maturity at original issuance of at least one year that have been rated
Investment Grade (without giving effect to any third-party credit support or
enhancement) by Standard & Poor's or Moody's Investors Service, Inc. which
rating continues in effect for the remainder of the period specified in clause
(x) above, the Securities shall be rated Investment Grade immediately upon such
Change of Control.
"Change of Control Date" see Section 4.14.
"Collateral" has the meaning provided in Section 2 of the
Security Agreement.
"Collateral Documents" means the Interest Escrow Agreement and
the Security Agreement.
"Communications Act" means the Communications Act of 1934, as
amended.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
Vice Chairman of the Board, its President, a Vice President or its Treasurer,
and by an Assistant Treasurer, its Secretary or an Assistant Secretary, or, at
any time when the Company is a limited liability company, by the Company's
manager through an individual serving in such capacity with the Company's
manager, and delivered to the Trustee.
"Consolidated Income Tax Expense" means, with respect to the
Company for any period, the provision for federal, state, local and foreign
income taxes payable by the Company and the Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP.
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<PAGE> 6
"Consolidated Interest Expense" means, with respect to the
Company for any period, without duplication, the sum of (i) the interest expense
of the Company and the Restricted Subsidiaries for such period as determined on
a consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount; (b) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts); (c) the
interest portion of any deferred payment obligation; (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing; and (e) all capitalized interest and all accrued
interest; (ii) the interest component of Capital Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by the Company and the Restricted
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP; and (iii) dividends and distributions in respect of
Disqualified Equity Interests actually paid in cash by the Company during such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any period,
the net income of the Company and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, adjusted, to the
extent included in calculating such net income, by excluding, without
duplication, (a) all extraordinary gains or losses and all gains and losses from
the sales or other dispositions of assets out of the ordinary course of business
(net of taxes, fees and expenses relating to the transaction giving rise
thereto) for such period; (b) that portion of such net income derived from or in
respect of investments in Persons other than Restricted Subsidiaries, except to
the extent actually received in cash by the Company or any Restricted Subsidiary
(subject, in the case of any Restricted Subsidiary, to the provisions of clause
(e) of this definition); (c) the portion of such net income (or loss) allocable
to minority interests in any Person (other than a Restricted Subsidiary) for
such period, except to the extent actually received in cash by the Company or
any Restricted Subsidiary (subject, in the case of any Restricted Subsidiary, to
the provisions of clause (e) of this definition); (d) net income (or loss) of
any other Person combined with the Company or any Restricted Subsidiary on a
"pooling of interests" basis attributable to any period prior to the date of
combination; and (e) the net income of any Restricted Subsidiary to the extent
that the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time (regardless of any waiver)
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulations applicable to that Restricted Subsidiary or its Equity
Interest holders.
"Consolidated Net Worth" with respect to any Person means the
equity of the holders of Qualified Equity Interests of such Person and its
Restricted Subsidiaries, as reflected on a balance sheet of such Person
determined on a consolidated basis and in accordance with GAAP.
"Consolidated Operating Cash Flow" means, with respect to any
period, Consolidated Net Income for such period increased (without duplication)
by the sum of (a) Consolidated Income Tax Expense for such period to the extent
deducted in determining Consolidated Net Income for such period; (b)
Consolidated Interest Expense for such period to the extent deducted in
determining Consolidated Net Income for such period; (c) all dividends on
Preferred Equity Interests to the extent not taken into account for computing
Consolidated
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<PAGE> 7
Net Income for that period; and (d) depreciation, amortization and any other non
cash items for such period to the extent deducted in determining Consolidated
Net Income for such period (other than any non cash item that requires the
accrual of, or a reserve for, cash charges for any future period) of the Company
and the Restricted Subsidiaries, including, without limitation, amortization of
capitalized debt issuance costs for such period, all of the foregoing determined
on a consolidated basis in accordance with GAAP minus non cash items to the
extent they increase Consolidated Net Income (including the partial or entire
reversal of reserves taken in prior periods) for such period.
"Corporate Conversion" shall mean the conversion of the
Company to a corporation, whether pursuant to a merger, consolidation,
conversion by filing, assignment of assets, or similar transaction or series of
transactions, in each case resulting in a corporation substantially all of the
assets of which consist of substantially all of the assets that were held
directly or indirectly by the Company immediately prior to such transaction and
substantially all of the capital stock of which corporation is held by Persons
who were members of the Company immediately prior to such transaction or
Permitted Transferees of such Persons in substantially the same proportions.
"Corporate Trust Office" of the Trustee shall be at the
address of the Trustee specified in Section 13.02 or such other address as the
Trustee may give notice to the Company.
"Credit Facility" means the Amended and Restated Credit
Agreement, dated as of July 30, 1997, between Digital Television Services, LLC,
the lenders named therein, CIBC Wood Gundy Securities Corp., as Arranger, Morgan
Guaranty Trust Company of New York, as Syndication Agent, Fleet National Bank,
as Documentation Agent and Canadian Imperial Bank of Commerce, as Administrative
Agent, including any deferrals, renewals, waivers, extensions, replacements,
refinancings or refundings thereof, or amendments, modifications or supplements
thereto and any agreement providing therefor, whether by or with the same or any
other lender, creditor, group of lenders or group of creditors, and including
related notes, guaranties, security agreements, pledge agreements, mortgages,
other collateral documents (including all Loan Documents (as defined in the
Credit Facility)) and note agreements and other instruments and agreements
executed in connection therewith.
"Cumulative Operating 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.
"Custodian" see Section 6.01.
"DBS" means direct broadcast satellite.
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<PAGE> 8
"Debt to Operating Cash Flow Ratio" means the ratio of (a) an
amount equal to the Total Consolidated Indebtedness as of the date of
calculation (the "Determination Date") minus the amount of funds on deposit in
the Interest Escrow Account as of the Determination Date to (b) four times the
Consolidated Operating Cash Flow for the latest fiscal quarter for which
financial information is available immediately preceding such Determination Date
(the "Measurement Period"). For purposes of calculating Consolidated Operating
Cash Flow for the Measurement Period immediately prior to the relevant
Determination Date, (I) any Person that is a Restricted Subsidiary on the
Determination Date (or would become a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Consolidated Operating Cash Flow) will be deemed to have
been a Restricted Subsidiary at all times during such Measurement Period, (II)
any Person that is not a Restricted Subsidiary on such Determination Date (or
would cease to be a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of such
Consolidated Operating Cash Flow) will be deemed not to have been a Restricted
Subsidiary at any time during such Measurement Period, and (III) if the Company
or any Restricted Subsidiary shall have in any manner (x) acquired (including
through an Acquisition or the commencement of activities constituting such
operating business) or (y) disposed of (including by way of an Asset Sale or the
termination or discontinuance of activities constituting such operating
business) any operating business during such Measurement Period or after the end
of such period and on or prior to such Determination Date, such calculation will
be made on a pro forma basis in accordance with GAAP as if, in the case of an
Acquisition or the commencement of activities constituting such operating
business, all such transactions had been consummated on the first day of such
Measurement Period and, in the case of an Asset Sale or termination or
discontinuance of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period; provided, however, that such pro forma adjustment shall not give effect
to the Operating Cash Flow of any Acquired Person to the extent that such
Person's net income would be excluded pursuant to clause (e) of the definition
of Consolidated Net Income. For purposes of determining Total Consolidated
Indebtedness as of any Determination Date, the sum of all Indebtedness
outstanding under the Credit Facility on such Determination Date and all amounts
that the Company or any Restricted Subsidiary could borrow under the Credit
Facility on such Determination Date (assuming the satisfaction of all conditions
precedent under the Credit Facility other than conditions relating solely to
incremental amounts being available under the Credit Facility) shall be deemed
to be outstanding and added to Total Consolidated Indebtedness on such
Determination Date (but without duplication).
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Default Amount" means the principal amount of all outstanding
Securities (plus any applicable premium thereon), plus accrued and unpaid
interest, if any, thereon.
"Depository" means, with respect to the Securities issued in
the form of one or more Global Securities, The Depository Trust Company or
another Person designated as Depository by the Company, which must be a clearing
agency registered under the Exchange Act.
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<PAGE> 9
"Designated Senior Indebtedness" means (a) any Indebtedness of
the Company and any Guarantor outstanding under the Credit Facility (including
guaranties) and (b) any other Senior Indebtedness or Guarantor Senior
Indebtedness that, at the time of determination, has an aggregate principal
amount outstanding, together with any commitments to lend additional amounts, of
at least $10.0 million, if (in the case of Senior Indebtedness or Guarantor
Senior Indebtedness described in this clause (b)) the instrument governing such
Senior Indebtedness or Guarantor Senior Indebtedness expressly states that such
Indebtedness is "Designated Senior Indebtedness" for purposes of this Indenture,
a Board Resolution setting forth such designation by the Company has been filed
with the Trustee and such designation is not prohibited by the Credit Facility.
"Designation" see Section 4.17.
"Designation Amount" see Section 4.17.
"Determination Date" has the meaning set forth in the
definition of "Debt to Operating Cash Flow Ratio" above.
"DirecTv(R) Services" means DBS television services and all
other video, audio, data packages, "a la carte" programming services and other
services offered by DirecTv, Inc., a subsidiary of Hughes Communications Galaxy,
Inc.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Equity Interest" means any Equity Interest
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable,
at the option of the holder thereof, in whole or in part, or exchangeable into
Indebtedness on or prior to the earlier of the maturity date of the Securities
or the date on which no Securities remain outstanding.
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500 million or its
equivalent in foreign currency, whose debt is rated Investment Grade at the time
as of which any investment or rollover therein is made.
"Equity Interest" in any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock or other
equity participations, including partnership interests, whether general or
limited, or member interests in such Person, including any Preferred Equity
Interests.
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<PAGE> 10
"Escrow Agent" means The Bank of New York, as Escrow Agent
under the Interest Escrow Agreement, or any successor thereto appointed pursuant
to such agreement.
"Event of Default" see Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Existing Indebtedness" means any Indebtedness of the Company
and its Subsidiaries in existence on the Issue Date until such amounts are
repaid.
"Expiration Date" has the meaning set forth in the definition of "Offer
to Purchase" below.
"Fair Market Value" means, with respect to any asset, the
price (after taking into account any liabilities relating to such assets) that
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of which is under
any compulsion to complete the transaction; provided, however, that the Fair
Market Value of any such asset or assets shall be determined conclusively by the
Board of Directors of the Company acting in good faith, and shall be evidenced
by resolutions of the Board of Directors of the Company delivered to the
Trustee; provided, however, that if the fair market value of such assets exceeds
$10.0 million, the fair market value shall be determined by an investment
banking firm of national standing selected by the Company.
"Final Maturity Date" means August 1, 2007.
"Funding Guarantor" see Section 11.05.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States that are applicable at the
date of determination and that are consistently applied for all applicable
periods.
"Global Security" means a security evidencing all or a portion
of the Securities issued to the Depository or its nominee in accordance with
Section 2.01 and bearing the legend set forth in Exhibit C hereto.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States are
pledged.
"guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn
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<PAGE> 11
down by letters of credit. A guarantee shall include, without limitation, any
agreement to maintain or preserve any other Person's financial condition or to
cause any other Person to achieve certain levels of operating results.
"Guarantor" means each Restricted Subsidiary, whether formed
or acquired before or after the Issue Date, that is required to become a
Guarantor of the Securities pursuant to Section 4.20.
"Guarantor Payment Blockage Period" see Section 12.02(a).
"Guarantor Senior Indebtedness" means, with respect to any
Guarantor, at any date, (i) all Obligations of such Guarantor under the Credit
Facility, (ii) all Interest Rate Protection Obligations of such Guarantor, (iii)
all Obligations of such Guarantor under stand-by letters of credit and (iv) all
other Indebtedness of such Guarantor for borrowed money, including principal,
premium, if any, and interest (including Post-Petition Interest) on such
Indebtedness, unless the instrument under which such Indebtedness of such
Guarantor for money borrowed is Incurred expressly provides that such
Indebtedness for money borrowed is not senior or superior in right of payment to
such Guarantor's Guaranty, and all renewals, extensions, modifications,
amendments or refinancings thereof. Notwithstanding the foregoing, Guarantor
Senior Indebtedness shall not include (i) to the extent that it may constitute
Indebtedness, any Obligation for federal, state, local or other taxes, (ii) any
Indebtedness among or between such Guarantor and the Company or any of such
Guarantor or the Company, (iii) to the extent that it may constitute
Indebtedness, any Obligation in respect of any trade payable Incurred for the
purchase of goods or materials, or for services obtained, in the ordinary course
of business, (iv) that portion of any Indebtedness that is Incurred in violation
of this Indenture; provided, however, that such Indebtedness shall be deemed not
to have been Incurred in violation of this Indenture for purposes of this clause
(iv) if (I) the holder(s) of such Indebtedness or their representative or such
Guarantor shall have furnished to the Trustee an opinion of independent legal
counsel, unqualified in all material respects, addressed to the Trustee (which
legal counsel may, as to matters of fact, rely upon an officers' certificate of
such Guarantor) to the effect that the Incurrence of such Indebtedness does not
violate the provisions of this Indenture or (II) in the case of any Obligations
under the Credit Facility, the holder(s) of such Obligations or their agent or
representative shall have received a representation from such Guarantor to the
effect that the Incurrence of such Indebtedness does not violate the provisions
of this Indenture, (v) Indebtedness evidenced by the Guaranty, (vi) Indebtedness
of such Guarantor that is expressly subordinate or junior in right of payment to
any other Indebtedness of such Guarantor, (vii) to the extent that it may
constitute Indebtedness, any obligation owing under leases (other than Capital
Lease Obligations) or management agreements and (viii) any obligation that by
operation of law is subordinate to any general unsecured obligations of such
Guarantor.
"Guaranty" means the guarantee of a Restricted Subsidiary set
forth in Article 11.
"High Power Satellite Transmission Business" means the
business of the acquisition, transmission or sale of programming in the high
power DBS business utilizing broadcast satellite service (including any
provision of such services to cable operators or other
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<PAGE> 12
media providers), which may utilize all or part of satellites owned by DirecTv,
Inc. or Hughes Communication Galaxy Inc. and all other activities relating
thereto or arising therefrom.
"Holder," "holder of Securities," "Securityholders" or other
similar terms mean the registered holder of any Security.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (including by conversion,
exchange or otherwise), assume, guarantee or otherwise become liable in respect
of such Indebtedness or other obligation or the recording, as required pursuant
to GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall
have meanings correlative to the foregoing).
"Indebtedness" means (without duplication), with respect to
any Person, whether recourse is to all or a portion of the assets of such Person
and whether or not contingent, (a) every obligation of such Person for money
borrowed; (b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable incurred in the
ordinary course of business and payable in accordance with industry practices,
or other accrued liabilities arising in the ordinary course of business that are
not overdue or that are being contested in good faith); (e) every Capital Lease
Obligation of such Person; (f) every net obligation under interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements,
and other agreements or arrangements designed to protect such Person against
fluctuations in interest rates; (g) every obligation of the type referred to in
clauses (a) through (f) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor, guarantor or
otherwise; and (h) any and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a) through (g) above. Indebtedness
(a) shall never be calculated taking into account any cash and cash equivalents
held by such Person; (b) shall not include obligations of any Person (x) arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently drawn against insufficient funds in the
ordinary course of business, provided that such obligations are extinguished
within two Business Days of their incurrence unless covered by an overdraft
line, (y) resulting from the endorsement of negotiable instruments for
collection in the ordinary course of business and consistent with past business
practices and (z) under stand-by letters of credit to the extent collateralized
by cash or Cash Equivalents; (c) that provides that an amount less than the
principal amount thereof shall be due upon any declaration of acceleration
thereof shall be deemed to be incurred or outstanding in an amount equal to the
accreted value thereof at the date of determination; (d) shall include the
liquidation preference and any mandatory redemption payment obligations in
respect of any Disqualified Equity Interests of the Company or any Restricted
Subsidiary; and (e) shall not include obligations under performance bonds,
performance guaranties, surety bonds and appeal bonds, letters of credit or
similar obligations,
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Incurred in the ordinary course of business (including standby letters of credit
securing obligations to the NRTC Incurred in the ordinary course of business
that are not overdue or that are being contested in good faith by appropriate
proceedings) (other than obligations under or in respect of any direct or
indirect credit support for obligations of any Unrestricted Subsidiary).
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Independent Financial Advisor" means a nationally recognized,
accounting, appraisal, investment banking firm or consultant with experience
advising DBS businesses that is, in the judgment of the Company's Board of
Directors, qualified to perform the task for which it has been engaged (i) that
does not, and whose directors, officers and employees or Affiliates do not, have
a direct or indirect financial interest in the Company and (ii) that, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette
Securities Corporation, CIBC Wood Gundy Securities Corp. and J.P. Morgan
Securities Inc.
"Insolvency or Liquidation Proceeding" means, with respect to
any Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"interest" means, with respect to the Securities, the sum of
any cash interest and any Additional Interest, if any, on the Securities.
"Interest Escrow Account" shall mean an account established in
the name of the Escrow Agent and funded by the Issuers on the Closing Date
pursuant to this Indenture.
"Interest Escrow Agreement" means the Interest Escrow
Agreement, dated as of the date hereof, by and among the Escrow Agent, the
Issuers and The Bank of New York, in its capacities as Trustee hereunder and as
Collateral Agent under the Security Agreement governing the disbursement of
funds from the Interest Escrow Account, in the form of Exhibit G.
"Interest Payment Date" means each semiannual interest payment
date on August 1 and February 1 of each year, commencing February 1, 1998.
"Interest Rate Protection Obligations" means, with respect to
any Person, the Obligations of such Person under (i) interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements,
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
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"Interest Record Date" for the interest payable on any
Interest Payment Date (except a date for payment of defaulted interest) means
the July 15 or January 15 (whether or not a Business Day), as the case may be,
immediately preceding such Interest Payment Date.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance, guarantee or other extension of credit or capital
contribution to (by means of transfers of cash or other property or assets to
others or payments for property or services for the account or use of others, or
otherwise), or purchase or acquisition of capital stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any other
Person. The amount of any Investment shall be the original cost of such
Investment, plus the cost of all additions thereto, and minus the amount of any
portion of such Investment repaid to such Person in cash as a repayment of
principal or a return of capital, as the case may be, but without any other
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment. In determining the amount of any
Investment involving a transfer of any property or asset other than cash, such
property shall be valued at its fair market value at the time of such transfer,
as determined in good faith by the Board of Directors (or comparable body) of
the Person making such transfer.
"Investment Grade" means with respect to a security, that such
security is rated, by at least two nationally recognized statistical rating
organizations, in one of each such organization's four highest generic rating
categories.
"Issue Date" means the original issue date of the Series A
Securities (July 30, 1997).
"Lien" means any lien, mortgage, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest).
"Marketable Securities" means (a) Government Securities; (b)
any certificate of deposit maturing not more than 365 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution; (c)
commercial paper maturing not more than 365 days after the date of acquisition
issued by a corporation (other than an Affiliate of the Issuer) with an
Investment Grade rating, at the time as of which any investment therein is made,
issued or offered by an Eligible Institution; (d) any bankers acceptances or
money market deposit accounts issued or offered by an Eligible Institution; and
(e) any fund investing exclusively in investments of the types described in
clauses (a) through (d) above.
"Maturity Date" means the date, which is set forth on the face
of the Securities, on which the Securities will mature.
"Measurement Period" has the meaning set forth in the
definition of "Debt to Operating Cash Flow Ratio" above.
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<PAGE> 15
"Net Cash Proceeds" means the aggregate proceeds in the form
of cash or Cash Equivalents received by the Company or any Restricted Subsidiary
in respect of any Asset Sale, including all cash or Cash Equivalents received
upon any sale, liquidation or other exchange of proceeds of Asset Sales received
in a form other than cash or Cash Equivalents, net of (a) the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof; (b) taxes paid or payable, or amounts in respect
thereof permitted to be distributed pursuant to clause (vi) of the second
paragraph of Section 4.06, as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements); (c)
amounts required to be applied to the repayment of Indebtedness secured by a
Lien on the asset or assets that were the subject of such Asset Sale; (d)
amounts deemed, in good faith, appropriate by the Board of Directors of the
Company to be provided as a reserve, in accordance with GAAP, against any
liabilities associated with such assets that are the subject of such Asset Sale
(provided that the amount of any such reserves shall be deemed to constitute Net
Cash Proceeds at the time such reserves shall have been released or are not
otherwise required to be retained as a reserve); and (e) with respect to Asset
Sales by Subsidiaries, the portion of such cash payments attributable to Persons
holding a minority interest in such Subsidiary.
"Non-Payment Event of Default" means any event (other than a
Payment Default) the occurrence of which entitles one or more Persons to
immediately accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person who is not a U.S. Person, as
defined in Regulation S.
"NRTC" means the National Rural Telecommunications Cooperative
and any successor entity to it.
"Obligations" means any principal, interest (including,
without limitation, Post-Petition Interest), penalties, fees, indemnifications,
reimbursement obligations, damages and other liabilities payable under the
documentation governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer
to Purchase" below.
"Offer to Purchase" means a written offer (the "Offer") sent
by or on behalf of the Company by first-class mail, postage prepaid, to each
Holder at such Holder's address appearing in the register for the Securities on
the date of the Offer offering to purchase up to the principal amount of
Securities specified in such Offer at the purchase price specified in such Offer
(as determined pursuant to this Indenture). Unless otherwise required by
applicable law, the Offer shall specify an expiration date (the "Expiration
Date") of the Offer to Purchase, which shall be not less than 20 Business Days
nor more than 60 days after the date of such Offer, and a settlement date (the
"Purchase Date") for purchase of Securities to occur no later than five Business
Days after the Expiration Date. The Company shall notify the Trustee at least 15
Business Days (or such shorter period as is acceptable to the Trustee) prior to
the mailing of the Offer of the Company's obligation to make an Offer to
Purchase, and the Offer shall be mailed by the Company or, at the Company's
request, by the Trustee in the name and at the expense
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of the Company; provided, however, that, if the Company mails the Offer, the
Company may notify the Trustee on the same Business Day as the mailing of the
Offer of the Company's obligation to make an Offer to Purchase pursuant to the
above. The Offer shall contain all the information required by applicable law to
be included therein. The Offer shall also contain information concerning the
business of the Company and its Subsidiaries that the Company in good faith
believes will enable such Holders to make an informed decision with respect to
the Offer to Purchase (which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
document required to be filed with the Trustee pursuant to this Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other information required by
applicable law to be included therein). The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Securities pursuant to
the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer
to Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding
Securities offered to be purchased by the Company pursuant to the Offer
to Purchase (including, if less than 100%, the manner by which such
amount has been determined pursuant to the Section of this Indenture
requiring the Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each
$1,000 aggregate principal amount of Securities accepted for payment
(as specified pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that any portion
of a Security tendered must be tendered in an integral multiple of
$1,000 principal face amount;
(6) the place or places where Securities are to be surrendered
for tender pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but
not purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
(8) that on the Purchase Date the Purchase Price will become
due and payable upon each Security being accepted for payment pursuant
to the Offer to Purchase and that interest thereon shall cease to
accrue on and after the Purchase Date;
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(9) that each Holder electing to tender all or any portion of
a Security pursuant to the Offer to Purchase will be required to
surrender such Security at the place or places specified in the Offer
prior to the close of business on the Expiration Date (such Security
being, if the Company or the Trustee so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or
such Holder's attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any
portion of Securities tendered if the Company (or its Paying Agent)
receives, not later than the close of business on the fifth Business
Day next preceding the Expiration Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Security the Holder tendered, the certificate number of the
Security the Holder tendered and a statement that such Holder is
withdrawing all or a portion of such Holder's tender;
(11) that (a) if Securities in an aggregate principal amount
less than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall purchase
all such Securities and (b) if Securities in an aggregate principal
amount in excess of the Purchase Amount are tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase
Securities having an aggregate principal amount equal to the Purchase
Amount on a pro rata basis (with such adjustments as may be deemed
appropriate so that only Securities in denominations of $1,000
principal amount or integral multiples thereof shall be purchased); and
(12) that in the case of any Holder whose Security is
purchased only in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in an aggregate principal amount equal to and
in exchange for the unpurchased portion of the Security so tendered.
An Offer to Purchase shall be governed by and effected in
accordance with the provisions above pertaining to any Offer.
"Officer" means the Chairman, any Vice Chairman, the
President, any Vice President, the Chief Financial Officer, the Treasurer, or
the Secretary of the Company, or of Capital, as the context may require, or, in
the case of the Company, at any time when the Company is a limited liability
company, an individual serving in such capacity with the Company's manager while
acting on behalf of the Company's manager in its capacity as such manager.
"Officers' Certificate" means a certificate signed by two
Officers or by an Officer and an Assistant Treasurer or Assistant Secretary of
the Company complying with Sections 13.04 and 13.05.
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<PAGE> 18
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company or the Trustee.
"Other Indebtedness" see Section 4.05.
"Participant" has the meaning set forth in Section 2.15.
"Paying Agent" has the meaning provided in Section 2.03.
"Payment Blockage Period" see Section 8.02(a).
"Payment Default" means any default, after any requirement for
the giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of (or premium, if any) or interest on or any other amount payable in connection
with Designated Senior Indebtedness.
"Permitted Acquisition Deposits" means any advance or payment
of funds, whether as consideration for an option to acquire or as a deposit,
binder or earnest money, whether or not refundable, and whether or not made into
escrow, made pursuant to any written agreement, term sheet, letter of intent or
other instrument providing for the Acquisition of any High Power Satellite
Transmission Business, the consummation of which would not constitute a
Restricted Payment pursuant to clause (iv) of the first paragraph under Section
4.06, or providing for an Investment made in compliance with clause (vii) of the
second paragraph under Section 4.06, to the extent that the aggregate of such
amounts outstanding at any one time with respect to Acquisitions or such
Investments that have not yet been consummated does not exceed $10 million.
"Permitted Holder" means any of those Persons who were members
of the Company on the Issue Date, the Permitted Transferees of such Persons, and
any Person or group controlled by each or any of such Persons.
"Permitted Indebtedness" see Section 4.04.
"Permitted Investments" means (a) Cash Equivalents; (b)
Investments in prepaid expenses, negotiable instruments held for collection and
lease, utility and workers' compensation, performance and other similar
deposits; (c) loans and advances to employees made in the ordinary course of
business not to exceed $1.0 million in the aggregate at any one time
outstanding; (d) Interest Rate Protection Obligations; (e) bonds, notes,
debentures or other securities received as a result of Asset Sales permitted
under Section 4.05 not to exceed 20% of the total consideration for such Asset
Sales (determined and computed as set forth in Section 4.05); (f) transactions
with officers, directors and employees of the Company, or any Restricted
Subsidiary entered into in the ordinary course of business (including
compensation or employee benefit arrangements with any such director or
employee) and consistent with past business practices; (g) Investments existing
as of the Issue Date and any amendment, extension, renewal or modification
thereof to the extent that any such amendment, extension, renewal or
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modification does not require the Company or any Restricted Subsidiary to make
any additional cash or non-cash payments or provide additional services in
connection therewith; (h) any Investment to the extent that the consideration
therefor consists of Qualified Equity Interests of the Company; (i) any
Investment consisting of a guarantee by a Restricted Subsidiary of Senior
Indebtedness or any guarantee permitted under clause (e) of the second paragraph
of Section 4.04; and (j) Investments in Marketable Securities by the Escrow
Agent and held in the Interest Escrow Account.
"Permitted Junior Guarantor Securities" means any securities
of any Guarantor or any other Person that are (i) equity securities without
special covenants or (ii) subordinated in right of payment to all Guarantor
Senior Indebtedness that may at the time be outstanding, to substantially the
same extent as, or to a greater extent than, its Guaranty is subordinated as
provided in this Indenture, in any event pursuant to a court order so providing
and as to which (a) the rate of interest on such securities shall not exceed the
effective rate of interest on the Securities on the date of this Indenture, (b)
such securities shall not be entitled to the benefits of covenants or defaults
materially more beneficial to the holders of such securities than those in
effect with respect to the Securities on the date of this Indenture and (c) such
securities shall not provide for amortization (including sinking fund and
mandatory prepayment provisions) commencing prior to the date six months
following the final scheduled maturity date of the Guarantor Senior Indebtedness
(as modified by the plan of reorganization or readjustment pursuant to which
such securities are issued).
"Permitted Junior Securities" means any securities of the
Company or any other Person that are (i) equity securities without special
covenants or (ii) subordinated in right of payment to all Senior Indebtedness
that may at the time be outstanding, to substantially the same extent as, or to
a greater extent than, the Securities are subordinated as provided in this
Indenture, in any event pursuant to a court order so providing and as to which
(a) the rate of interest on such securities shall not exceed the effective rate
of interest on the Securities on the date of this Indenture, (b) such securities
shall not be entitled to the benefits of covenants or defaults materially more
beneficial to the holders of such securities than those in effect with respect
to the Securities on the date of this Indenture and (c) such securities shall
not provide for amortization (including sinking fund and mandatory prepayment
provisions) commencing prior to the date six months following the final
scheduled maturity date of the Senior Indebtedness (as modified by the plan of
reorganization or readjustment pursuant to which such securities are issued).
"Permitted Liens" means (a) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the Company
or any Restricted Subsidiary; provided, however, that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
secure any property or assets of the Company or any Restricted Subsidiary other
than the property or assets subject to the Liens prior to such merger or
consolidation; (b) Liens imposed by law such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course of
business that secure payment of obligations not more than 60 days past due or
that are being contested in good faith and by appropriate proceedings; (c) Liens
existing on the Issue Date; (d) Liens securing only the Securities; (e) Liens in
favor of the Company or any Restricted Subsidiary so long as held by
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<PAGE> 20
the Company or any Restricted Subsidiary; (f) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted; provided, however, that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been made
therefor; (g) easements, reservation of rights of way, restrictions and other
similar easements, licenses, restrictions on the use of properties, or minor
imperfections of title that in the aggregate are not material in amount and do
not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of the Company and the
Restricted Subsidiaries; (h) Liens resulting from the deposit of cash or notes
in connection with contracts, Permitted Acquisition Deposits, tenders or
expropriation proceedings, or to secure workers' compensation, surety or appeal
bonds, costs of litigation when required by law and public and statutory
obligations or obligations under franchise arrangements and agreements with the
NRTC entered into in the ordinary course of business; (i) Liens securing
Indebtedness consisting of Capital Lease Obligations, Purchase Money
Indebtedness, mortgage financings, industrial revenue bonds or other monetary
obligations, in each case incurred solely for the purpose of financing all or
any part of the purchase price or cost of construction or installation of assets
used in the business of the Company or the Restricted Subsidiaries, or repairs,
additions or improvements to such assets; provided, however, that (I) such Liens
secure Indebtedness in an amount not in excess of the original purchase price or
the original cost of any such assets or repair, addition or improvement thereto
(plus an amount equal to the reasonable fees and expenses in connection with the
incurrence of such Indebtedness), (II) such Liens do not extend to any other
assets of the Company or the Restricted Subsidiaries (and, in the case of
repair, addition or improvements to any such assets, such Lien extends only to
the assets (and improvements thereto or thereon) repaired, added to or
improved), (III) the Incurrence of such Indebtedness is permitted by Section
4.04, and (IV) such Liens attach within 90 days of such purchase, construction,
installation, repair, addition or improvement; (j) Liens to secure any
refinancings, renewals, extensions, modifications or replacements (collectively,
"refinancing") (or successive refinancings), in whole or in part, of any
Indebtedness secured by Liens referred to in the clauses above so long as such
Lien does not extend to any other property (other than improvements thereto);
(k) Liens securing letters of credit entered into in the ordinary course of
business and consistent with past business practice; (l) Liens on and pledges of
the Equity Interests of any Unrestricted Subsidiary securing any Indebtedness of
such Unrestricted Subsidiary; and (m) any calls or rights of first refusal with
respect to any partnership interests.
"Permitted Transferee" means, with respect to any Person: (a)
in the case of any Person who is a natural person, such individual's spouse or
children, any trust for such individual's benefit or the benefit of such
individual's spouse or children, or any corporation, limited liability company
or partnership in which the direct and beneficial owner of all of the equity
interest is such Person or such individual's spouse or children or any trust for
the benefit of such persons; (b) in the case of any Person who is a natural
person, the heirs, executors, administrators or personal representatives upon
the death of such Person or upon the incompetency or disability of such Person
for purposes of the protection and management of such individual's assets; and
(c) in the case of any Person who is not a natural person, any Affiliate of such
Person.
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"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, limited
liability limited partnership, trust, unincorporated organization or government
or any agency or political subdivision thereof.
"Physical Securities" has the meaning set forth in Section
2.01.
"Post-Petition Interest" means, with respect to any
Indebtedness of any Person, all interest accrued or accruing on such
Indebtedness after the commencement of any Insolvency or Liquidation Proceeding
with respect to such Person in accordance with and at the contract rate
(including, without limitation, any rate applicable upon default) specified in
the agreement or instrument creating, evidencing or governing such Indebtedness,
whether or not, pursuant to applicable law or otherwise, the claim for such
interest is allowed as a claim in such Insolvency or Liquidation Proceeding.
"Preferred Equity Interest", in any Person, means an Equity
Interest of any class or classes (however designated) that is preferred as to
the payment of dividends or distributions, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over Equity Interests of any other class in such Person.
"principal" of a debt security means the principal of the
security, plus, when appropriate, the premium, if any, on the security.
"Private Exchange Securities" has the meaning provided in
Section 2(b) of the Registration Rights Agreement.
"Private Placement Legend" means the legend initially set
forth on the Securities in the form set forth on Exhibit A hereto.
"Public Equity Offering" means an underwritten public offering
of Qualified Equity Interests of the Company or its corporate successor pursuant
to an effective registration statement filed under the Securities Act (excluding
registration statements filed on Form S-8).
"Purchase Agreement" means the Purchase Agreement dated July
25, 1997 between the Company and the Initial Purchasers.
"Purchase Amount" has the meaning set forth in the definition
of "Offer to Purchase" above.
"Purchase Date" has the meaning set forth in the definition of
"Offer to Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the
Company or any Restricted Subsidiary Incurred for the purpose of financing all
or any part of the purchase price or the cost of construction or improvement of
any property; provided, however, that the aggregate principal amount of such
Indebtedness does not exceed the lesser of the Fair Market Value of such
property or such purchase price or cost, including any refinancing of such
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Indebtedness that does not increase the aggregate principal amount (or accreted
amount, if less) thereof as of the date of refinancing.
"Purchase Price" has the meaning set forth in the definition
of "Offer to Purchase" above.
"QIB Global Security" see Section 2.01.
"Qualified Equity Interest" in any Person means any Equity
Interest in such Person other than any Disqualified Equity Interest.
"Qualified Institutional Buyer" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price fixed for such redemption pursuant to this
Indenture as set forth in the form of Security annexed hereto as Exhibit A.
"Registered Exchange Offer" means the offer to exchange the
Series B Securities for all of the outstanding Series A Securities in accordance
with the Registration Rights Agreement.
"Registrar" see Section 2.03.
"Registration" means a Registered Exchange Offer for the
Securities by the Company or other registration of the Securities under the
Securities Act pursuant to and in accordance with the terms of the Registration
Rights Agreement.
"Registration Rights Agreement" means the Senior Subordinated
Notes Registration Rights Agreement dated as of July 30, 1997 between the
Company and the Initial Purchasers.
"Registration Statement" means the registration statement(s)
as defined and described in the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" see Section 2.01.
"Representative" see Section 8.02(b).
"Required Filing Date" see Section 4.12.
"Restricted Investment" means any Investment other than a
Permitted Investment.
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<PAGE> 23
"Restricted Payments" see Section 4.06.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) under the Securities Act; provided, that the Trustee shall be entitled
to request and conclusively rely upon an Opinion of Counsel with respect to
whether any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company
that has not been designated by the Board of Directors of the Company, by a
resolution of the Board of Directors of the Company delivered to the Trustee, as
an Unrestricted Subsidiary pursuant to Section 4.17. Any such designation may be
revoked by a resolution of the Board of Directors of the Company delivered to
the Trustee, subject to the provisions of Section 4.17.
"Revocation" see Section 4.17.
"Rule 144A" means Rule 144A under the Securities Act.
"Rural DirecTv(R) Market" means a designated rural area of the
United States in which the NRTC has the exclusive right to provide DirecTv(R)
Services to residential households and business establishments.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities, the Series B
Securities and the Private Exchange Securities treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Securities Amount" see Section 4.05.
"Securities Portion of Unutilized Net Cash Proceeds" see
Section 4.05.
"Security Agreement" means the Escrow Security Agreement dated
as of the date of this Indenture, by and between the Escrow Agent and the
Issuers, governing the disbursement of funds for the Interest Escrow Account.
"Senior Indebtedness" means, at any date, (a) all Obligations
of the Company under the Credit Facility; (b) all Interest Rate Protection
Obligations of the Company; (c) all Obligations of the Company under stand-by
letters of credit; and (d) all other Indebtedness of the Company for borrowed
money, including principal, premium, if any, and interest (including
Post-Petition Interest) on such Indebtedness, unless the instrument under which
such Indebtedness of the Company for money borrowed is Incurred expressly
provides that such Indebtedness for money borrowed is not senior or superior in
right of payment to the Securities, and all renewals, extensions, modifications,
amendments or refinancings thereof. Notwithstanding the foregoing, Senior
Indebtedness shall not include (a) to the extent that it may
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<PAGE> 24
constitute Indebtedness, any Obligation for federal, state, local or other
taxes; (b) any Indebtedness among or between the Company and any Subsidiary of
the Company; (c) to the extent that it may constitute Indebtedness, any
Obligation in respect of any trade payable Incurred for the purchase of goods or
materials, or for services obtained, in the ordinary course of business; (d)
that portion of any Indebtedness that is Incurred in violation of this
Indenture; provided, however, that such Indebtedness shall be deemed not to have
been Incurred in violation of this Indenture for purposes of this clause (d) if
(I) the holder(s) of such Indebtedness or their representative or the Company
shall have furnished to the Trustee an opinion of independent legal counsel,
unqualified in all material respects, addressed to the Trustee (which legal
counsel may, as to matters of fact, rely upon an officers' certificate of the
Company) to the effect that the Incurrence of such Indebtedness does not violate
the provisions of this Indenture or (II) in the case of any Obligations under
the Credit Facility, the holder(s) of such Obligations or their agent or
representative shall have received a representation from the Company to the
effect that the Incurrence of such Indebtedness does not violate the provisions
of this Indenture; (e) Indebtedness evidenced by the Securities; (f)
Indebtedness of the Company that is expressly subordinate or junior in right of
payment to any other Indebtedness of the Company; (g) to the extent that it may
constitute Indebtedness, any obligation owing under leases (other than Capital
Lease Obligations) or management agreements; and (h) any obligation that by
operation of law is subordinate to any general unsecured obligations of the
Company.
"Series A Securities" means the 12 1/2% Senior Subordinated
Notes due 2007, Series A, of the Issuers issued pursuant to this Indenture and
sold pursuant to the Purchase Agreement.
"Series B Securities" means the 12 1/2% Senior Subordinated
Notes due 2007, Series B, of the Issuers to be issued in exchange for the Series
A Securities pursuant to the Registered Exchange Offer and the Registration
Rights Agreement.
"Significant Restricted Subsidiary" means, at any date of
determination, (a) any Restricted Subsidiary that, together with its
Subsidiaries that constitute Restricted Subsidiaries (i) for the most recent
fiscal year of the Company accounted for more than 5.0% of the consolidated
revenues of the Company and the Restricted Subsidiaries or (ii) as of the end of
such fiscal year, owned more than 5.0% of the consolidated assets of the Company
and the Restricted Subsidiaries, all as set forth on the consolidated financial
statements of the Company and the Restricted Subsidiaries for such year prepared
in conformity with GAAP, and (b) any Restricted Subsidiary that, when aggregated
with all other Restricted Subsidiaries that are not otherwise Significant
Restricted Subsidiaries and as to which any event described in clause (7), (8)
or (9) of Section 6.01 has occurred, would constitute a Significant Restricted
Subsidiary under clause (a) of this definition.
"Stated Maturity", when used with respect to any Security or
any installment of interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such installment of
interest is due and payable.
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"Strategic Equity Investor" means a Person that owns and
operates businesses in the telecommunications, DBS information systems,
entertainment, cable television, programming, electronics or similar or related
industries.
"Subordinated Indebtedness" means (a) with respect to the
Company, any Indebtedness of the Company that is expressly subordinated in right
of payment to the Securities and (b) with respect to any Guarantor, any
Indebtedness of such Guarantor that is expressly subordinated in right of
payment to the Guaranty of such Guarantor.
"Subsidiary" means, with respect to any Person, (a) any
corporation of which the outstanding Voting Equity Interests having at least a
majority of the votes entitled to be cast in the election of directors shall at
the time be owned, directly or indirectly, by such Person, or (b) any other
Person of which at least a majority of Voting Equity Interests are at the time,
directly or indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved
in or that makes any Disposition, the Person formed by or surviving such
Disposition or the Person to which such Disposition is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb), as amended, as in effect on the date of this Indenture,
except as provided in Section 10.03.
"Total Consolidated Indebtedness" means, as at any date of
determination, an amount equal to the aggregate amount of all Indebtedness and
Disqualified Equity Interests of the Company and the Restricted Subsidiaries
outstanding as of such date of determination.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
department (or any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary, assistant treasurer or any other
officer or assistant officer of the Trustee customarily performing functions
similar to those performed by the persons who at that time shall be such
officers, and also means, with respect to a particular corporate trust matter,
any other officer to whom such trust matter is referred because of his knowledge
of and familiarity with the particular subject.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the State of New York.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to Section 4.17. Any such designation may be revoked
by a resolution of the Board of Directors of the Company delivered to the
Trustee, subject to the provisions of Section 4.17.
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"Unutilized Net Cash Proceeds" see Section 4.05(a).
"U.S. Person" means a "U.S. person" as defined in Rule 902
under the Securities Act.
"Voting Equity Interests" means Equity Interests in a
corporation or other Person with voting power under ordinary circumstances
entitling the holders thereof to elect the Board of Directors or other governing
body of such corporation or such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary all of the outstanding Voting Equity Interests (other than directors'
qualifying shares) of which are owned, directly or indirectly, by the Company.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
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SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles in effect from time to time, and any other reference in this
Indenture to "generally accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision.
ARTICLE II.
THE SECURITIES
SECTION 2.01. Form and Dating.
The Series A Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of Exhibit A hereto,
which is hereby incorporated in and expressly made a part of this Indenture. The
Series B Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Private
Exchange Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B hereto, but shall have the
Private Placement Legend contained in Exhibit A. The Securities may have
notations, legends or endorsements (including notations relating to the
Guaranties) required by law, stock exchange rule or usage. The Company and the
Trustee shall approve the form of the Securities and any notation, legend or
endorsement (including notations relating to the Guaranties) on them. Each
Security shall be dated the date of its issuance and shall show the date of its
authentication.
Securities initially offered and sold by the Initial
Purchasers (i) to Qualified Institutional Buyers in reliance on Rule 144A, (ii)
to Institutional Accredited Investors or (iii) in offshore transactions in
reliance on Regulation S shall, unless the applicable Holder requests Securities
in the form of Certificated Securities in registered form ("Physical
Securities"), which shall be in substantially the form set forth in Exhibit A,
be issued initially in the form of one
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or more permanent Global Securities in registered form, substantially in the
form set forth in Exhibit A hereto, deposited with the Trustee, as custodian for
the Depository, and shall bear the legend set forth on Exhibit C hereto. One or
more separate Global Securities shall be issued to represent Securities held by
(i) Qualified Institutional Buyers (a "QIB Global Security"), (ii) Institutional
Accredited Investors (an "Accredited Investor Global Security") and (iii)
Persons acquiring Securities in offshore transactions in reliance on Regulation
S (a "Regulation S Global Security"). The Company shall cause the QIB Global
Securities, Accredited Investor Global Securities and Regulation S Global
Securities to have separate CUSIP numbers. The aggregate principal amount of any
Global Security may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depository, as
hereinafter provided.
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, of
each of the Issuers shall sign, or one Officer shall sign and one Officer or an
Assistant Secretary (each of whom shall, in each case, have been duly authorized
by all requisite corporate actions) of each of the Issuers shall attest to, the
Securities for the Issuers by manual or facsimile signature. Seals may be
accepted by facsimile transmission. A single individual may serve as an Officer
or Assistant Secretary of each of the Issuers and execute or attest the
execution of the Securities in such dual capacity with the effect that the
Securities shall have been executed or attested to by at least two individuals
and an Officer or Assistant Secretary of each Issuer.
If an Officer whose signature is on a Security was an Officer
at the time of such execution but no longer holds that office at the time the
Trustee authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate (i) Series A Securities for
original issue in the aggregate principal face amount not to exceed $155,000,000
and (ii) Series B Securities or Private Exchange Securities from time to time
only in exchange for a like principal face amount of Series A Securities, in
each case upon a written order of the Company in the form of an Officers'
Certificate. The Officers' Certificate shall specify the amount of Securities to
be authenticated, the series of Securities and the date on which the Securities
are to be authenticated. The aggregate principal face amount of Securities
outstanding at any time may not exceed $155,000,000, except as provided in
Section 2.07. Upon receipt of a written order of the Company in the form of an
Officers' Certificate, the Trustee shall authenticate Securities in substitution
for Securities originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise provided
in the appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent.
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An authenticating agent has the same rights as an Agent to deal with the Company
and Affiliates of the Company.
The Securities shall be issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Issuers shall maintain an office or agency in the Borough
of Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
Securities may be presented or surrendered for payment ("Paying Agent") and (c)
notices and demands in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Issuers, upon notice to the Trustee, may appoint one
or more co-Registrars and one or more additional Paying Agents. The term "Paying
Agent" includes any additional Paying Agent. Except as provided herein, either
of the Issuers, or any Subsidiary may act as Paying Agent, Registrar or
co-Registrar.
The Issuers 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 Issuers shall notify the Trustee of the
name and address of any such Agent. If the Issuers fail 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 7.07.
The Issuers initially appoint the Trustee as Registrar and
Paying Agent until such time as the Trustee has resigned or a successor has been
appointed.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Issuers shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, or interest on, the Securities, and shall notify the
Trustee of any Default by the Issuers in making any such payment. The Issuers at
any time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Issuers to the
Paying Agent (if other than either of the Issuers or a Subsidiary), the Paying
Agent shall have no further liability for such assets. If either of the Issuers,
any Subsidiary or any of their respective Affiliates acts as Paying Agent, it
shall, on or before each due date of the principal of or interest on the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
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SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders. If the Trustee is not the Registrar, the Issuers shall
furnish to the Trustee before each Interest Record Date and at such other times
as the Trustee may request in writing a list as of such date and in such form as
the Trustee may reasonably require of the names and addresses of Holders, which
list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when
Securities are presented to the Registrar or a co-Registrar with a request to
register the transfer of such Securities or to exchange such Securities for an
equal principal amount of Securities of other authorized denominations of the
same series, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Issuers and the Registrar or co-Registrar, duly
executed by the Holder thereof or such Holder's attorney duly authorized in
writing. To permit registrations of transfers and exchanges, the Issuers shall
execute and the Trustee shall authenticate Securities at the Registrar's or
co-Registrar's written request. No service charge shall be made for any
registration of transfer or exchange, but the Issuers 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
governmental charge payable upon exchanges or transfers pursuant to Section
2.02, 2.10, 3.06, 4.05, 4.14 or 10.05). The Registrar or co-Registrar shall not
be required to register the transfer or exchange of any Security (i) during a
period beginning at the opening of business 15 days before the mailing of a
notice of redemption of Securities and ending at the close of business on the
day of such mailing and (ii) selected for redemption in whole or in part
pursuant to Article Three hereof, except the unredeemed portion of any Security
being redeemed in part.
Prior to the registration of any transfer by a Holder as
provided herein, the Issuers, the Trustee, and any Agent of the Issuers shall
treat the person in whose name the Security is registered as the owner thereof
for all purposes whether or not the Security shall be overdue, and neither the
Issuers, the Trustee, nor any such Agent shall be affected by notice to the
contrary. Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by the Depository
(or its agent), and that ownership of a beneficial interest in a Global Security
shall be required to be reflected in a book entry.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements for replacement of Securities
are met. Such Holder must provide an indemnity bond or other
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indemnity, sufficient in the judgment of both the Issuers and the Trustee, to
protect the Issuers, the Trustee and any Agent from any loss that any of them
may suffer if a Security is replaced and evidence to their satisfaction of the
apparent loss, destruction or theft of such Security. The Issuers may charge
such Holder for their reasonable out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel.
Every replacement Security is an additional joint and several
obligation of the Issuers.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that
have been authenticated by the Trustee except those canceled by it, those
delivered to it for cancellation and those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because either of the Issuers or any of their Affiliates holds the
Security.
If a Security is replaced pursuant to Section 2.07 (other than
a mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date, Purchase Date or the Final Maturity
Date the Paying Agent holds money sufficient to pay all of the principal and
interest due on the Securities payable on that date, then on and after that date
such Securities cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by either of the Issuers, the Guarantors or any of their
respective Affiliates shall be disregarded, except that, for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that a Trust Officer of the
Trustee actually knows are so owned shall be disregarded.
The Trustee may require an Officers' Certificate listing
Securities owned by either of the Issuers, the Guarantors or their respective
Affiliates.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Issuers may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Issuers consider appropriate for temporary
Securities. Without unreasonable delay, the Issuers shall prepare and the
Trustee
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shall authenticate upon receipt of a written order of the Issuers pursuant to
Section 2.02 definitive Securities in exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Issuers at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent, and no one else, shall cancel all Securities surrendered for transfer,
exchange, payment or cancellation and deliver to the Company such canceled
Securities for disposal. Subject to Section 2.07, the Issuers may not issue new
Securities to replace Securities that they have paid or delivered to the Trustee
for cancellation. If either of the Issuers or any Guarantor shall acquire any of
the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation pursuant to this
Section 2.11.
SECTION 2.12. Defaulted Interest.
If the Issuers default in a payment of principal or interest
on the Securities, they shall jointly and severally pay interest on overdue
principal and on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the rate per annum
borne by the Securities, to the extent lawful.
SECTION 2.13. CUSIP Number.
The Issuers in issuing the Securities will use one or more
"CUSIP" numbers and the Trustee shall use any such CUSIP numbers in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of any such CUSIP numbers printed in the notice or on the Securities,
and that reliance may be placed only on the other identification numbers printed
on the Securities. The Issuers shall promptly notify the Trustee of any changes
in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
Prior to 10:00 a.m. New York City time on each Interest
Payment Date, Redemption Date, Purchase Date and the Final Maturity Date, the
Issuers shall deposit with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date,
Redemption Date, Purchase Date or Final Maturity Date, as the case may be, in a
timely manner that permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date, Redemption Date, Purchase Date or Final Maturity
Date, as the case may be.
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SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in
the name of the Depository or the nominee of such Depository, (ii) be delivered
to the Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit C hereto.
Members of, or participants in, the Depository
("Participants") shall have no rights under this Indenture with respect to any
Global Security held on their behalf by the Depository, or the Trustee as its
custodian, or under such Global Security, and the Depository may be treated by
the Issuers, the Trustee and any agent of the Issuers or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the
Trustee or any agent of the Issuers or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and Participants, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.
(b) Transfers of Global Securities shall be limited to
transfers in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global Securities may
be transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Issuers that it is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Issuers within 90 days of such notice or (ii) the Issuers, at their
option, notify the Trustee in writing that the Issuers elect to cause the
issuance of Securities in the form of Physical Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Issuers shall execute, and the Trustee shall upon written
instructions from the Issuers authenticate and make available for delivery, to
each beneficial owner identified by the Depository in exchange for its
beneficial interest in the Global Securities, an aggregate principal face amount
of Physical Securities of authorized denominations equal to such beneficial
owner's interest in the Global Securities.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(b) of this Section 2.15 shall, except as otherwise provided by Section 2.16,
bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action that a Holder is entitled to
take under this Indenture or the Securities.
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SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When
Physical Securities are presented to the Registrar or co-Registrar with a
request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal number
of Physical Securities of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; provided, however, that the Physical
Securities presented or surrendered for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(II) in the case of Physical Securities the offer and sale of
which have not been registered under the Securities Act, such Physical
Securities shall be accompanied, in the sole discretion of the Company,
by the following additional information and documents, as applicable:
(A) if such Physical Security is being delivered to
the Registrar or co-Registrar by a Holder for registration in
the name of such Holder, without transfer, a certification
from such Holder to that effect (substantially in the form of
Exhibit D hereto); or
(B) if such Physical Security is being transferred to
a Qualified Institutional Buyer in accordance with Rule 144A,
a certification to that effect (substantially in the form of
Exhibit D hereto); or
(C) if such Physical Security is being transferred to
an Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form of
Exhibit D hereto) and a transferee certificate for
Institutional Accredited Investors substantially in the form
of Exhibit E hereto; or
(D) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification to that
effect (substantially in the form of Exhibit D hereto) and a
transferor certificate for Regulation S transfers
substantially in the form of Exhibit F hereto and an Opinion
of Counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the Securities
Act; or
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(E) if such Physical Security is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of
Exhibit D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act; or
(F) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect (substantially in the form of Exhibit D hereto) and an
Opinion of Counsel reasonably acceptable to the Company to the
effect that such transfer is in compliance with the Securities
Act.
(b) Restrictions on Transfer of a Physical Security for a
Beneficial Interest in a Global Security. A Physical Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Registrar
or co-Registrar of a Physical Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Registrar or
co-Registrar, together with:
(A) certification, substantially in the form of
Exhibit D hereto, that such Physical Security is being
transferred (I) to a Qualified Institutional Buyer, (II) to an
Accredited Investor or (III) in an offshore transaction in
reliance on Regulation S; and
(B) written instructions directing the Registrar or
co-Registrar to make, or to direct the Depository to make, an
endorsement on the applicable Global Security to reflect an
increase in the aggregate amount of the Securities represented
by the Global Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal face amount of Securities represented by the
applicable Global Security to be increased accordingly. If no Global Security
representing Securities held by Qualified Institutional Buyers, Institutional
Accredited Investors or Persons acquiring Securities in offshore transactions in
reliance on Regulation S, as the case may be, is then outstanding, the Company
shall issue and the Trustee shall, upon written instructions from the Company in
accordance with Section 2.02, authenticate such a Global Security in the
appropriate principal face amount.
(c) Transfer and Exchange of Global Securities. The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor. Upon receipt by the Registrar or Co-Registrar of written instructions,
or such other instruction as is customary for the Depository, from the
Depository or its nominee, requesting the registration of transfer of an
interest in a QIB Global Security, an Accredited Investor Global Security or
Regulation S Global Security, as the case may be, to another type of Global
Security, together with the applicable Global Securities (or, if the
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applicable type of Global Security required to represent the interest as
requested to be transferred is not then outstanding, only the Global Security
representing the interest being transferred) and a certification, substantially
in the form of Exhibit D hereto, that such interest is being transferred (I) to
a Qualified Institutional Buyer, (II) to an Accredited Investor or (III) in an
offshore transaction in reliance on Regulation S, as the case may by, the
Registrar or Co-Registrar shall cancel such Global Securities (or Global
Security) and the Company shall issue and the Trustee shall, upon written
instructions from the Company in accordance with Section 2.02, authenticate new
Global Securities of the types so canceled (or the type so canceled and
applicable type required to represent the interest as requested to be
transferred) reflecting the applicable increase and decrease of the principal
face amount of Securities represented by such types of Global Securities, giving
effect to such transfer. If the applicable type of Global Security required to
represent the interest as requested to be transferred is not outstanding at the
time of such request, the Company shall issue and the Trustee shall, upon
written instructions from the Company in accordance with Section 2.02,
authenticate a new Global Security of such type in principal face amount equal
to the principal face amount of the interest requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Security for
a Physical Security.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a
Physical Security. Upon receipt by the Registrar or co-Registrar of
written instructions, or such other form of instructions as is
customary for the Depository, from the Depository or its nominee on
behalf of any Person having a beneficial interest in a Global Security
and upon receipt by the Trustee of a written order or such other form
of instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest
containing registration instructions and, in the case of any such
transfer or exchange of a beneficial interest in Securities the offer
and sale of which have not been registered under the Securities Act,
the following additional information and documents:
(A) if such beneficial interest is being transferred
to the Person designated by the Depository as being the
beneficial owner, a certification from such Person to that
effect (substantially in the form of Exhibit D hereto); or
(B) if such beneficial interest is being transferred
to a Qualified Institutional Buyer in accordance with Rule
144A, a certification to that effect (substantially in the
form of Exhibit D hereto); or
(C) if such beneficial interest is being transferred
to an Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form of
Exhibit D hereto) and a transferee certificate for
Institutional Accredited Investors substantially in the form
of Exhibit E hereto; or
(D) if such beneficial interest is being transferred
in reliance on Regulation S, delivery of a certification to
that effect (substantially in the form of Exhibit D hereto)
and a transferor certificate for Regulation S transfers
substantially in the form of Exhibit F hereto and an Opinion
of Counsel
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reasonably satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(E) if such beneficial interest is being transferred
in reliance on Rule 144 under the Securities Act, delivery of
a certification to that effect (substantially in the form of
Exhibit D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act; or
(F) if such beneficial interest is being transferred
in reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect (substantially in the form of Exhibit D hereto) and an
Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depository
and the Registrar or co-Registrar, the aggregate principal face amount
of the applicable Global Security to be reduced and, following such
reduction, the Company will execute and, upon receipt of an
authentication order in the form of an Officers' Certificate in
accordance with Section 2.02, the Trustee will authenticate and deliver
to the transferee a Physical Security in the appropriate principal face
amount.
(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.16(d) shall be registered in
such names and in such authorized denominations as the Depository,
pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar or co-Registrar in writing. The
Registrar or co-Registrar shall deliver such Physical Securities to the
Persons in whose names such Physical Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Indenture, a Global
Security may not be transferred as a whole except by the Depository to a nominee
of the Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and the
Trustee is hereby authorized to deliver Securities without the Private Placement
Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act or (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act.
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(g) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Participants
or beneficial owners of interest in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
ARTICLE III.
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Issuers want to redeem Securities pursuant to paragraph
5 or 6 of the Securities at the applicable redemption price set forth thereon,
they shall notify the Trustee in writing of the Redemption Date and the
principal amount of Securities to be redeemed. The Issuers shall give such
notice to the Trustee at least 45 days before the Redemption Date (unless a
shorter notice shall be agreed to by the Trustee in writing), together with an
Officers' Certificate stating that such redemption will comply with the
conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant
to paragraph 5 of the Securities, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or in such other manner as the Trustee shall deem fair and appropriate.
Selection of the Securities to be redeemed pursuant to paragraph 6 of the
Securities shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to the procedures of the Depository)
based on the aggregate principal amount of Securities held by each Holder. The
Trustee shall make the selection from the Securities then outstanding, subject
to redemption and not previously called for redemption.
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The Trustee may select for redemption pursuant to paragraph 5
or 6 of the Securities portions of the principal face amount of Securities that
have denominations equal to or larger than $1,000 principal face amount.
Securities and portions of them the Trustee so selects shall be in amounts of
$1,000 principal face amount or integral multiples thereof. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Issuers shall mail a notice of redemption by first-class mail to each
Holder whose Securities are to be redeemed at such Holder's registered address;
provided, however, that notice of a redemption pursuant to paragraph 6 of the
Securities shall be mailed to each Holder whose Securities are to be redeemed no
later than 90 days following the consummation of the last Public Equity Offering
or sale of Qualified Equity Interests of the Company to Strategic Equity
Investors resulting in gross cash proceeds to the Company, when aggregated with
all prior Public Equity Offerings and sales of Qualified Equity Interests of the
Company to Strategic Equity Investors, of at least $25.0 million.
Each notice of redemption shall identify the Securities to be
redeemed (including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the
Securities are to be surrendered for redemption;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) that, unless the Issuers default in making the redemption
payment, interest on Securities called for redemption ceases to accrue
on and after the Redemption Date and the only remaining right of the
Holders is to receive payment of the redemption price upon surrender to
the Paying Agent; and
(6) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after
the Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof
will be issued.
At the Issuers' request, the Trustee shall give the notice of
redemption on behalf of the Issuers, in the Issuers' names and at the Issuers'
joint and several expense.
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SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon, if any, to the Redemption Date,
but interest installments whose maturity is on or prior to such Redemption Date
shall be payable to the Holders of record at the close of business on the
relevant Interest Record Date.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day before the Redemption Date, the
Issuers shall deposit with the Paying Agent (or if either of the Issuers or a
Subsidiary is the Paying Agent, it shall, on or before the Redemption Date,
segregate and hold in trust) money sufficient to pay the redemption price of and
accrued interest, if any, on all Securities to be redeemed on that date other
than Securities or portions thereof called for redemption on that date that have
been delivered by the Issuers to the Trustee for cancellation.
If any Security surrendered for redemption in the manner
provided in the Securities shall not be so paid on the Redemption Date due to
the failure of the Issuers to deposit with the Paying Agent money sufficient to
pay the redemption price thereof, the principal and accrued and unpaid interest,
if any, thereon shall, until paid or duly provided for, bear interest as
provided in Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the
Trustee shall authenticate for the Holder a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE IV.
COVENANTS
SECTION 4.01. Payment of Securities.
The Issuers shall jointly and severally pay the principal of
and interest on the Securities in the manner provided in the Securities and the
Registration Rights Agreement. An installment of principal or interest shall be
considered paid on the date due if the Trustee or Paying Agent (other than
either of the Issuers, a Subsidiary or an Affiliate of the Issuers) holds on
that date money designated for and sufficient to pay the installment in full and
is not prohibited from paying such money to the Holders of the Securities
pursuant to the terms of this Indenture.
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The Issuers shall jointly and severally pay cash interest on
overdue principal at the same rate per annum borne by the Securities. The
Issuers shall jointly and severally pay cash interest on overdue installments of
interest at the same rate per annum borne by the Securities, to the extent
lawful, as provided in Section 2.12.
SECTION 4.02. Maintenance of Office or Agency.
The Issuers shall maintain in the Borough of Manhattan, The
City of New York, the office or agency required under Section 2.03. The Issuers
shall give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Issuers 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
13.02 hereof. The Issuers hereby initially designate the Trustee at its address
set forth in Section 13.02 hereof as its office or agency in the Borough of
Manhattan, The City of New York for such purposes.
SECTION 4.03. Transactions with Affiliates.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, conduct any business or enter
into any transaction (or series of related transactions) with or for the benefit
of any of their respective Affiliates or any direct or indirect beneficial
holder of 10% or more of the Equity Interests of the Company or any officer,
director or employee of the Company or any Restricted Subsidiary (each an
"Affiliate Transaction"), unless such Affiliate Transaction is on terms that are
no less favorable to the Company or such Restricted Subsidiary, as the case may
be, than would be available in a comparable transaction with an unaffiliated
third party. If such Affiliate Transaction (or series of related Affiliate
Transactions) involves aggregate payments or other consideration having a Fair
Market Value in excess of $5.0 million, the Company shall not, and shall not
cause or permit any Restricted Subsidiary to, enter into such Affiliate
Transaction, unless a majority of the disinterested members of the Board of
Directors of the Company shall have approved such Affiliate Transaction and
determined that such Affiliate Transaction complies with the foregoing
provisions; provided, however, that if such Affiliate Transaction is in the
ordinary course of business consistent with the past practice of any business of
the Company or a Restricted Subsidiary, then there shall be no need to comply
with this sentence. In the event that the Company obtains a written opinion from
an Independent Financial Advisor (and files the same with the Trustee) stating
that the terms of an Affiliate Transaction are fair, from a financial point of
view, to the Company or the Restricted Subsidiary involved in such Affiliate
Transaction, as the case may be, such opinion will conclusively meet the
requirements of the first sentence of this paragraph and there shall be no need
to comply with the second sentence of this paragraph.
Notwithstanding the foregoing, the restrictions set forth in
this Section 4.03 shall not apply to (i) transactions with or among the Company
and any Restricted Subsidiary or between or among Restricted Subsidiaries; (ii)
customary directors' fees, indemnification and similar arrangements, consulting
fees, employee salaries, bonuses or employment agreements, compensation or
employee benefit arrangements and incentive arrangements with any officer,
director or employee of the Company entered into in the ordinary course of
business (including
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customary benefits thereunder) and payments under any indemnification
arrangements permitted by applicable law; (iii) any transactions undertaken
pursuant to any other contractual obligations in existence on the Issue Date (as
in effect on the Issue Date); (iv) any Restricted Payments made in compliance
with Section 4.06; (v) loans and advances to officers, directors and employees
of the Company and the Restricted Subsidiaries for travel, entertainment, moving
and other relocation expenses, in each case made in the ordinary course of
business and consistent with past business practices; (vi) the Incurrence of
intercompany Indebtedness permitted pursuant to clause (d) of the second
paragraph of Section 4.04 hereof; (vii) the pledge of Equity Interests of
Unrestricted Subsidiaries to support the Indebtedness thereof; and (viii) the
issuance and sale by the Company of Qualified Equity Interests.
SECTION 4.04. Limitation on Indebtedness.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness) or issue any Disqualified Equity Interests
except for Permitted Indebtedness; provided, however, that the Company or any
Restricted Subsidiary may Incur Indebtedness and the Company or any Restricted
Subsidiary may issue Disqualified Equity Interests if, at the time of and
immediately after giving pro forma effect to such Incurrence of Indebtedness or
issuance of Disqualified Equity Interests and the application of the proceeds
therefrom, the Debt to Operating Cash Flow Ratio would be less than or equal to
6.5 to 1.0.
The foregoing limitations will not apply to the Incurrence by
the Company (or any Restricted Subsidiary with respect to clauses (a), (b), (d),
(e), (f), (g), (i), (j), (l) and, to the extent provided therein, clauses (h)
and (k) below of this Section 4.04) of any of the following (collectively,
"Permitted Indebtedness"), each of which shall be given independent effect:
(a) Indebtedness under the Securities, the Guaranties and this
Indenture;
(b) Existing Indebtedness;
(c) Indebtedness of the Company under the Credit Facility in
an aggregate principal amount at any one time outstanding not to exceed
the sum of (A) $75.0 million, which amount shall be reduced by (x) any
permanent reduction of commitments thereunder and (y) any other
repayment accompanied by a permanent reduction of commitments
thereunder (other than in connection with any refinancing thereof where
the aggregate principal amount outstanding and commitments thereunder
immediately prior thereto are not greater than such amounts immediately
thereafter), plus (B) any amounts outstanding under the Credit Facility
that utilize clause (l) of this Section 4.04;
(d) (x) Indebtedness of any Restricted Subsidiary owed to and
held by the Company or any Restricted Subsidiary and (y) Indebtedness
of the Company owed to and held by any Restricted Subsidiary that is
unsecured and subordinated in right of payment to the payment and
performance of the Company's obligations under any Senior Indebtedness,
this Indenture and the Securities (or pledged to secure any Senior
Indebtedness); provided, however, that an Incurrence of Indebtedness
that is not permitted
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by this clause (d) shall be deemed to have occurred upon (i) any sale
or other disposition of any Indebtedness of the Company or any
Restricted Subsidiary referred to in this clause (d) to a Person (other
than the Company or any Restricted Subsidiary), (ii) any sale or other
disposition of Equity Interests of any Restricted Subsidiary that holds
Indebtedness of the Company or another Restricted Subsidiary such that
such Restricted Subsidiary ceases to be a Restricted Subsidiary, or
(iii) the designation of a Restricted Subsidiary that holds
Indebtedness of the Company or any other Restricted Subsidiary as an
Unrestricted Subsidiary;
(e) guarantees by any Restricted Subsidiary of Senior
Indebtedness of the Company or of Guarantor Senior Indebtedness of any
Guarantor;
(f) Interest Rate Protection Obligations of the Company or any
Restricted Subsidiary relating to Indebtedness of the Company or such
Restricted Subsidiary (which Indebtedness (i) bears interest at
fluctuating interest rates and (ii) is otherwise permitted to be
Incurred under this Section 4.04) and guarantees by the Company or any
Restricted Subsidiary of such Interest Rate Protection Obligations;
provided, however, that the notional principal amount of such Interest
Rate Protection Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Rate Protection Obligations relate;
(g) Purchase Money Indebtedness and Capital Lease Obligations
of the Company or any Restricted Subsidiary that do not exceed $2.0
million in the aggregate for the Company and all of its Restricted
Subsidiaries at any one time outstanding;
(h) Indebtedness or Disqualified Equity Interests to the
extent representing a replacement, renewal, refinancing or extension
(collectively, a "refinancing") of outstanding Indebtedness or
Disqualified Equity Interests Incurred in compliance with the Debt to
Operating Cash Flow Ratio of the first paragraph of this Section 4.04
or clause (a), (b), (i) or (k) of this paragraph of this Section 4.04;
provided, however, that (i) any such refinancing shall not exceed the
sum of the principal amount (or, if such Indebtedness or Disqualified
Equity Interests provide for a lesser amount to be due and payable upon
a declaration of acceleration thereof at the time of such refinancing,
an amount no greater than such lesser amount) of the Indebtedness or
Disqualified Equity Interests being refinanced, plus the amount of
accrued interest or dividends thereon, plus the amount of any
reasonably determined prepayment premium necessary to accomplish such
refinancing and such reasonable fees and expenses incurred in
connection therewith, (ii) Indebtedness representing a refinancing of
Indebtedness (other than Senior Indebtedness and Guarantor Senior
Indebtedness) shall have a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of the
Indebtedness being refinanced, (iii) Indebtedness that is pari passu
with the Securities or a Guaranty may only be refinanced with
Indebtedness that is made pari passu with or subordinate in right of
payment to the Securities or such Guaranty, as applicable, and
Subordinated Indebtedness or Disqualified Equity Interests may only be
refinanced with Subordinated Indebtedness or Disqualified Equity
Interests, (iv) with respect to any refinancing of Indebtedness
Incurred pursuant to clauses (i) or (k) of this paragraph, such
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refinancing pursuant to this clause (h) shall also be deemed to be
Incurred pursuant to clause (i) or (k), as the case may be, of this
paragraph (for the avoidance of doubt, the result of which is that a
refinancing does not create new debt Incurrence capacity under such
clauses) and (v) Indebtedness of the Company Incurred under clauses (b)
or (k) of this paragraph may only be refinanced with Indebtedness of
the Company;
(i) Indebtedness of the Company or any Restricted Subsidiary
Incurred to finance the acquisition of the exclusive right to
distribute DirecTv(R) Services within designated Rural DirecTv(R)
Markets; provided, however, that such Indebtedness shall be Permitted
Indebtedness under this clause (i) in an amount not greater than the
face amount of any letter of credit issued under the Credit Facility to
support such Indebtedness, it being understood that the issuance of
such letter of credit constitutes a reduction in the amount of
Permitted Indebtedness available to be Incurred under clause (c) of
this Section 4.04.
(j) indemnification obligations of the Company or any
Restricted Subsidiary and guarantees thereof under agreements providing
for the disposition of assets or one or more businesses or Restricted
Subsidiaries; provided, however, that such obligations do not exceed at
any time the Fair Market Value of the gross proceeds received by the
Company and its Restricted Subsidiaries for such disposition;
(k) Acquired Indebtedness of any Restricted Subsidiary
Incurred upon the Acquisition of such Restricted Subsidiary or
substantially all of its assets (other than Acquired Indebtedness
incurred in connection with or in anticipation of such Acquisition) and
Indebtedness of the Company not to exceed, in the aggregate, an amount
equal to the product of two multiplied by the sum of the aggregate net
proceeds received in cash by the Company (x) as capital contributions
to the Company for which no Equity Interests were issued after the
Issue Date and (y) from the issue and sale (other than to a Restricted
Subsidiary) of its Qualified Equity Interests after the Issue Date
(excluding (i) the net proceeds from any issuance and sale of Qualified
Equity Interests financed, directly or indirectly, using funds borrowed
from the Company or any Restricted Subsidiary until and to the extent
such borrowing is repaid, (ii) any of such net proceeds to the extent
that such proceeds were at any time included in clause (c)(2) of the
first paragraph or clause (ii), (iii) or (iv) of the second paragraph
of Section 4.06 hereof based upon such proceeds and (iii) the net
proceeds from any issuance or sale of Qualified Equity Interests to a
seller or its Affiliates in connection with such Acquisition); and
(l) in addition to the items referred to in clauses (a)
through (k) above, Indebtedness of the Company or any of the Restricted
Subsidiaries (including any Indebtedness under the Credit Facility that
utilizes this clause (l)) or any Restricted Subsidiaries having an
aggregate principal amount for the Company and all of its Restricted
Subsidiaries not to exceed $5.0 million at any time outstanding.
Indebtedness of any Person or any of its Subsidiaries existing
at the time such Person becomes a Restricted Subsidiary (or is merged into or
consolidated with the Company or any Restricted Subsidiary), whether or not such
Indebtedness was incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary (or being merged into or consolidated
with the Company or any Restricted Subsidiary), shall be deemed Incurred at the
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time any such Person becomes a Restricted Subsidiary or merges into or
consolidates with the Company or any Restricted Subsidiary.
SECTION 4.05. Disposition of Proceeds of Asset Sales.
(a) The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, 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 assets sold or otherwise disposed of and (ii) at least 80% of such
consideration consists of (A) cash or Cash Equivalents, (B) properties and
capital assets to be used in distributing DirecTv(R) Services, other services
provided by DirecTv, Inc. or other high-powered DBS services, or (C) Equity
Interests in one or more Persons that thereby become Restricted Subsidiaries
whose assets consist primarily of properties and capital assets used in
distributing DirecTv(R) Services, other services provided by DirecTv, Inc. or
other high-powered DBS services; provided, however, that if the Fair Market
Value of the assets sold or otherwise disposed of exceeds $25.0 million, the
Company shall be required to obtain the written opinion from an Independent
Financial Advisor (and file such opinion with the Trustee) stating that the
terms of such Asset Sale are fair, from a financial point of view, to the
Company or the Restricted Subsidiary involved in such Asset Sale. The amount of
any (i) Indebtedness (other than any Subordinated Indebtedness) of the Company
or any Restricted Subsidiary that is actually assumed by the transferee in such
Asset Sale and from which the Company and the Restricted Subsidiaries are fully
released shall be deemed to be cash for purposes of determining the percentage
of cash consideration received by the Company or the Restricted Subsidiaries and
(ii) notes or other similar obligations received by the Company or the
Restricted Subsidiaries from such transferee that are immediately converted,
sold or exchanged (or are converted, sold or exchanged within thirty days of the
related Asset Sale) by the Company or the Restricted Subsidiaries into cash
shall be deemed to be cash, in an amount equal to the net cash proceeds realized
upon such conversion, sale or exchange for purposes of determining the
percentage of cash consideration received by the Company or the Restricted
Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be,
may (i) apply the Net Cash Proceeds of any Asset Sale within 365 days of receipt
thereof to repay Senior Indebtedness and permanently reduce any related
commitment, (ii) commit in writing to acquire, construct or improve properties
and capital assets to be used in distributing DirecTv(R) Services, other
services provided by DirecTv, Inc. or other high-powered DBS services at such
time and so apply such Net Cash Proceeds within 365 days after the receipt
thereof, or (iii) apply the Net Cash Proceeds of any Asset Sale within 365 days
after receipt thereof to the making of any Investment that is permitted to be
made under Section 4.06.
To the extent that all or part of the Net Cash Proceeds of any
Asset Sale are not applied within 365 days of such Asset Sale as described in
clause (i), (ii) or (iii) of the immediately preceding paragraph (such Net Cash
Proceeds, the "Unutilized Net Cash Proceeds"), the Company shall, within 20 days
after such 365th day, make an Offer to Purchase all outstanding Securities up to
a maximum principal amount of Securities equal to the Securities Portion of
Unutilized Net Cash Proceeds, at a purchase price in cash equal to 100% of the
principal amount of Securities, plus accrued and unpaid interest (including
Additional Interest,
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if any) thereon, if any, to the Purchase Date; provided, however, that the Offer
to Purchase may be deferred until there are aggregate Unutilized Net Cash
Proceeds equal to or in excess of $5.0 million, at which time the entire amount
of such Unutilized Net Cash Proceeds, and not just the amount in excess of $5.0
million, shall be applied as required pursuant to this paragraph.
In the event that any other Indebtedness of the Company or any
Restricted Subsidiary that ranks pari passu with the Securities or any Guaranty
requires that an offer to purchase be made to repurchase such Indebtedness upon
the consummation of any Asset Sale (the "Other Indebtedness"), the Company may
apply the Unutilized Net Cash Proceeds otherwise required to be applied to an
Offer to Purchase to an offer to purchase such Other Indebtedness and to an
Offer to Purchase so long as the amount of such Unutilized Net Cash Proceeds
applied to repurchase the Securities is not less than the Securities Portion of
Unutilized Net Cash Proceeds. With respect to any Unutilized Net Cash Proceeds,
the Company shall make the Offer to Purchase in respect thereof at the same time
as the analogous offer to purchase is made under any Other Indebtedness and the
Purchase Date in respect thereof shall be the same under this Indenture as the
purchase date in respect thereof pursuant to any Other Indebtedness.
For purposes of this Section 4.05, "Securities Portion of
Unutilized Net Cash Proceeds" means the amount of the Unutilized Net Cash
Proceeds equal to the product of (x) the Unutilized Net Cash Proceeds and (y) a
fraction the numerator of which is the principal amount of all Securities
tendered pursuant to the Offer to Purchase related to such Unutilized Net Cash
Proceeds (the "Securities Amount") and the denominator of which is the sum of
the Securities Amount and the lesser of the aggregate principal face amount or
accreted value as of the relevant purchase date of all Other Indebtedness
tendered pursuant to a concurrent offer to purchase such Other Indebtedness made
at the time of such Offer to Purchase.
With respect to any Offer to Purchase effected pursuant to
this Section 4.05, to the extent that the principal amount of the Securities
tendered pursuant to such Offer to Purchase exceeds the Securities Portion of
Unutilized Net Cash Proceeds to be applied to the repurchase thereof, such
Securities shall be purchased pro rata based on the principal amount of such
Securities tendered by each Holder.
In the event that the Issuers make an Offer to Purchase the
Securities, the Issuers shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act, and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed an Event of Default or an event that with the
passing of time or giving of notice, or both, would constitute an Event of
Default.
(b) Each Holder shall be entitled to tender all or any portion
of the Securities owned by such Holder pursuant to the Offer to Purchase,
subject to the requirement that any portion of a Security tendered must be
tendered in an integral multiple of $1,000 principal face amount and subject to
any proration among tendering Holders as described above.
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SECTION 4.06. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on
any Equity Interests of the Company or any Restricted Subsidiary or
make any payment or distribution to the direct or indirect holders (in
their capacities as such) of Equity Interests of the Company or any
Restricted Subsidiary (other than any dividends, distributions and
payments made to the Company or any Wholly Owned Restricted Subsidiary
and dividends or distributions payable to any Person solely in
Qualified Equity Interests of the Company or in options, warrants or
other rights to purchase Qualified Equity Interests of the Company);
(ii) purchase, redeem or otherwise acquire or retire for
value any Equity Interests of the Company or any Restricted Subsidiary
(other than any such Equity Interests owned by the Company or any
Wholly Owned Restricted Subsidiary);
(iii) purchase, redeem, defease or retire for value, or make
any principal payment on, prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated
Indebtedness (other than any Subordinated Indebtedness held by any
Wholly Owned Restricted Subsidiary); or
(iv) make any Investment (other than Permitted Investments or
Permitted Acquisition Deposits) in any Person (other than in the
Company, any Restricted Subsidiary or a Person that becomes a
Restricted Subsidiary, or is merged with or into or consolidated with
the Company or a Restricted Subsidiary (provided the Company or a
Restricted Subsidiary is the survivor) as a result of or in connection
with such Investment);
(such payments or any other actions (other than the exceptions thereto)
described in (i), (ii), (iii) and (iv) collectively, "Restricted Payments"),
unless
(a) no Default or Event of Default shall have occurred and be
continuing at the time or after giving effect to such Restricted
Payment;
(b) immediately after giving effect to such Restricted
Payment, the Company would be able to Incur $1.00 of Indebtedness
(other than Permitted Indebtedness) under the Debt to Operating Cash
Flow Ratio of the first paragraph of Section 4.04; and
(c) 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 (1) the difference between (x) the Cumulative Operating Cash
Flow determined at the time of such Restricted Payment and (y) 150% of
cumulative Consolidated Interest Expense of the Company determined for
the period commencing on the Issue Date and ending on the last day of
the most recent fiscal quarter immediately preceding the date of such
Restricted Payment for which
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consolidated financial information of the Company is available, plus
(2) 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 and sale (other than to a Restricted Subsidiary) of its
Qualified Equity Interests after the Issue Date (excluding (i) the net
proceeds from any issuance and sale of Qualified Equity Interests
financed, directly or indirectly, using funds borrowed from the Company
or any Restricted Subsidiary until and to the extent such borrowing is
repaid and (ii) any such proceeds to the extent that such proceeds were
included at any time in clause (k) of Section 4.04), plus (3) the
principal amount (or accrued or accreted amount, if less) of any
Indebtedness of the Company or any Restricted Subsidiary Incurred after
the Issue Date that has been converted into or exchanged for Qualified
Equity Interests of the Company, plus (4) in the case of the
disposition or repayment of any Investment constituting a Restricted
Payment made after the Issue Date, an amount (to the extent not
included in the computation of Cumulative Operating Cash Flow) equal to
the lesser of: (i) the return of capital with respect to such
Investment, (ii) the amount of such Investment that was treated as a
Restricted Payment, and (iii) the amount of cash received by the
Company or a Wholly Owned Restricted Subsidiary for such disposition or
in such repayment, less in any case, the cost of the disposition of
such Investment and net of taxes, plus, (5) so long as the Designation
thereof was treated as a Restricted Payment made after the Issue Date,
with respect to any Unrestricted Subsidiary that has been redesignated
as a Restricted Subsidiary after the Issue Date in accordance with
Section 4.17, the Company's proportionate interest in the lesser of the
Fair Market Value and the net worth of any Unrestricted Subsidiary that
has been redesignated as a Restricted Subsidiary after the Issue Date
in accordance with Section 4.17 not to exceed in any case the
Designation Amount with respect to such Restricted Subsidiary upon its
Designation, plus (6) (to the extent not included in the computation of
Cumulative Operating Cash Flow) the amount of cash dividends or cash
distributions (other than to pay taxes) received from any Unrestricted
Subsidiary since the Issue Date, minus (7) the greater of (i) $0 and
(ii) the Designation Amount (measured as of the date of Designation)
with respect to any Subsidiary of the Company that has been designated
as an Unrestricted Subsidiary after the Issue Date in accordance with
Section 4.17.
The foregoing provisions will not prevent (i) the payment of
any dividend or distribution on, or redemption of, Equity Interests within 60
days after the date of declaration of such dividend or distribution or the
giving of formal notice of such redemption, if at the date of such declaration
or giving of formal notice such payment or redemption would comply with the
provisions of this Indenture; (ii) the purchase, redemption, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the net cash proceeds of the substantially concurrent issue and sale (other than
to a Restricted Subsidiary) of, Qualified Equity Interests of the Company;
provided, however, that any such net cash proceeds and the value of any Equity
Interests issued in exchange for such retired Equity Interests are excluded from
clause (c)(2) of the preceding paragraph and clause (k) of Section 4.04 (and
were not included therein at any time); (iii) the purchase, redemption,
retirement, defeasance or other acquisition of Subordinated Indebtedness, or any
other payment thereon, made in exchange for, or out of the net cash proceeds of,
a substantially concurrent issue and sale (other than to a Restricted
Subsidiary) of (x) Qualified Equity Interests of the Company; provided, however,
that
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any such net cash proceeds and the value of any Equity Interests issued in
exchange for Subordinated Indebtedness are excluded from clauses (c)(2) and
(c)(3) of the preceding paragraph and clause (k) of Section 4.04 (and were not
included therein at any time) or (y) other Subordinated Indebtedness having no
stated maturity for the payment of principal thereof prior to the final stated
maturity of the Securities; (iv) any Investment to the extent that the
consideration therefor consists of the net cash proceeds of the substantially
concurrent issue and sale (other than to a Restricted Subsidiary) of Qualified
Equity Interests of the Company; provided, however, that any such net cash
proceeds are excluded from clause (c)(2) of the preceding paragraph and clause
(k) of Section 4.04 (and were not included therein at any time); (v) the
purchase, redemption or other acquisition, cancellation or retirement for value
of Equity Interests, or options, warrants, equity appreciation rights or other
rights to purchase or acquire Equity Interests (or distributions by any
Restricted Subsidiary to the Company to permit such purchase, redemption or
other acquisition, cancellation or retirement for value), of the Company or any
Restricted Subsidiary, or similar securities, held by officers or employees or
former officers or employees of the Company or any Restricted Subsidiary (or
their estates or beneficiaries under their estates), upon death, disability,
retirement or termination of employment, not to exceed $1.0 million in any
calendar year, and (vi) the payment of any dividend or distribution on Equity
Interests of the Company or any Restricted Subsidiary to the extent necessary to
permit the direct or indirect beneficial owners of such Equity Interests to pay
federal, state and local income tax liabilities arising from income of the
Company or such Restricted Subsidiary and attributable to them solely as a
result of the Company or such Restricted Subsidiary (and any intermediate entity
through which such holder owns such Equity Interests) being a partnership or a
similar pass-through entity, or ignored as an entity separate from its owner,
for federal, state or local income tax purposes; provided, however, that in the
case of each of clauses (ii), (iii) and (iv) no Default or Event of Default
(and, in the case of clause (v), no Default or Event of Default under clause
(1), (2) or (3) of Section 6.01) shall have occurred and be continuing or would
arise therefrom. For purposes of this paragraph, any Investment made in any
Person that subsequently becomes a Restricted Subsidiary shall be deemed not to
be outstanding so long as such Person is a Restricted Subsidiary.
In determining the amount of Restricted Payments permissible
under this Section 4.06, amounts expended pursuant to clauses (i) and (v) of the
immediately preceding paragraph shall be included as Restricted Payments and
amounts expended pursuant to clauses (ii), (iii), (iv) and (vi) shall be
excluded. The amount of any non-cash Restricted Payment shall be deemed to be
equal to the Fair Market Value thereof at the date of the making of such
Restricted Payment.
SECTION 4.07. Corporate Existence.
Subject to Article Five, each of the Issuers shall do or shall
cause to be done all things necessary to preserve and keep in full force and
effect its corporate, partnership or other existence and the corporate,
partnership or other existence of each Restricted Subsidiary in accordance with
the respective organizational documents of each such Restricted Subsidiary and
the rights (charter and statutory) and material franchises of the Company and
the Restricted Subsidiaries; provided, however, that the Company shall not be
required to preserve any such right or franchise, or the corporate existence of
any Restricted Subsidiary, if the Board of
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Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and the
Restricted Subsidiaries, taken as a whole, and that the loss thereof is not, and
will not be, adverse in any material respect to the Holders; provided, further
however, that a determination of the Board of Directors of the Company shall not
be required in the event of a merger of one or more Wholly Owned Restricted
Subsidiaries of the Company with or into another Wholly Owned Restricted
Subsidiary of the Company or another Person, if the surviving Person is a Wholly
Owned Restricted Subsidiary of the Company organized under the laws of the
United States or a State thereof or of the District of Columbia.
SECTION 4.08. Payment of Taxes and Other Claims.
The Issuers shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all material taxes,
assessments and governmental charges levied or imposed upon either of the
Issuers or any Restricted Subsidiary or upon the income, profits or property of
either of the Issuers or any Restricted Subsidiary and (2) all lawful claims for
labor, materials and supplies which, in each case, if unpaid, may by law become
a material liability, or Lien upon the property, of either of the Issuers or any
Restricted Subsidiary; provided, however, that neither Issuer shall be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which appropriate provision has
been made.
SECTION 4.09. Notice of Defaults.
(a) In the event that any Indebtedness of the Company or any
of its Subsidiaries is declared due and payable before its maturity because of
the occurrence of any default (or any event that, with notice or lapse of time,
or both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(b) Upon becoming aware of any Default or Event of Default,
the Company shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.10. Maintenance of Properties and Insurance.
(a) The Company shall cause all material properties owned by
or leased to it or any Restricted Subsidiary and used in the conduct of its
business or the business of any Restricted Subsidiary to be maintained and kept
in normal condition, repair and working order, normal and tear excepted, and
supplied with all necessary equipment and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 4.10 shall prevent the Company
or any Restricted Subsidiary from
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discontinuing the use, operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the Board of Directors or of the board of directors of the Restricted
Subsidiary concerned, or of an officer (or other agent employed by the Company
or of any Restricted Subsidiary) of the Company or such Restricted Subsidiary
having managerial responsibility for any such property, desirable in the conduct
of the business of the Company or any Restricted Subsidiary, and if such
discontinuance or disposal is not adverse in any material respect to the
Holders.
(b) The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against such risks
and in such amounts, and with such deductibles, retentions, self-insured amounts
and co-insurance provisions, as are customarily carried by similar businesses of
similar size, including property and casualty loss, and workers' compensation
insurance. Anything contained herein to the contrary notwithstanding, the
Company shall not be required to obtain business interruption insurance.
SECTION 4.11. Compliance Certificate.
The Issuers shall deliver to the Trustee within 45 days after
the end of each of the first three fiscal quarters of the Company and within 90
days after the close of each fiscal year a certificate signed by the principal
executive officer, principal financial officer or principal accounting officer
of each Issuer stating that a review of the activities of the Issuers has been
made under the supervision of the signing officers with a view to determining
whether a Default or Event of Default has occurred and whether or not the
signers know of any Default or Event of Default by either of the Issuers that
occurred during such fiscal quarter or fiscal year. If they do know of such a
Default or Event of Default, the certificate shall describe all such Defaults or
Events of Default, their status and the action the Issuers are taking or propose
to take with respect thereto. The first certificate to be delivered by the
Issuers pursuant to this Section 4.11 shall be for the fiscal quarter ending
September 30, 1997.
SECTION 4.12. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or
15(d) of the Exchange Act, or any successor provision thereto, the Company shall
file with the SEC (if permitted by SEC practice and applicable law and
regulations) the annual reports, quarterly reports and other documents that the
Company would have been required to file with the SEC pursuant to such Section
13(a) or 15(d) or any successor provision thereto if the Company were so
subject, such documents to be filed with the SEC on or prior to the respective
dates (the "Required Filing Dates") by which the Company would have been
required so to file such documents if the Issuers were so subject. The Company
shall also in any event (a) within 15 days of each Required Filing Date (whether
or not permitted or required to be filed with the SEC) (i) transmit (or cause to
be transmitted) by mail to all Holders, as their names and addresses appear in
the Security Register, without cost to such Holders, and (ii) file with the
Trustee, copies of the annual reports, quarterly reports and other documents
that the Company is required to file with the SEC pursuant to the preceding
sentence, or, if such filing is not so permitted, information and data of a
similar nature, and (b) if, notwithstanding the preceding sentence, filing such
documents by the Company with the SEC is not permitted by SEC practice or
applicable law
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or regulations, promptly upon written request supply copies of such documents to
any Holder. In addition, for so long as any Securities remain outstanding, the
Company will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act, and, to any beneficial holder of
Securities, if not obtainable from the SEC, information of the type that would
be filed with the SEC pursuant to the foregoing provisions, upon the request of
any such holder. Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information therein, including the Company's compliance with
any of its covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officers' Certificates).
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.
Each of the Issuers and each Guarantor covenants (to the
extent that it may lawfully do so) that it shall 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 either Issuer or such Guarantor from paying all or any portion of the
principal of and/or interest, if any, on the Securities 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 that it may
lawfully do so) each of the Issuers and each Guarantor hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 4.14. Change of Control.
(a) Following the occurrence of a Change of Control (the date
of such occurrence being the "Change of Control Date"), the Issuers shall notify
the Holders of the Securities of such occurrence in the manner prescribed by
this Indenture and shall, within 20 days after the Change of Control Date,
jointly and severally make an Offer to Purchase all Securities then outstanding
at a purchase price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest (including Additional Interest, if
any) thereon, if any, to the Purchase Date. The Issuers' obligations may be
satisfied if a third party makes the Offer to Purchase in the manner, at the
times and otherwise in compliance with the requirements of this Indenture
applicable to an Offer to Purchase made by the Issuers and purchases all
Securities validly tendered and not withdrawn under such Offer to Purchase. Each
Holder shall be entitled to tender all or any portion of the Securities owned by
such Holder pursuant to the Offer to Purchase, subject to the requirement that
any portion of a Security tendered must be tendered in an integral multiple of
$1,000 principal face amount.
(b) On or prior to the Purchase Date specified in the Offer to
Purchase, the Issuers shall (i) accept for payment all Securities or portions
thereof validly tendered pursuant to the Offer, (ii) deposit with the Paying
Agent (or, if either Issuer or a Subsidiary is acting as the Paying Agent,
segregate and hold in trust as provided in Section 2.04) money sufficient to
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pay the Purchase Price of all Securities or portions thereof so accepted and
(iii) deliver or cause to be delivered to the Trustee for cancellation all
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Issuers. The Paying
Agent (or either of the Issuers or a Subsidiary, if so acting) shall promptly
mail or deliver to Holders of Securities so accepted, payment in an amount equal
to the Purchase Price for such Securities, and the Trustee shall promptly
authenticate and mail or deliver to each Holder of Securities a new Security or
Securities equal in principal amount at maturity to any unpurchased portion of
the Security surrendered as requested by the Holder. Any Security not accepted
for payment shall be promptly mailed or delivered by the Issuers to the Holder
thereof. The Issuers shall publicly announce the results of the Offer on or as
soon as practicable after the Purchase Date.
(c) If the Issuers make an Offer to Purchase, the Issuers will
comply with all applicable tender offer laws and regulations, including, to the
extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any
other applicable federal or state securities laws and regulations and any
applicable requirements of any securities exchange on which the Securities are
listed, and any violation of the provisions of this Indenture relating to such
Offer to Purchase occurring as a result of such compliance shall not be deemed
an Event of Default or an event that, with the passing of time or giving of
notice, or both, would constitute an Event of Default.
SECTION 4.15. Limitation on Senior Subordinated Indebtedness.
(a) The Issuers shall not, directly or indirectly, Incur any
Indebtedness that by its terms would expressly rank senior in right of payment
to the Securities and expressly rank subordinate in right of payment to any
Senior Indebtedness.
(b) The Company shall not permit any Guarantor to and no
Guarantor shall, directly or indirectly, Incur any Indebtedness that by its
terms would expressly rank senior in right of payment to the Guaranty of such
Guarantor and expressly rank subordinate in right of payment to any Guarantor
Senior Indebtedness of such Guarantor.
SECTION 4.16. Limitations on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions to the Company or any other Restricted Subsidiary on its Equity
Interests or with respect to any other interest or participation in, or measured
by, its profits, or pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (b) make loans or advances to, or guarantee any
Indebtedness or other obligations of, the Company or any other Restricted
Subsidiary, or (c) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) the Credit Facility or any other agreement of
the Company or the Restricted Subsidiaries outstanding on the Issue Date, in
each case as in effect on the Issue Date, and any amendments,
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restatements, renewals, replacements or refinancings thereof; provided, however,
that any such amendment, restatement, renewal, replacement or refinancing is no
more restrictive in the aggregate with respect to such encumbrances or
restrictions than those contained in the Credit Facility on the Issue Date; (ii)
applicable law; (iii) any instrument governing Indebtedness or Equity Interests
of an Acquired Person acquired by the Company or any Restricted Subsidiary as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred by such Acquired Person in connection with, as a result of or in
contemplation of such acquisition); provided, however, that such encumbrances
and restrictions are not applicable to the Company or any Restricted Subsidiary,
or the properties or assets of the Company or any Restricted Subsidiary, other
than the Acquired Person; (iv) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices and non-assignment provisions in agreements between the Company or any
Restricted Subsidiary and the NRTC with respect to DBS services; (v) Purchase
Money Indebtedness for property acquired in the ordinary course of business that
only imposes encumbrances and restrictions on the property so acquired; (vi) any
agreement for the sale or disposition of the Equity Interests or assets of any
Restricted Subsidiary; provided, however, that such encumbrances and
restrictions described in this clause (vi) are only applicable to such
Restricted Subsidiary or assets, as applicable, and any such sale or disposition
is made in compliance with Section 4.05 to the extent applicable thereto; (vii)
refinancing Indebtedness permitted under clause (h) of the second paragraph of
Section 4.04; provided, however, that the encumbrances and restrictions
contained in the agreements governing such Indebtedness are no more restrictive
in the aggregate than those contained in the agreements governing the
Indebtedness being refinanced immediately prior to such refinancing; (viii) this
Indenture; or (ix) any such customary encumbrance or restriction existing under
any other security agreement, instrument or document hereafter in effect;
provided, however, that the terms and conditions of any such encumbrance or
restriction are not more restrictive than those contained in the Credit Facility
as in effect on the Issue Date.
SECTION 4.17. Designation of Unrestricted Subsidiaries.
(a) The Company may designate after the Issue Date any
Subsidiary of the Company as an "Unrestricted Subsidiary" under this Indenture
(a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation;
(ii) at the time of and after giving effect to such
Designation, the Company could Incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the Debt to Operating Cash
Flow Ratio of the first paragraph of Section 4.04; and
(iii) the Company would be permitted to make an Investment
(other than a Permitted Investment) at the time of Designation
(assuming the effectiveness of such Designation) pursuant to the first
paragraph of Section 4.06 in an amount (the "Designation Amount") equal
to the Fair Market Value of the Company's proportionate interest in the
net worth of such Subsidiary on such date calculated in accordance with
GAAP.
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Notwithstanding the above, no Subsidiary of the Company shall
be designated an Unrestricted Subsidiary if such Subsidiary (i) distributes,
directly or indirectly, DirecTv(R) Services or has any right, title or interest
in the revenue or profits in, or holds any Lien in respect of, such distribution
or (ii) conducts, directly or indirectly, the High Power Satellite Transmission
Business or the business of distributing high power DBS services to subscribers,
or has any interest in any such business or the right to receive the income or
profits therefrom.
Neither the Company nor any Restricted Subsidiary shall at any
time (x) provide credit support for, subject any of its property or assets
(other than the Equity Interests of any Unrestricted Subsidiary) to the
satisfaction of, or guarantee, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary, or (z) be directly or indirectly liable for any
Indebtedness that 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,
except, in the case of clause (x) or (y), to the extent otherwise permitted
under the terms of this Indenture, including, without limitation, pursuant to
Sections 4.05 and 4.06, and except for any non-recourse guarantee given solely
to support the pledge by the Company or any Restricted Subsidiary of the Equity
Interests of any Unrestricted Subsidiary.
(b) The Company may revoke any Designation of a Subsidiary as
an Unrestricted Subsidiary (a "Revocation") if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation;
and
(ii) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such Revocation would, if
Incurred at such time, have been permitted to be Incurred for all
purposes of this Indenture.
All Designations and Revocations must be evidenced by
resolutions of the Board of Directors of the Company, delivered to the Trustee
certifying compliance with the foregoing provisions.
SECTION 4.18. Limitation on Liens.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, Incur any Liens of any kind
against or upon any of their respective properties or assets now owned or
hereafter acquired, or any proceeds therefrom or any income or profits
therefrom, to secure any Indebtedness unless contemporaneously therewith
effective provision is made to secure the Securities equally and ratably with
such Indebtedness with a Lien on the same properties and assets securing
Indebtedness for so long as such Indebtedness is secured by such Lien, except
for (i) Liens securing any Senior Indebtedness or any guarantee of Senior
Indebtedness by any Restricted Subsidiary and (ii) Permitted Liens.
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SECTION 4.19. Deposit of Funds with Escrow Agent.
The Issuers shall initially place $38,750,000 million of the
net proceeds realized from the sale of the Series A Securities in the Interest
Escrow Account held by the Escrow Agent for the benefit of the Holders of the
Securities. The disbursement of such funds shall be governed by the Interest
Escrow Agreement and the Security Agreement. Such funds, together with the
proceeds from the investment thereof, will secure, and will be sufficient (and
shall be applied) to pay, the first four semi-annual interest payments on the
Securities. Funds will be released from the Interest Escrow Account, pro rata,
to reflect any reduction in the outstanding principal amount of Securities prior
to the fourth semi-annual interest payment date.
Pending disbursement, funds maintained in the Interest Escrow
Account will be invested in Marketable Securities.
SECTION 4.20. Guaranty of Securities by Subsidiaries.
The Company shall cause each Restricted Subsidiary which is
not a party hereto to jointly and severally guarantee the Issuers' Obligations
under this Indenture and the Securities; provided however, that the Guaranty
shall be subordinated in right of payment to all Guarantor Senior Indebtedness
pursuant to the subordination provisions of Article Twelve. The Company shall
cause each Restricted Subsidiary issuing a Guaranty to (i) execute and deliver
to the Trustee a supplemental indenture in form reasonably satisfactory to the
Trustee pursuant to which such Restricted Subsidiary shall become a party to
this Indenture and thereby unconditionally guarantee all of the Issuers'
Obligations under the Securities and this Indenture on the terms set forth in
Article Eleven and Article Twelve hereof, and (ii) deliver to the Trustee an
opinion of counsel that such supplemental indenture has been duly authorized,
executed and delivered by such Restricted Subsidiary and constitutes a legal,
valid, binding and enforceable obligation of such Restricted Subsidiary (which
opinion may be subject to customary assumptions and qualifications). Thereafter,
such Restricted Subsidiary shall (unless released in accordance with the terms
of this Indenture) be a Guarantor for all purposes of this Indenture.
SECTION 4.21. Limitations on Conduct of Business of Capital and the Company.
Capital will not hold any operating assets or other properties
or conduct any business other than to serve as an Issuer and co-obligor with
respect to the Securities and will not own any Equity Interests of any Person to
the extent that such ownership would cause such Person to be deemed a Subsidiary
of Capital.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any business, either directly or through
any Subsidiary, except for those businesses in which the Company and its
Restricted Subsidiaries were engaged on the Issue Date or businesses reasonably
related thereto.
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SECTION 4.22. Payments for Consent.
None of the Issuers or any of the Company's Subsidiaries
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of a Security for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Securities unless such consideration is
offered to be paid or agreed to be paid to all Holders of the Securities that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
ARTICLE V.
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc.
(a) No Issuer shall consolidate with or merge with or into
(whether or not such Issuer is the Surviving Person) any other entity and the
Company shall not and shall not cause or permit any Restricted Subsidiary to,
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Company's properties and assets (determined on a
consolidated basis for the Company and the Restricted Subsidiaries) to any
entity in a single transaction or series of related transactions, unless: (i)
either (x) such Issuer shall be the Surviving Person or (y) the Surviving Person
(if other than such Issuer) shall be, in the case of Capital, a corporation, or
in any other case, a corporation, partnership or limited liability company
organized and validly existing under the laws of the United States of America or
any State thereof or the District of Columbia, and shall, in any such case,
expressly assume by a supplemental indenture, the due and punctual payment of
the principal of, premium, if any, and interest on all the Securities and the
performance and observance of every covenant of this Indenture, the Collateral
Documents and the Registration Rights Agreement to be performed or observed on
the part of the Issuers; (ii) immediately thereafter, no Default or Event of
Default shall have occurred and be continuing; and (iii) immediately after
giving effect to any such transaction involving the Incurrence by the Company or
any Restricted Subsidiary, directly or indirectly, of additional Indebtedness
(and treating any Indebtedness not previously an obligation of the Company or
any Restricted Subsidiary in connection with or as a result of such transaction
as having been Incurred at the time of such transaction), the Surviving Person
could Incur, on a pro forma basis after giving effect to such transaction as if
it had occurred at the beginning of the latest fiscal quarter for which
consolidated financial statements of the Company are available, at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the Debt to
Operating Cash Flow Ratio of the first paragraph of Section 4.04; (iv) the
Issuers have delivered to the Trustee an opinion of counsel to the effect that
the holders of the Securities will not recognize gain or loss for federal income
tax purposes as a result of such transaction; and (v) immediately thereafter the
Surviving Person shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of such Issuer immediately prior to such transaction.
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Notwithstanding the foregoing, Capital may merge into the
Company upon or at any time following a Corporation Conversion, and clauses
(iii), (iv) and (v) of the first paragraph of this Section 5.01(a) shall not
apply in the case of a merger by the Company if (i) the Company is the Surviving
Person, (ii) the consideration issued or paid by the Company in such merger
consists solely of Qualified Equity Interests of the Company, and (iii)
immediately after giving effect to such merger, (x) if the Debt to Operating
Cash Flow Ratio immediately before such merger is positive, the Debt to
Operating Cash Flow Ratio immediately after such merger does not exceed such
ratio immediately prior to such merger (giving pro forma effect to the merger as
described in clause (iii) of the first paragraph of this Section 5.01(a)) or (y)
if the Debt to Operating Cash Flow Ratio immediately before such merger is
negative, the Company shall have Consolidated Net Worth immediately after such
merger equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such merger.
For purposes of this Section 5.01(a), the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all the properties and assets of one or
more Restricted Subsidiaries the Equity Interest of which constitutes all or
substantially all the properties and assets of the Company shall be deemed to be
the transfer of all or substantially all the properties and assets of the
Company.
(b) Subject to the requirements of subparagraph (a) of this
Section 5.01, in the event of a sale of all or substantially all the assets of
any Guarantor or all of the Equity Interests of any Guarantor, by way of merger,
consolidation or otherwise, then the Surviving Person of any such merger or
consolidation, or such Guarantor, if all of its Equity Interests are sold, shall
be released and relieved of any and all obligations under the Guaranty of such
Guarantor if (i) the Person or entity surviving such merger or consolidation or
acquiring the Equity Interests of such Guarantor is not a Restricted Subsidiary,
and (ii) the Net Cash Proceeds from such sale are used after such sale in a
manner that complies with the provisions of Section 4.05. Except as provided in
the preceding sentence, no Guarantor shall consolidate with or merge with or
into another Person, whether or not such Person is affiliated with such
Guarantor and whether or not such Guarantor is the Surviving Person, unless (i)
the Surviving Person is a corporation, partnership or limited liability company
organized and validly existing under the laws of the United States, any State
thereof or the District of Columbia, (ii) the Surviving Person (if other than
such Guarantor) assumes all the Obligations of such Guarantor under the
Securities, this Indenture and the Registration Rights Agreement pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, (iii)
at the time of and immediately after such Disposition, no Default or Event of
Default shall have occurred and be continuing, and (iv) the Surviving Person
will have Consolidated Net Worth (immediately after giving pro forma effect to
the Disposition) equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction; provided, however, that clause
(iv) of this paragraph shall not be a condition to a merger or consolidation of
a Guarantor if such merger or consolidation only involves the Company and/or one
or more Wholly Owned Restricted Subsidiaries.
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SECTION 5.02. Successor Corporation Substituted.
In the event of any transaction (other than a lease) described
in and complying with the conditions listed in Section 5.01(a) or (b), in which
an Issuer, or any Guarantor, that is a party to such transaction is not the
Surviving Person and the Surviving Person is to assume all of the Obligations of
such Issuer or any such Guarantor under the Securities, this Indenture and the
Registration Rights Agreement pursuant to a supplemental indenture, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, such Issuer or any such Guarantor, as applicable, and
such Issuer or such Guarantor, as applicable, shall be discharged from its
Obligations under this Indenture, the Securities and the Guaranty, as
applicable.
ARTICLE VI.
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for
purposes of this Indenture:
(1) failure to pay principal of (or premium, if any, on) any
Security when due, whether or not such payment is prohibited by Article
Eight hereof;
(2) failure to pay any interest on any Security when due,
continued for 30 days or more, whether or not such payment is
prohibited by Article Eight hereof;
(3) default in the payment of principal of or interest on
Securities required to be purchased pursuant to any Offer to Purchase
required by this Indenture when due and payable or failure to pay on
the Purchase Date the Purchase Price for any Security validly tendered
pursuant to any Offer to Purchase, whether or not such payment is
prohibited by Article Eight hereof;
(4) failure to perform or comply with any of the provisions of
Section 5.01 hereof;
(5) failure to perform or comply with any of the provisions of
Section 4.19 or the Collateral Documents;
(6) failure to perform any other covenant, warranty or
agreement under this Indenture or in the Securities, and the Default
continues for the period and after the notice specified in the last
paragraph of this Section 6.01;
(7) a default or defaults under the terms of one or more
instruments evidencing or securing Indebtedness of any Issuer or any of
the Company's Significant Restricted Subsidiaries having an outstanding
principal amount of $5.0 million or more
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individually or in the aggregate that has resulted in the acceleration
of the payment of such Indebtedness; provided, however, that it shall
not be an Event of Default if such Indebtedness shall have been repaid
in full or such acceleration shall have been rescinded within 20 days;
(8) there shall have been any final judgment or judgments (not
subject to appeal) against any Issuer or any of the Company's
Significant Restricted Subsidiaries in an amount of $2.0 million or
more (net of any amounts covered by reputable and creditworthy
insurance companies) that remains undischarged or unstayed for a period
of 60 days after the date on which the right to appeal has expired;
(9) any Issuer or any Significant Restricted Subsidiary of the
Company pursuant to or within the meaning of any Bankruptcy Law:
(A) admits in writing its inability to pay its debts
generally as they become due,
(B) commences a voluntary case or proceeding,
(C) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(D) consents or acquiesces in the institution of a
bankruptcy or insolvency proceeding against it,
(E) consents to the appointment of a Custodian of it
or for all or substantially all of its property, or
(F) makes a general assignment for the benefit of its
creditors, or any of them takes any action to authorize or
effect any of the foregoing;
(10) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against any Issuer or any
Significant Restricted Subsidiary of the Company in an
involuntary case or proceeding,
(B) appoints a Custodian of any Issuer or any
Significant Restricted Subsidiary of the Company or for all or
substantially all of its property, or
(C) orders the liquidation of any Issuer or any
Significant Restricted Subsidiary of the Company, and in each
case the order or decree remains unstayed and in effect for 60
days; provided, however, that if the entry of such order or
decree is appealed and dismissed on appeal, then the Event of
Default hereunder by reason of the entry of such order or
decree shall be deemed to have been cured; or
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(11) any Guaranty of a Guarantor shall be held in a judicial
proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect, or any Guarantor, or any Person acting
on behalf of any Guarantor, shall deny or disaffirm its obligations
under its Guaranty.
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar federal, state or foreign law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law.
A Default under clause (6) is not an Event of Default until
the Trustee notifies the Issuers, or the Holders of at least 25% in principal
amount of the outstanding Securities notify the Issuers and the Trustee, of the
Default in writing and the Issuers do not cure the Default within 30 days after
receipt of the notice. The notice must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default." Such notice shall
be given by the Trustee if so requested by the Holders of at least 25% in
principal amount of the Securities then outstanding. When a Default is cured, it
ceases.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other
than an Event of Default specified in clause (9) or (10) of Section 6.01 with
respect to the Company) occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate principal amount of the outstanding Securities by
notice in writing to the Company (and to the Trustee if given by the Holders)
may declare the Default Amount to be due and payable immediately and, upon any
such declaration, such Default Amount, notwithstanding anything contained in
this Indenture or the Securities to the contrary, but subject to the provisions
limiting payment described in Article Eight shall become immediately due and
payable; provided, however, that so long as the Credit Facility shall be in full
force and effect, if an Event of Default shall have occurred and be continuing
(other than an Event of Default specified in clause (9) or (10) of Section 6.01
with respect to the Company), the Securities shall not become due and payable
until the earlier to occur of (x) five Business Days following delivery of a
written notice of such acceleration of the Securities to the agent under the
Credit Facility and (y) the acceleration (ipso facto or otherwise) of any
Indebtedness under the Credit Facility.
If an Event of Default specified in clause (9) or (10) of
Section 6.01 with respect to an Issuer occurs under this Indenture, the Default
Amount shall ipso facto become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder of the
Securities.
After a declaration of acceleration, but before a judgment or
decree of the money due in respect of the Securities has been obtained, the
Holders of not less than a majority in aggregate principal amount of the
Securities then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if all existing Events of Default (other than
the nonpayment of principal of (and premium, if any) or interest on the
Securities which has become due solely by virtue of such acceleration) have been
cured or waived and if the rescission would
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not conflict with any judgment or decree. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities, this Indenture or either of the
Collateral Documents.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy maturing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, prior to the
declaration of acceleration of the Securities, the Holders of not less than a
majority in aggregate principal amount of the outstanding Securities by written
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 or
interest on any Security as specified in clauses (1), (2) and (3) of Section
6.01 or a Default in respect of any term or provision of this Indenture that may
not be amended or modified without the consent of each Holder affected as
provided in Section 10.02. The Issuers shall deliver to the Trustee an Officers'
Certificate stating that the requisite percentage of Holders have consented to
such waiver and attaching copies of such consents. In case of any such waiver,
the Issuers, the Trustee and the Holders shall be restored to their former
positions and rights hereunder and under the Securities, respectively. This
paragraph of this Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the
TIA and such Section 316(a)(1)(B) of the TIA is hereby expressly excluded from
this Indenture and the Securities, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture, the Collateral Documents and the
Securities, but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Securities 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. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that
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may involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction. In the event the Trustee takes any action or
follows any direction pursuant to this Indenture, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against any loss or
expense caused by taking such action or following such direction. This
Section 6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such
Section 316(a)(1)(A) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
(i) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount
of the outstanding Securities make a written request to the Trustee to
pursue a remedy;
(iii) such Holder or Holders offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(v) during such 60-day period the Holders of a majority in
principal amount of the outstanding Securities (excluding Affiliates of
the Company) do not give the Trustee a direction which, in the opinion
of the Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over such
other Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of or interest on a
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest
specified in Section 6.01(1), (2) or (3) 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 Securities for the whole amount of
principal and accrued interest remaining unpaid, together with interest overdue
on principal and to the extent that payment of such interest is lawful, interest
on
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overdue installments of interest, in each case at the rate per annum borne by
the Securities 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 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company (or
any other obligor upon the Securities), its creditors or its property and shall
be entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Securityholder 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
Securityholders, 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 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
Third: to the Issuers.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Securityholders 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
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attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by
a Holder or group of Holders of more than 10% in aggregate principal amount of
the outstanding Securities, or to any suit instituted by any Holder for the
enforcement or the payment of the principal or interest on any Securities on or
after the respective due dates expressed in the Security.
ARTICLE VII.
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a 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 a Default:
(1) The Trustee shall not be liable except for the performance
of such duties as are specifically set forth herein; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions conforming to the requirements of this Indenture; however, 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.
(c) The Trustee shall not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
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(d) 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 to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of such
funds is not assured to it or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense that may be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and/or an Opinion of Counsel, which
shall conform to the provisions of Section 13.05. 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 attorneys and agents of its
selection and shall not be responsible for the misconduct or negligence
of any agent or attorney (other than an agent who is an employee of the
Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it reasonably believes to be
authorized or within its rights or powers.
(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 and protection from liability 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) Any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution.
(g) 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 Securityholders pursuant to this Indenture,
unless such Securityholders shall have offered
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to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred by it in compliance with
such request or direction.
(h) 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.
(i) The Trustee shall not be deemed to have notice of any
Event of Default unless a Trust Officer of the Trustee has actual
knowledge thereof or unless the Trustee shall have received written
notice thereof at the Corporate Trust Office of the Trustee, and such
notice references the Securities and this Indenture.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company or
its Affiliates with the same rights it would have if it were not Trustee,
subject to Section 7.10 hereof. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Issuers' use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in this Indenture or any document issued in connection with the sale of
Securities or any statement in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing
and the Trustee knows of such Defaults or Events of Default, the Trustee shall
mail to each Securityholder notice of the Default or Event of Default within 30
days after the occurrence thereof or, if later, within 10 days after such
Default or Event of Default becomes known to the Trustee. Except in the case of
a Default or an Event of Default in payment of principal of or interest on any
Security or a Default or Event of Default in complying with Section 5.01 hereof,
the Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the interest
of Securityholders. This Section 7.05 shall be in lieu of the proviso to ss.
315(b) of the TIA and such proviso to ss. 315(b) of the TIA is hereby expressly
excluded from this Indenture and the Securities, as permitted by the TIA.
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SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after each
May 15 beginning with the May 15 following the date of this Indenture, the
Trustee shall mail to each Securityholder a report dated as of such May 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b), (c) and (d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
The Issuers shall promptly notify the Trustee in writing if
the Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Issuers shall jointly and severally pay to the Trustee
from time to time such compensation as the Issuers and the Trustee shall from
time to time agree in writing for its services. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express trust. The
Issuers shall jointly and severally reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances (including fees, disbursements
and expenses of its agents and counsel) incurred or made by it in addition to
the compensation for its services except any such disbursements, expenses and
advances as may be attributable to the Trustee's negligence or bad faith. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 9.01 hereof.
The Issuers shall jointly and severally indemnify the Trustee
for, and hold it harmless against any and all loss, damage, claims, liability or
expense, including taxes (other than franchise taxes imposed on the Trustee and
taxes based upon, measured by or determined by the income of the Trustee),
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder, except to the extent that such loss,
damage, claim, liability or expense is due to its own negligence or bad faith.
The Trustee shall notify the Issuers promptly of any claim asserted against the
Trustee for which it may seek indemnity. However, the failure by the Trustee to
so notify the Issuers shall not relieve the Issuers of their obligations
hereunder. The Issuers shall defend the claim and the Trustee shall cooperate in
the defense (and may employ its own counsel) at the Issuers' expense; provided,
however, that the Issuers' reimbursement obligation with respect to counsel
employed by the Trustee will be limited to the reasonable fees and expenses of
such counsel.
The Issuers need not pay for any settlement made without their
written consent, which consent shall not be unreasonably withheld. The Issuers
need not reimburse any expense or indemnify against any loss or liability
incurred by the Trustee as a result of the violation of this Indenture by the
Trustee.
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To secure the Issuers' payment obligations in this Section
7.07, the Trustee shall have a Lien prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of or interest on particular
Securities or the Purchase Price or redemption price of any Securities to be
purchased or pursuant to an Offer to Purchase or redeem.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(9) or (10) occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute expenses
of administration under any Bankruptcy Law. The Issuers' obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Issuers' obligations pursuant to
Article Nine and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Issuers
in writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Issuers in
writing and may appoint a successor Trustee with the Issuers' consent. The
Issuers may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent under
any Bankruptcy Law;
(3) a custodian or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Issuers shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
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If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuers or the Holders of at least 10% in principal amount of the outstanding
Securities may petition, at the expense of the Issuers, any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Issuers' obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. 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 banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee provided such successor Trustee must meet the requirements set
forth in Section 7.10.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be
eligible to act as Trustee under TIA Sections 310(a)(1) and 310(a)(2). The
Trustee shall have a combined capital and surplus of at least $50,000,000 as
set forth in its most recent published annual report of condition. If the
Trustee has or shall acquire any "conflicting interest" within the meaning of
TIA Section 310(b), the Trustee and the Issuers shall comply with the
provisions of TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met. If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 7.10, the Trustee shall resign immediately in the
manner and with the effect hereinbefore specified in this Article Seven.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
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ARTICLE VIII.
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Indebtedness.
Each of the Issuers covenants and agrees, and the Trustee and
each Holder of the Securities by its acceptance thereof likewise covenant and
agree, that all Securities shall be issued subject to the provisions of this
Article Eight; and each person holding any Security, whether upon original issue
or upon transfer, assignment or exchange thereof, accepts and agrees that all
payments of the principal of, premium, if any, and interest on the Securities by
either of the Issuers shall, to the extent and in the manner set forth in this
Article Eight, be subordinated and junior in right of payment to the prior
payment in full in cash of all amounts payable under Senior Indebtedness.
SECTION 8.02. No Payment on Securities in Certain Circumstances.
(a) Upon the occurrence of a Non-Payment Event of Default on
Designated Senior Indebtedness, no payment or distribution of any assets or
securities of either of the Issuers of any kind or character (including, without
limitation, cash, property and any payment or distribution which may be payable
or deliverable by reason of the payment of any other Indebtedness of either of
the Issuers being subordinated to the payment of the Securities by either of the
Issuers, but excluding any payment or distribution of Permitted Junior
Securities and excluding payments from the Interest Escrow Account) may be made
by or on behalf of either of the Issuers, including, without limitation, by way
of set-off or otherwise, for or on account of the Securities, or for or on
account of the purchase, redemption, defeasance or other acquisition of
Securities, and neither the Trustee nor any Holder or owner of any Securities
shall take or receive from either of the Issuers, directly or indirectly in any
manner, payment in respect of all or any portion of the Securities, for a period
(a "Payment Blockage Period") commencing on the date of receipt by the Trustee
of written notice from the Representative (as defined below) of such Non-Payment
Event of Default unless and until (subject to any blockage of payments that may
then be in effect under Section 8.02(b)) the earliest of (x) the date on which
more than 179 days shall have elapsed since receipt of such written notice by
the Trustee, (y) such Non-Payment Event of Default shall have been cured or
waived in writing or shall have ceased to exist or such Designated Senior
Indebtedness shall have been paid in full or (z) such Payment Blockage Period
shall have been terminated by written notice to the Company or the Trustee from
the Representative, after which, in the case of clause (x), (y) or (z), the
Issuers shall resume making any and all required payments in respect of the
Securities, including any missed payments. Notwithstanding any other provision
of this Indenture, (x) in no event shall a Payment Blockage Period commenced in
accordance with the provisions of this Indenture described in this paragraph
extend beyond 179 days from the date of the receipt by the Trustee of the notice
referred to above, (y) there shall be a period of at least 181 consecutive days
in each 360-day period when no Payment Blockage Period is in effect and (z) not
more than one Payment Blockage Period may be commenced with respect to the
Securities during any period of 360 consecutive days. Notwithstanding any other
provision of this Indenture, no event of default with respect to Designated
Senior Indebtedness which existed or was continuing on the
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date of the commencement of any Payment Blockage Period initiated by the
Representative shall be, or be made, the basis for the commencement of any other
Payment Blockage Period initiated by the Representative, whether or not within a
period of 360 consecutive days, unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days.
(b) No payment or distribution of any assets or securities of
either of the Issuers or any Restricted Subsidiary of any kind or character
(including, without limitation, cash, property and any payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of the Company being subordinated to the payment of the Securities
by the Company, but excluding any payment or distribution of Permitted Junior
Securities and excluding payments from the Interest Escrow Account) may be made
by or on behalf of either of the Issuers or any Restricted Subsidiary,
including, without limitation, by way of set-off or otherwise, for or on account
of the Securities, except from those funds held in trust for the benefit of
Holders of any Securities pursuant to the procedures set forth under Section
9.01, or for or on account of the purchase, redemption, defeasance or other
acquisition of the Securities, and neither the Trustee nor any Holder or owner
of any Securities shall take or receive from either of the Issuers or any
Restricted Subsidiary, directly or indirectly in any manner, payment in respect
of all or any portion of the Securities following the delivery by the
representative of the holders of Designated Senior Indebtedness under or in
respect of the Credit Facility, for so long as there shall exist any Designated
Senior Indebtedness under or in respect of the Credit Facility, and thereafter,
the holders of Designated Senior Indebtedness (in either such case, the
"Representative") to the Trustee of written notice of (i) the occurrence of a
Payment Default on Designated Senior Indebtedness or (ii) the occurrence of a
Non-Payment Event of Default on Designated Senior Indebtedness and the
acceleration of the maturity of Designated Senior Indebtedness in accordance
with its terms and in any such event, such prohibition shall continue until such
Payment Default is cured, waived in writing or ceases to exist or such
acceleration has been rescinded or otherwise cured. At such time as the
prohibition set forth in the preceding sentence shall no longer be in effect,
subject to the provisions of Section 8.02(a), the Issuers shall resume making
any and all required payments in respect of the Securities, including any missed
payments.
(c) In the event that, notwithstanding the foregoing provision
prohibiting such payment, any payment shall be received by the Trustee or any
Holder when such payment is prohibited by Section 8.02, such payment shall be
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Designated Senior Indebtedness or their respective representatives,
or to the trustee or trustees under any indenture pursuant to which any of such
Designated Senior Indebtedness may have been issued, as their respective
interests may appear, but only to the extent that, upon notice from the Trustee
to the holders of Designated Senior Indebtedness that such prohibited payment
has been made, the holders of the Designated Senior Indebtedness (or their
representative or representatives or a trustee) notify the Trustee in writing of
the amounts then due and owing on the Designated Senior Indebtedness, if any,
and only the amounts specified in such notice to the Trustee shall be paid to
the holders of Designated Senior Indebtedness.
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SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities
of either of the Issuers of any kind or character, whether in cash, property or
securities (excluding any payment or distribution of Permitted Junior Securities
and payments from the Interest Escrow Account), upon any dissolution or other
winding-up or liquidation, rearrangement or reorganization of either of the
Issuers, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings or any general assignment for the benefit of
creditors or other marshalling of assets or liabilities of either Issuer (except
in connection with the merger or consolidation of either Issuer or liquidation
or dissolution following the transfer of substantially all of its assets, upon
the terms and conditions permitted under the circumstances described in Section
5.01), all Senior Indebtedness shall first be paid and satisfied in full in cash
before the Holders of the Securities or the Trustee on behalf of such Holders
shall be entitled to receive any payment by the Issuers of the principal of,
premium, if any, or interest on the Securities (other than payments from the
Interest Escrow Account), or any payment by the Issuers to acquire any of the
Securities for cash, property or securities, or any distribution by the Issuers
with respect to the Securities of any cash, property or securities (excluding
any payment or distribution of Permitted Junior Securities and excluding
payments from the Interest Escrow Account). Before any payment may be made by,
or on behalf of, the Issuers of the principal of, premium, if any, or interest
on the Securities (other than payments from the Interest Escrow Account) upon
any such dissolution or winding-up or liquidation, rearrangement or
reorganization, any payment or distribution of assets or securities of the
Issuers of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding payments from the Interest Escrow Account) to which the Holders of the
Securities or the Trustee on their behalf would be entitled, but for the
subordination provisions of this Indenture, shall be made by the Issuers or by
any receiver, trustee in bankruptcy, liquidation trustee, agent or other Person
making such payment or distribution, directly to the holders of the Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their representatives or to the
trustee or trustees or agent or agents under any agreement or indenture pursuant
to which any of such Senior Indebtedness might have been issued, as their
respective interests may appear, to the extent necessary to pay all such Senior
Indebtedness in full in cash after giving effect to any prior or concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, the Trustee or any Holder of
Securities receives any payment or distribution of assets of either of the
Issuers of any kind, whether in cash, property or securities (excluding any
payment or distribution of Permitted Junior Securities and excluding payments
from the Interest Escrow Account), including, without limitation, by way of
set-off or otherwise, in respect of the Securities at a time when such payment
or distribution is prohibited by Section 8.03 and before all Senior Indebtedness
of the Company is paid and satisfied in full in cash, then such payment or
distribution shall be held by the recipient in trust for the benefit of holders
of Senior Indebtedness and will be immediately paid over or delivered to the
trustee in bankruptcy or such other Person making payment or distribution of
assets of the Company to the extent necessary to make payment in full in cash of
all Senior Indebtedness remaining unpaid, after
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giving effect to any current payment or distribution, or provision therefor, to
or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the
Company with or into, a corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to a corporation upon the terms and conditions
provided in Article Five shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 8.03 if such
corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article Five.
SECTION 8.04. Subrogation.
Upon the payment in full in cash of all Senior Indebtedness,
or provision for payment, the Holders of the Securities shall be subrogated to
the rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company made on such Senior
Indebtedness until the principal of, premium, if any, and interest on the
Securities shall be paid in full in cash; and, for the purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee on their behalf would be entitled except for the
provisions of this Article Eight, and no payment over pursuant to the provisions
of this Article Eight to the holders of Senior Indebtedness by Holders of the
Securities or the Trustee on their behalf shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness. It is understood that the provisions of this Article Eight
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Securities, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
If any payment or distribution to which the Holders of the
Securities would otherwise have been entitled but for the provisions of this
Article Eight shall have been applied, pursuant to the provisions of this
Article Eight, to the payment of all amounts payable under Senior Indebtedness,
then and in such case, the Holders of the Securities shall be entitled to
receive from the holders of such Senior Indebtedness any payments or
distributions received by such holders of Senior Indebtedness in excess of the
amount required to make payment in full, or provision for payment, of such
Senior Indebtedness.
SECTION 8.05. Obligations of Issuers Unconditional.
Nothing contained in this Article Eight or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as among the
Issuers and the Holders of the Securities, the obligation of the Issuers, which
is absolute and unconditional, to pay to the Holders of the Securities the
principal of and interest on the Securities as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders of the Securities and creditors of the
Issuers other than the holders of the Senior Indebtedness, nor shall anything
herein or therein prevent the Holder of any Security or the Trustee on their
behalf from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
Eight of the holders
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of the Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article Eight shall restrict the right of the Trustee or the
Holders of Securities to take any action to declare the Securities to be due and
payable prior to their stated maturity pursuant to Section 6.01 or to pursue any
rights or remedies hereunder; provided, however, that all Senior Indebtedness
then due and payable shall first be paid in full before the Holders of the
Securities or the Trustee are entitled to receive any direct or indirect payment
from the Company of principal of, premium, if any, or interest on the
Securities.
SECTION 8.06. Notice to Trustee.
The Issuers shall give prompt written notice to the Trustee of
any fact known to the Issuers that would prohibit the making of any payment to
or by the Trustee in respect of the Securities pursuant to the provisions of
this Article Eight. The Trustee shall not be charged with knowledge of the
existence of any event of default with respect to any Senior Indebtedness or of
any other facts that would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice in writing at
its Corporate Trust Office to that effect signed by an Officer of each of the
Issuers, or by a holder of Senior Indebtedness or trustee or agent therefor; and
prior to the receipt of any such written notice, the Trustee shall, subject to
Article Seven, be entitled to assume that no such facts exist; provided that if
the Trustee shall not have received the notice provided for in this Section 8.06
at least two Business Days prior to the date upon which by the terms of this
Indenture any moneys shall become payable for any purpose (including, without
limitation, the payment of the principal of or interest on any Security), then,
regardless of anything herein to the contrary, the Trustee shall have full power
and authority to receive any moneys from the Issuers and to apply the same to
the purpose for which they were received, and shall not be affected by any
notice to the contrary that may be received by it on or after such prior date.
Nothing contained in this Section 8.06 shall limit the right of the holders of
Senior Indebtedness to recover payments as contemplated by Section 8.03. The
Trustee shall be entitled to rely on the delivery to it of a written notice by a
Person purporting to be a holder of any Senior Indebtedness (or a trustee on
behalf of, or other representative of, such holder) to establish that such
notice has been given by a holder of such Senior Indebtedness or a trustee or
representative on behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Eight, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Eight, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
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SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities
referred to in this Article Eight, the Trustee and the Holders of the Securities
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation
or reorganization proceedings are pending, or upon a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Securities for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Eight.
SECTION 8.08. Trustee's Relation to Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all the
rights set forth in this Article Eight with respect to any Senior Indebtedness
that may at any time be held by it in its individual or any other capacity to
the same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Trustee or any Paying Agent of any of its rights as
such holder.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Eight, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness (except
as provided in Section 8.02(c) or 8.03(b)). The Trustee shall not be liable to
any such holders if the Trustee shall in good faith mistakenly pay over or
distribute to Holders of Securities or to the Company or to any other person
cash, property or securities to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article Eight or otherwise.
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the
Issuers or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Issuers or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Issuers with the terms of this Indenture,
regardless of any knowledge thereof that any such holder may have or otherwise
be charged with. The provisions of this Article Eight are intended to be for the
benefit of, and shall be enforceable directly by, the holders of Senior
Indebtedness.
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SECTION 8.10. Securityholders Authorize Trustee To Effectuate Subordination of
Securities.
Each Holder of Securities by its acceptance of such Securities
authorizes and expressly directs the Trustee on its behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Eight, and appoints the Trustee its attorney-in-fact for such
purposes, including, in the event of any dissolution, winding-up, liquidation or
reorganization of either of the Issuers (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of either of the Issuers, the filing of a claim for the
unpaid balance of its Securities in the form required in those proceedings.
SECTION 8.11. This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Securities by reason of any provision of
this Article Eight shall not be construed as preventing the occurrence of an
Event of Default specified in clause (1), (2) or (3) of Section 6.01.
SECTION 8.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Eight shall apply to amounts due to
the Trustee pursuant to other sections in this Indenture, including, without
limitation, Section 7.07.
SECTION 8.13. No Waiver of Subordination Provisions.
Without in any way limiting the generality of Section 8.09,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
Eight or the obligations hereunder of the Holders of the Securities to the
holders of Senior Indebtedness, do any one or more of the following: (a) change
the manner, place or terms of payment or extend the time of payment of, or renew
or alter, Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding or secured; (b) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (c) release any Person liable in any
manner for the collection of Senior Indebtedness; and (d) exercise or refrain
from exercising any rights against the Issuers and any other Person.
SECTION 8.14. Subordination Provisions Not Applicable to Collateral Held in
Trust for Securityholders; Payments May Be Paid Prior to
Dissolution.
All money and Government Securities deposited in trust with
the Trustee pursuant to and in accordance with Article Nine shall be for the
sole benefit of the Holders and shall not be subject to this Article Eight.
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Nothing contained in this Article Eight or elsewhere in this
Indenture shall prevent (i) the Issuers, except under the conditions described
in Section 8.02, from making payments of principal of, premium, if any, and
interest on the Securities, or from depositing with the Trustee any moneys for
such payments or from effecting a termination of the Issuers' and the
Guarantors' obligations under the Securities and this Indenture as provided in
Article Nine, or (ii) the application by the Trustee of any moneys deposited
with it for the purpose of making such payments of principal of, premium, if
any, and interest on the Securities, to the holders entitled thereto unless at
least two Business Days prior to the date upon which such payment becomes due
and payable, the Trustee shall have received the written notice provided for in
Section 8.02(a) or 8.02(b) or in Section 8.06. The Issuers shall give prompt
written notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of either of the Issuers.
SECTION 8.15. Acceleration of Securities.
If payment of the Securities is accelerated because of an
Event of Default, the Issuers shall promptly notify holders of the Senior
Indebtedness of the acceleration.
ARTICLE IX.
DISCHARGE OF INDENTURE
SECTION 9.01 Option to Effect Legal Defeasance or Covenant Defeasance.
Subject to the provisions of Article Eight, the Issuers may terminate
their and the Guarantors' substantive obligations in respect of the Securities
by delivering all outstanding Securities to the Trustee for cancellation and
paying all sums payable by them on account of principal of, premium, if any, and
interest on all Securities or otherwise. In addition to the foregoing, subject
to the provisions of Article Eight with respect to the creation of the
defeasance trust provided for in Section 9.04(a), the Issuers and the Guarantors
may, at the option of their respective Boards of Directors evidenced by
resolutions set forth in an Officers' Certificate for each such entity, at any
time, with respect to the Securities, elect to have either Section 9.02 or 9.03
be applied to all outstanding Securities upon compliance with the conditions set
forth below in this Article Nine.
SECTION 9.02 Legal Defeasance and Discharge.
Upon the exercise by the Issuers and the Guarantors under Section 9.01
of the option applicable to this Section 9.02, the Issuers and the Guarantors
shall be deemed to have been discharged from their respective obligations with
respect to all outstanding Securities on the date the conditions set forth below
are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that each of the Guarantors shall be deemed to be released from
its respective Guaranty and each of the Issuers shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Securities,
which shall thereafter be deemed to be "outstanding" only for the purposes of
Section 9.05 and the other Sections of this Indenture referred to in (a) and (b)
below of this paragraph, and to have satisfied all of their other
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respective obligations under such Securities and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Securities to receive payments in respect of the
principal of, premium, if any, and interest (including Additional Interest, if
any) on such Securities when such payments are due, or on the redemption date,
as the case may be, (b) the Issuers' obligations with respect to such Securities
under Sections 2.05, 2.07, 2.08, 2.10, 2.11 and 4.02, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Issuers'
obligations in connection therewith and (d) this Article Nine. Subject to
compliance with this Article Nine, the Issuers and the Guarantors may exercise
the option under this Section 9.02 notwithstanding the prior exercise of the
option under Section 9.03 with respect to the Securities.
SECTION 9.03 Covenant Defeasance.
Upon the exercise by the Issuers and the Guarantors under Section 9.01
of the option applicable to this Section 9.03, each of the Guarantors and each
of the Issuers shall be released from its respective obligations under the
covenants contained in Sections 4.03, 4.04, 4.05, 4.06, 4.09, 4.10, 4.11, 4.12,
4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21 and 4.22 and Article Five with
respect to the outstanding Securities on and after the date the conditions set
forth below are satisfied (hereinafter, "Covenant Defeasance"), and the
Securities shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Securities shall not be deemed outstanding for accounting
purposes). For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Securities, each of the Issuers and each of the Guarantors
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 6.01(4), 6.01(5) and 6.01(6), but, except
as specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby. In addition, upon the exercise by the Guarantors and the
Issuers under Section 9.01 of the option applicable to this Section 9.03,
Sections 6.01(7) and 6.01(8) shall not constitute Events of Default.
SECTION 9.04 Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 9.02 or Section 9.03 to the outstanding Securities:
(a) The Issuers 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 Article Nine applicable to it) 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 Securities, (i) cash in United States Dollars, (ii)
non-callable Government Securities which through the
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scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before
the due date of any payment, cash in United States Dollars, or (iii) a
combination thereof, in such amounts, as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee at the expense of the Issuers, to pay and discharge and
which shall be applied by the Trustee (or other qualifying trustee) to
pay and discharge the principal of, premium, if any, and interest
(including Additional Interest, if any) on the outstanding Securities
on the stated maturity or on the applicable optional redemption date,
as the case may be, of such principal or installment of principal,
premium, if any, or interest (including Additional Interest, if any);
provided that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such non-callable Government
Securities to said payments with respect to the Securities;
(b) In the case of an election under Section 9.02, the Issuers
shall have delivered to the Trustee an Opinion of Counsel reasonably
satisfactory to the Trustee confirming that (i) the Issuers have
received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date hereof, there has been a change
in the applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that, the
Holders of the outstanding Securities will not recognize income, gain
or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(c) In the case of an election under Section 9.03, the Issuers
shall have delivered to the Trustee an Opinion of Counsel reasonably
satisfactory to the Trustee to the effect that the Holders of the
outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amount, in the same
manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(d) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit or, insofar as Section 6.01(9) or 6.01(10) is concerned, at any
time in the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(e) Such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which either
of the Issuers is a party or by which either of the Issuers is bound;
(f) Each of the Issuers shall have delivered to the Trustee an
Officers' Certificate stating that the deposit made by such Issuer
pursuant to its election under Section 9.02 or 9.03 was not made by
such Issuer with the intent of preferring the Holders over any
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other creditors of such Issuer or with the intent of defeating,
hindering, delaying or defrauding creditors of such Issuer or others;
and
(g) Each of the Issuers shall have delivered to the Trustee an
Officers' Certificate stating that all conditions precedent provided
for or relating to either the Legal Defeasance under Section 9.02 or
the Covenant Defeasance under Section 9.03 (as the case may be) have
been complied with as contemplated by this Section 9.04.
SECTION 9.05 Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 9.06, all money and Government Securities (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 9.05, the "Trustee") pursuant to
Section 9.04 in respect of the outstanding Securities shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company or a Guarantor, if any, acting as Paying Agent) as the
Trustee may determine, to the Holders of such Securities of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Issuers shall jointly and severally pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the cash or
Government Securities deposited pursuant to Section 9.04 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Securities.
Anything in this Article Nine to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or Government Securities held by it as provided in
Section 9.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
9.04(a)) at the expense of the Company, 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 9.06 Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest (including Additional Interest, if any) on any Security and
remaining unclaimed for two years after such principal, and premium, if any, or
interest (including Additional Interest, if any) has become due and payable
shall be paid to the Company on its written request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as a secured creditor, look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustees thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying
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Agent, before being required to make any such repayment, may at the expense of
the Company cause to be published once, in the New York Times and The Wall
Street Journal (national edition), notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
SECTION 9.07 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
Dollars or Government Securities in accordance with Section 9.02 or 9.03, as the
case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the obligations of each of the Guarantors and each of the Issuers under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 9.02 or 9.03 until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 9.02 or 9.03, as the case may be; provided, however, that, if either of
the Issuers makes any payment of principal of, premium, if any, or interest
(including Additional Interest, if any) on any Security following the
reinstatement of its obligations, the Issuers shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE X.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Issuers and the Guarantors, when authorized by a
resolution of their respective Boards of Directors, and the Trustee may amend or
supplement this Indenture, the Securities or the Collateral Documents without
notice to or consent of any Securityholder:
(i) to cure any ambiguity, defect or inconsistency;
provided, however, that such amendment or supplement does not
adversely affect the rights of any Holder;
(ii) to effect the assumption by a successor Person
of all obligations of either Issuer under the Securities, this
Indenture, the Registration Rights Agreement and the
Collateral Documents in connection with any transaction
complying with Article Five of this Indenture;
(iii) to provide for uncertificated Securities in
addition to or in place of certificated Securities;
(iv) to comply with any requirements of the SEC in
order to effect or maintain the qualification of this
Indenture under the TIA;
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(v) to make any change that would provide any
additional benefit or rights to the Holders;
(vi) to make any other change that does not adversely
affect the rights of any Holder under this Indenture;
(vii) to evidence the succession of another Person to
any Guarantor and the assumption by any such successor of the
covenants of such Guarantor herein and in the Guaranty;
(viii) to add to the covenants of the Issuers or the
Guarantors for the benefit of the Holders, or to surrender any
right or power herein conferred upon the Issuers or any
Guarantor;
(ix) to secure the Securities pursuant to the
requirements of Section 4.18 or otherwise; or
(x) to reflect the release of a Guarantor from its
obligations with respect to its Guarantee in accordance with
the provisions of Section 11.03 and to add a Guarantor
pursuant to the requirements of Section 4.20;
provided, however, that the Issuers have delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 10.01.
SECTION 10.02. With Consent of Holders.
Subject to Section 6.07, the Issuers and the Guarantors, when
authorized by a resolution of their respective Boards of Directors, and the
Trustee may amend or supplement this Indenture or the Securities with the
written consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to Section 6.07, the Holders of a majority in
principal amount of the outstanding Securities may waive compliance by the
Issuers or any Guarantor with any provision of this Indenture, the Collateral
Documents or the Securities. However, without the consent of each Securityholder
affected, an amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may not:
(1) change the Stated Maturity of the principal of or any
installment of interest on any Security or alter the optional
redemption or repurchase provisions of any Security or this Indenture
in a manner adverse to the Holders of the Securities;
(2) reduce the principal amount (or the premium) of any
Security;
(3) reduce the rate of or extend the time for payment of
interest on any Security;
(4) change the place or currency of payment of the principal
of (or premium, if any) or interest on any Security;
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(5) modify any provisions of Section 6.04 (other than to add
sections of this Indenture or the Securities subject thereto) or 6.07
or this Section 10.02 (other than to add sections of this Indenture or
the Securities which may not be amended, supplemented or waived without
the consent of each Securityholder affected);
(6) reduce the percentage of the principal amount of
outstanding Securities necessary for amendment to or waiver of
compliance with any provision of this Indenture or the Securities or
for waiver of any Default;
(7) waive a default in the payment of the principal of or
interest on or redemption payment with respect to any Security (except
a rescission of acceleration of the Securities by the Holders as
provided in Section 6.02 and a waiver of the payment default that
resulted from such acceleration);
(8) modify the ranking or priority of the Securities or of the
Guaranties in respect of any Guarantor, or modify the definition of
Senior Indebtedness or Guarantor Senior Indebtedness, or amend or
modify any of the provisions of Article Eight or Article Twelve in any
manner adverse to the Holders;
(9) release any Guarantor from any of its obligations under
its Guaranty or this Indenture otherwise than in accordance with this
Indenture;
(10) modify the provisions relating to any Offer to Purchase
required pursuant to Section 4.05 or 4.14 in a manner materially
adverse to the Holders; or
(11) release any of the Collateral from the lien created by
the Security Agreement prior to the time specified therein.
An amendment under this Section 10.02 may not make any change
under Article Eight, Article Nine, Article Eleven or Article Twelve hereof that
adversely affects in any material respect the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any representative thereof authorized to give a consent) shall have consented to
such change.
It shall not be necessary for the consent of the Holders under
this Section 10.02 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
10.02 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 supplemental indenture.
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SECTION 10.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 10.04. Revocation and Effect of 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 Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to such Holder's Security or portion of such
Security by notice to the Trustee or the Company received before the date on
which the Trustee receives an Officers' Certificate certifying that the Holders
of the requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
The Issuers may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders of Securities entitled to
consent to any amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last sentence of the immediately preceding paragraph, those
persons who were Holders of Securities 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 such Securities after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (10) of Section 10.02. In that case the amendment,
supplement or waiver shall bind each Holder of a Security who has consented to
it and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security.
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Issuers or
the Trustee so determine, the Issuers in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or issue a new Security shall
not affect the validity and effect of such amendment, supplement or waiver.
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SECTION 10.06. Trustee To Sign Amendments, etc.
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 amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Issuers and
the Guarantors, enforceable in accordance with its terms (subject to customary
exceptions). The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
ARTICLE XI.
GUARANTY
SECTION 11.01. Unconditional Guaranty.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees to each Holder of a Security authenticated by the Trustee and to the
Trustee and its successors and assigns that: the principal of, premium, if any,
and interest on the Securities will be promptly paid in full when due, subject
to any applicable grace period, whether at maturity, by acceleration or
otherwise, and interest on the overdue principal and interest on any overdue
interest on the Securities and all other obligations of the Issuers to the
Holders or the Trustee hereunder or under the Securities will be promptly paid
in full or performed, all in accordance with the terms hereof and thereof;
subject, however, to the limitations set forth in Section 11.04. Each Guarantor
hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Securities or
this Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder of the Securities with respect to any provisions hereof or
thereof, the recovery of any judgment against either Issuer, any action to
enforce the same or any other circumstance that may otherwise constitute a legal
or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of either Issuer, any right to require a
proceeding first against either Issuer, protest, notice and all demands
whatsoever and covenants that the Guaranty will not be discharged except by
complete performance of the obligations contained in the Securities, this
Indenture, and this Guaranty. If any Holder or the Trustee is required by any
court or otherwise to return to either Issuer, any Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to either
Issuer or any Guarantor, any amount paid by either Issuer or any Guarantor to
the Trustee or such Holder, this Guaranty, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Guarantor further agrees
that, as between each Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Six for the purpose of this
Guaranty, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any acceleration of such obligations as provided in Article Six,
such obligations (whether or not due
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and payable) shall forthwith become due and payable by each Guarantor for the
purpose of this Guaranty.
SECTION 11.02. Severability.
In case any provision of this Guaranty shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.03. Release of a Guarantor.
If the Securities are defeased in accordance with the terms of
Section 9.02 of this Indenture, or if Section 5.01(b) is complied with, then
each Guarantor (in the case of such a defeasance) or the applicable Guarantor
(in the case of compliance with Section 5.01(b)) shall be deemed released from
all obligations under this Article Eleven without any further action required on
the part of the Trustee or any Holder. The Trustee shall, at the sole cost and
expense of the Company and upon receipt at the reasonable request of the Trustee
of an Opinion of Counsel that the provisions of this Section 11.03 have been
complied with, deliver an appropriate instrument evidencing such release upon
receipt of a request by the Company accompanied by an Officers' Certificate
certifying as to the compliance with this Section 11.03. Any Guarantor not
released pursuant to the first sentence of this Section 11.03 remains liable for
the full amount of principal of, premium, if any, and interest on the Securities
and the other obligations of the Company hereunder as provided in this Article
Eleven.
SECTION 11.04. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder and
the Trustee, hereby confirms that it is the intention of all such parties that
the guarantee by such Guarantor pursuant to its Guaranty not constitute a
fraudulent transfer or conveyance for purposes of title 11 of the United States
Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar U.S. federal or state or other applicable law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guaranty
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guaranty or
pursuant to Section 11.05, result in the obligations of such Guarantor under the
Guaranty not constituting such fraudulent transfer or conveyance.
SECTION 11.05. Contribution.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Guaranty, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount, based on the net assets of each Guarantor
(including the Funding Guarantor), determined in accordance with GAAP,
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subject to Section 11.04, for all payments, damages and expenses incurred by
that Funding Guarantor in discharging the Issuers' obligations with respect to
the Securities or any other Guarantor's obligations with respect to the
Guaranty.
SECTION 11.06. Subordination of Subrogation and Other Rights.
Each Guarantor hereby agrees that any claim against either
Issuer that arises from the payment, performance or enforcement of such
Guarantor's obligations under its Guaranty or this Indenture, including, without
limitation, any right of subrogation, shall be subject and subordinate to, and
no payment with respect to any such claim of such Guarantor shall be made
before, the payment in full in cash of all outstanding Securities in accordance
with the provisions provided therefor in this Indenture.
SECTION 11.07. Applicability of Article Eleven.
Anything contained in this Article Eleven to the contrary
notwithstanding, Article Eleven shall not apply unless and until a Person is
required to become a Guarantor pursuant to Section 4.20 hereof.
ARTICLE XII.
SUBORDINATION OF GUARANTY
SECTION 12.01. Guaranty Obligations Subordinated to Guarantor Senior
Indebtedness.
Each Guarantor covenants and agrees, and the Trustee and each
Holder of the Securities by its acceptance thereof likewise covenant and agree,
that the Guaranty shall be issued subject to the provisions of this Article
Twelve; and each person holding any Security, whether upon original issue or
upon transfer, assignment or exchange thereof, accepts and agrees that all
payments of the principal of, premium, if any, and interest on the Securities
pursuant to the Guaranty made by or on behalf of any Guarantor shall, to the
extent and in the manner set forth in this Article Twelve, be subordinated and
junior in right of payment to the prior payment in full in cash of all amounts
payable under Guarantor Senior Indebtedness of such Guarantor.
SECTION 12.02. No Payment on Guarantees in Certain Circumstances.
(a) Upon the occurrence of a Non-Payment Event of Default on
Designated Senior Indebtedness of a Guarantor, no payment or distribution of any
assets or securities of such Guarantor of any kind or character (including,
without limitation, cash, property and any payment or distribution which may be
payable or deliverable by reason of the payment of any other Indebtedness of
such Guarantor being subordinated to the payment of the Securities by such
Guarantor, but excluding any payment or distribution of Permitted Junior
Guarantor Securities and excluding payments from the Interest Escrow Account)
may be made by or on behalf of such Guarantor, including, without limitation, by
way of set-off or otherwise, for or
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on account of the Securities, or for or on account of the purchase, redemption,
defeasance or other acquisition of Securities, and neither the Trustee nor any
Holder or owner of any Securities shall take or receive from such Guarantor,
directly or indirectly in any manner, payment in respect of all or any portion
of the Securities, for a period (a "Guarantor Payment Blockage Period")
commencing on the date of receipt by the Trustee of written notice from the
Representative of such Non-Payment Event of Default unless and until (subject to
any blockage of payments that may then be in effect under Section 12.02(b)) the
earliest of (x) the date on which more than 179 days shall have elapsed since
receipt of such written notice by the Trustee, (y) such Non-Payment Event of
Default shall have been cured or waived in writing or shall have ceased to exist
or such Designated Senior Indebtedness shall have been paid in full or (z) such
Guarantor Payment Blockage Period shall have been terminated by written notice
to the Company or the Trustee from the Representative, after which, in the case
of clause (x), (y) or (z), such Guarantor shall resume making any and all
required payments in respect of the Securities, including any missed payments.
Notwithstanding any other provision of this Indenture, (x) in no event shall a
Guarantor Payment Blockage Period commenced in accordance with the provisions of
this Indenture described in this paragraph extend beyond 179 days from the date
of the receipt by the Trustee of the notice referred to above, (y) there shall
be a period of at least 181 consecutive days in each 360-day period when no
Guarantor Payment Blockage Period is in effect and (z) not more than one
Guarantor Payment Blockage Period may be commenced with respect to the
Securities during any period of 360 consecutive days. Notwithstanding any other
provision of this Indenture, no event of default with respect to Designated
Senior Indebtedness of a Guarantor which existed or was continuing on the date
of the commencement of any Guarantor Payment Blockage Period initiated by the
Representative shall be, or be made, the basis for the commencement of any other
Guarantor Payment Blockage Period initiated by the Representative, whether or
not within a period of 360 consecutive days, unless such event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
(b) No payment or distribution of any assets or securities of
any Guarantor of any kind or character (including, without limitation, cash,
property and any payment or distribution which may be payable or deliverable by
reason of the payment of any other Indebtedness of such Guarantor being
subordinated to the payment of the Securities by the Company, but excluding any
payment or distribution of Permitted Junior Guarantor Securities and excluding
payments from the Interest Escrow Account) may be made by or on behalf of any
Guarantor pursuant to the terms of such Guarantor's Guaranty including, without
limitation, by way of set-off or otherwise, for or on account of the Securities,
except from those funds held in trust for the benefit of Holders of any
Securities pursuant to the procedures set forth under Section 9.01, or for or on
account of the purchase, redemption, defeasance or other acquisition of the
Securities, and neither the Trustee nor any Holder or owner of any Securities
shall take or receive from any Guarantor, directly or indirectly in any manner,
payment in respect of the Guarantor's Guaranty following the delivery by the
Representative to the Trustee of written notice of (i) the occurrence of a
Payment Default on Designated Senior Indebtedness of such Guarantor or (ii) the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness
of such Guarantor and the acceleration of the maturity of Designated Senior
Indebtedness of such Guarantor in accordance with its terms and in any such
event, such prohibition shall continue until such Payment Default is cured,
waived in writing or ceases to exist or such acceleration has been rescinded or
otherwise cured. At such time as the prohibition set forth in the preceding
sentence
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shall no longer be in effect, subject to the provisions of Section 12.02(a), the
Guarantors shall resume making any and all required payments in respect of the
Guaranties, including any missed payments.
(c) In the event that, notwithstanding the foregoing provision
prohibiting such payment, any payment shall be received by the Trustee or any
Holder when such payment is prohibited by Section 12.02, such payment shall be
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Designated Senior Indebtedness of the applicable Guarantor or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Designated Senior Indebtedness may have been
issued, as their respective interests may appear, but only to the extent that,
upon notice from the Trustee to the holders of such Designated Senior
Indebtedness that such prohibited payment has been made, the holders of such
Designated Senior Indebtedness (or their representative or representatives or a
trustee) notify the Trustee in writing of the amounts then due and owing on such
Designated Senior Indebtedness, if any, and only the amounts specified in such
notice to the Trustee shall be paid to the holders of such Designated Senior
Indebtedness.
SECTION 12.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities
of any Guarantor of any kind or character, whether in cash, property or
securities (excluding any payment or distribution of Permitted Junior Guarantor
Securities and payments from the Interest Escrow Account), upon any dissolution
or other winding-up or liquidation, rearrangement or reorganization of such
Guarantor, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings or any general assignment for the benefit of
creditors or other marshalling of assets or liabilities of such Guarantor
(except in connection with the merger or consolidation of such Guarantor or
liquidation or dissolution following the transfer of substantially all of its
assets, upon the terms and conditions permitted under the circumstances
described in Section 5.01), all Guarantor Senior Indebtedness of such Guarantor
shall first be paid and satisfied in full in cash before the Holders of the
Securities or the Trustee on behalf of such Holders shall be entitled to receive
any payment by such Guarantor with respect to its Guaranty (other than payments
from the Interest Escrow Account), or any payment by such Guarantor to acquire
any of the Securities for cash, property or securities, or any distribution by
such Guarantor with respect to the Securities of any cash, property or
securities (excluding any payment or distribution of Permitted Junior Guarantor
Securities and excluding payments from the Interest Escrow Account). Before any
payment may be made by, or on behalf of, any Guarantor of the principal of,
premium, if any, or interest on the Securities (other than payments from the
Interest Escrow Account) upon any such dissolution or winding-up or liquidation,
rearrangement or reorganization, any payment or distribution of assets or
securities of such Guarantor of any kind or character, whether in cash, property
or securities (excluding any payment or distribution of Permitted Junior
Guarantor Securities and excluding payments from the Interest Escrow Account) to
which the Holders of the Securities or the Trustee on their behalf would be
entitled, but for the subordination provisions of this Indenture, shall be made
by such Guarantor or by any receiver, trustee in bankruptcy, liquidation
trustee, agent or other Person making such payment or distribution, directly to
the holders of the Guarantor Senior Indebtedness of such Guarantor (pro rata to
such holders on the basis of the respective amounts of such Guarantor Senior
Indebtedness held by such holders) or their representatives or to the
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trustee or trustees or agent or agents under any agreement or indenture pursuant
to which any of such Guarantor Senior Indebtedness might have been issued, as
their respective interests may appear, to the extent necessary to pay all such
Guarantor Senior Indebtedness in full in cash after giving effect to any prior
or concurrent payment, distribution or provision therefor to or for the holders
of such Guarantor Senior Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, the Trustee or any Holder of
Securities receives any payment or distribution of assets of a Guarantor of any
kind, whether in cash, property or securities (excluding any payment or
distribution of Permitted Junior Guarantor Securities and excluding payments
from the Interest Escrow Account), including, without limitation, by way of
set-off or otherwise, in respect of such Guarantor's Guaranty at a time when
such payment or distribution is prohibited by Section 12.03 and before all
Guarantor Senior Indebtedness of such Guarantor is paid and satisfied in full in
cash, then such payment or distribution shall be held by the recipient in trust
for the benefit of holders of Guarantor Senior Indebtedness of such Guarantor
and will be immediately paid over or delivered to the trustee in bankruptcy or
such other Person making payment or distribution of assets of such Guarantor to
the extent necessary to make payment in full in cash of all Guarantor Senior
Indebtedness of such Guarantor remaining unpaid, after giving effect to any
current payment or distribution, or provision therefor, to or for the holders of
Guarantor Senior Indebtedness of such Guarantor.
The consolidation of a Guarantor with, or the merger of a
Guarantor with or into, a corporation or the liquidation or dissolution of a
Guarantor following the conveyance or transfer of its property as an entirety,
or substantially as an entirety, to a corporation upon the terms and conditions
provided in Article Five shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 12.03 if such
corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article Five. The consolidation
of any Guarantor with, or the merger of any Guarantor with or into the Company
or any other Guarantor, or the liquidation or dissolution of any Guarantor
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to the Company or any other Guarantor shall not be
deemed a dissolution, winding-up, liquidation or reorganization for purposes of
this Section 12.03.
SECTION 12.04. Subrogation.
Upon the payment in full in cash of all Guarantor Senior
Indebtedness of a Guarantor, or provision for payment, the Holders of the
Securities shall be subrogated to the rights of the holders of such Guarantor
Senior Indebtedness to receive payments or distributions of cash, property or
securities of such Guarantor made on such Guarantor Senior Indebtedness until
the principal of, premium, if any, and interest on the Securities shall be paid
in full in cash; and, for the purposes of such subrogation, no payments or
distributions to the holders of such Guarantor Senior Indebtedness of any cash,
property or securities to which the Holders of the Securities or the Trustee on
their behalf would be entitled except for the provisions of this Article Twelve,
and no payment over pursuant to the provisions of this Article Twelve to the
holders of such Guarantor Senior Indebtedness by Holders of the Securities or
the Trustee on their behalf shall, as between such Guarantor, its creditors
other than holders of such Guarantor Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment by such
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Guarantor to or on account of such Guarantor Senior Indebtedness. It is
understood that the provisions of this Article Twelve are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Securities, on the one hand, and the holders of Guarantor Senior Indebtedness of
each Guarantor, on the other hand.
If any payment or distribution to which the Holders of the
Securities would otherwise have been entitled but for the provisions of this
Article Twelve shall have been applied, pursuant to the provisions of this
Article Twelve, to the payment of all amounts payable under Guarantor Senior
Indebtedness, then and in such case, the Holders of the Securities shall be
entitled to receive from the holders of such Guarantor Senior Indebtedness any
payments or distributions received by such holders of Guarantor Senior
Indebtedness in excess of the amount required to make payment in full, or
provision for payment, of such Guarantor Senior Indebtedness.
SECTION 12.05. Obligations of Guarantors Unconditional.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Securities or the Guaranties is intended to or shall impair,
as among the Guarantors and the Holders of the Securities, the obligation of
each Guarantor, which is absolute and unconditional, to pay to the Holders of
the Securities the principal of, premium, if any, and interest on the Securities
as and when the same shall become due and payable in accordance with the terms
of the Guaranty of such Guarantor, or is intended to or shall affect the
relative rights of the Holders of the Securities and creditors of any Guarantor
other than the holders of Guarantor Senior Indebtedness of such Guarantor, nor
shall anything herein or therein prevent the Holder of any Security or the
Trustee on their behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Twelve of the holders of Guarantor Senior Indebtedness in
respect of cash, property or securities of any Guarantor received upon the
exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article Twelve shall restrict the right of the Trustee or the
Holders of Securities to take any action to declare the Securities to be due and
payable prior to their stated maturity pursuant to Section 6.01 or to pursue any
rights or remedies hereunder; provided, however, that all Guarantor Senior
Indebtedness of any Guarantor then due and payable shall first be paid in full
before the Holders of the Securities or the Trustee are entitled to receive any
direct or indirect payment from such Guarantor of principal of, premium, if any,
or interest on the Securities pursuant to such Guarantor's Guaranty.
SECTION 12.06. Notice to Trustee.
The Company and each Guarantor shall give prompt written
notice to the Trustee of any fact known to the Company or such Guarantor that
would prohibit the making of any payment to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article Twelve. The Trustee shall
not be charged with knowledge of the existence of any event of default with
respect to any Guarantor Senior Indebtedness or of any other facts that would
prohibit the making of any payment to or by the Trustee unless and until the
Trustee shall have
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received notice in writing at its Corporate Trust Office to that effect signed
by an Officer of the Company or such Guarantor, or by a holder of Guarantor
Senior Indebtedness or trustee or agent therefor; and prior to the receipt of
any such written notice, the Trustee shall, subject to Article Seven, be
entitled to assume that no such facts exist; provided that if the Trustee shall
not have received the notice provided for in this Section 12.06 at least two
Business Days prior to the date upon which by the terms of this Indenture any
moneys shall become payable for any purpose (including, without limitation, the
payment of the principal of or interest on any Security), then, regardless of
anything herein to the contrary, the Trustee shall have full power and authority
to receive any moneys from any Guarantor and to apply the same to the purpose
for which they were received, and shall not be affected by any notice to the
contrary that may be received by it on or after such prior date. Nothing
contained in this Section 12.06 shall limit the right of the holders of
Guarantor Senior Indebtedness to recover payments as contemplated by Section
12.02 or 12.03. The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person purporting to be a holder of any Guarantor Senior
Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such
Guarantor Senior Indebtedness or a trustee or representative on behalf of any
such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Indebtedness to participate in any payment or distribution
pursuant to this Article Twelve, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Twelve, and if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities of a
Guarantor referred to in this Article Twelve, the Trustee and the Holders of the
Securities shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Securities for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Guarantor Senior Indebtedness
of such Guarantor and other indebtedness of such Guarantor, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Twelve.
SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all the
rights set forth in this Article Twelve with respect to any Guarantor Senior
Indebtedness that may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of
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Guarantor Senior Indebtedness, and nothing in this Indenture shall deprive the
Trustee or any Paying Agent of any of its rights as such holder.
With respect to the holders of Guarantor Senior Indebtedness,
the Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Twelve, and no implied
covenants or obligations with respect to the holders of Guarantor Senior
Indebtedness shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior
Indebtedness (except as provided in Sections 12.02(b) and 12.03(b)). The Trustee
shall not be liable to any such holders if the Trustee shall in good faith
mistakenly pay over or distribute to Holders of Securities or to the Company or
to any other person cash, property or securities to which any holders of
Guarantor Senior Indebtedness shall be entitled by virtue of this Article Twelve
or otherwise.
SECTION 12.09. Subordination Rights Not Impaired by Acts or Omissions of the
Guarantors or Holders of Guarantor Senior Indebtedness.
No right of any present or future holders of any Guarantor
Senior Indebtedness to enforce subordination as provided herein shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of any Guarantor or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by any Guarantor with the terms of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with. The provisions of this Article Twelve are intended to
be for the benefit of, and shall be enforceable directly by, the holders of
Guarantor Senior Indebtedness.
SECTION 12.10. Securityholders Authorize Trustee To Effectuate Subordination of
Guaranty.
Each Holder of Securities by its acceptance of such Securities
authorizes and expressly directs the Trustee on its behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Twelve, and appoints the Trustee its attorney-in-fact for such
purposes, including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of such Guarantor, the filing of a claim for the unpaid
balance of its or his Securities in the form required in those proceedings.
SECTION 12.11. This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Securities by reason of any provision of
this Article Twelve shall not be construed as preventing the occurrence of an
Event of Default specified in clauses (1) or (2) of Section 6.01.
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SECTION 12.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Twelve shall apply to amounts due to
the Trustee pursuant to other sections in this Indenture.
SECTION 12.13. No Waiver of Guaranty Subordination Provisions.
Without in any way limiting the generality of Section 12.09,
the holders of Guarantor Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Securities to the
holders of Guarantor Senior Indebtedness, do any one or more of the following:
(a) change the manner, place or terms of payment or extend the time of payment
of, or renew or alter, Guarantor Senior Indebtedness or any instrument
evidencing the same or any agreement under which Guarantor Senior Indebtedness
is outstanding or secured; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Guarantor Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Guarantor Senior Indebtedness; and (d) exercise or refrain from exercising any
rights against any Guarantor and any other Person.
SECTION 12.14. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Twelve or elsewhere in this
Indenture shall prevent (i) a Guarantor, except under the conditions described
in Section 12.02, from making payments of principal of, premium, if any, and
interest on the Securities, or from depositing with the Trustee any moneys for
such payments or from effecting a termination of the Issuers' and the
Guarantors' obligations under the Securities and this Indenture as provided in
Article Nine, or (ii) the application by the Trustee of any moneys deposited
with it for the purpose of making such payments of principal of, premium, if
any, and interest on the Securities, to the holders entitled thereto unless at
least two Business Days prior to the date upon which such payment becomes due
and payable, the Trustee shall have received the written notice provided for in
Section 12.02 or in Section 12.06. A Guarantor shall give prompt written notice
to the Trustee of any dissolution, winding-up, liquidation or reorganization of
such Guarantor.
ARTICLE XIII.
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that
are required to be a part of this Indenture, and shall, to the extent
applicable, be governed by such provisions. If any provision of this Indenture
modifies any TIA provision that may be so modified, such TIA provision shall be
deemed to apply to this Indenture as so modified. If any provision of this
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Indenture excludes any TIA provision that may be so excluded, such TIA provision
shall be excluded from this Indenture.
The provisions of TIA ss.ss. 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person, by facsimile and confirmed by first-class mail,
or mailed by first-class mail addressed as follows:
if to the Issuers or to the Guarantors:
Digital Television Services, LLC
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Chief Financial Officer
Facsimile: (770) 645-9586
Telephone: (770) 645-4440
with a copy to:
Nelson Mullins Riley & Scarborough, LLP
100 North Tryon Street
Suite 3350
NationsBank Corporate Center
Charlotte, North Carolina 28202
Attention: H. Bryan Ives III
Facsimile: (704) 377-4814
Telephone: (704) 417-3000
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if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
Telephone: (212) 815-5092
The Issuers or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
When notice is sent by facsimile, notice is effective upon
confirmation of receipt, provided that a duplicate copy of such notice is
promptly given by first-class mail. Any notice given by facsimile shall be
deemed to have been received on the next business day if it is received after
5:00 p.m. (recipient's time) or on a nonbusiness day.
Any notice or communication mailed, first-class, postage
prepaid, to a Holder including any notice delivered in connection with TIA ss.
310(b), TIA ss. 313(c), TIA ss. 314(a) and TIA ss. 315(b), shall be mailed to
such Holder at such Holder's address as set forth on the Security Register and
shall be sufficiently given to such Holder if so mailed within the time
prescribed. To the extent required by the TIA, any notice or communication shall
also be mailed to any Person described in TIA ss. 313(c).
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Issuers, the Trustee, the Registrar and any other person
shall have the protection of TIA ss. 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee
to take or refrain from taking any action under this Indenture, the Company
shall furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
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(2) an Opinion of Counsel in form and substance satisfactory
to the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, such
person has made such examination or investigation as is necessary to
enable such person to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with; 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 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a
meeting of Securityholders. The Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 13.07. Governing Law.
The laws of the State of New York shall govern this Indenture,
the Securities and the Guaranties without regard to principles of conflicts of
law.
SECTION 13.08. No Recourse Against Others.
No director, officer, employee, incorporator, manager or
stockholder, as such, of either Issuer or any of its Affiliates, as such, shall
have any liability for any obligations of such Issuer or any of its Affiliates
under the Securities, any Guaranty or this Indenture or for any claim based on,
in respect of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability.
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SECTION 13.09. Successors.
All agreements of each Issuer in this Indenture and the
Securities shall bind its successor. All agreements of each Guarantor in this
Indenture and such Guarantor's Guaranty shall bind its successor. All agreements
of the Trustee in this Indenture shall bind its successor.
SECTION 13.10. Counterpart 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 13.11. Severability.
In case any provision in this Indenture, in the Securities or
in the Guaranties 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, and a Holder shall have no claim therefor against
any party hereto.
SECTION 13.12. 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. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.13. Legal Holidays.
If a payment date is a not a Business Day at a place of
payment, payment may be made at that place on the next succeeding Business Day,
and no interest shall accrue for the intervening period.
ARTICLE XIV
COLLATERAL AND SECURITY
SECTION 14.01. Interest Escrow Agreement.
On the Issue Date, the Issuers shall (i) enter into the
Interest Escrow Agreement and comply with the terms and provisions thereof and
(ii) deposit into the Interest Escrow Account such amount as will be sufficient
to provide for payment in full of the first four scheduled interest payments due
on the Securities. On the first date on which such amount is invested in
Marketable Securities, such Marketable Securities shall be in an amount
sufficient upon receipt of scheduled interest and/or principal payments of such
Collateral, in the opinion of a nationally recognized firm of independent public
accountants selected by the Company, to provide for payment in full of the first
four scheduled interest payments due on the securities. The Issuers shall grant
a first priority security interest in the Collateral to the Trustee for the
benefit of the Holders and the Collateral shall be held by the Trustee in the
Interest Escrow Account pending disposition pursuant to the Interest Escrow
Agreement.
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<PAGE> 100
In the event the Registered Exchange Offer is not consummated
and the Registration Statement is not declared effective on or prior to the
Filing Date (as defined in the Registration Rights Agreement), and the interest
rate on the Securities is increased as required by the Registration Rights
Agreement, the Issuers shall purchase and deliver to the Trustee additional
Collateral in such amount as will be sufficient upon receipt of scheduled
interest and/or principal payments of all Collateral thereafter held in the
Interest Escrow Account, in the opinion of a nationally recognized firm of
independent public accountants selected by the Company, to provide payment for
the first four scheduled interest payments due on the Securities (assuming the
Additional Interest remains in effect for the entire period). The additional
Collateral shall be subject to the security interest granted by the Issuers to
the Trustee for the benefit of the Holders and shall be held by the Trustee in
the Interest Escrow Account.
Each Holder, by its acceptance of a Security, consents and
agrees to the terms of the Collateral Documents (including, without limitation,
the provisions providing for foreclosure and release of the Collateral) as the
same may be in effect or may be amended from time to time in accordance with its
terms, and authorizes and directs the Trustee to enter into the Collateral
Documents and to perform its respective obligations and exercise its respective
rights thereunder in accordance therewith. The Issuers will do or cause to be
done all such acts and things as may be necessary or proper, or as may be
required by the provisions of the Collateral Documents, to assure and confirm to
the Trustee the security interest in the Collateral contemplated hereby, by the
Collateral Documents or any part thereof, as from time to time constituted, so
as to render the same available for the security and benefit of this Indenture
and of the Securities secured hereby, according to the intent and purposes
herein expressed. The Issuers shall take, or shall cause to be taken, upon
request of the Trustee, any and all actions reasonably required to cause the
Collateral Documents to create and maintain, as security for the obligations of
the Issuers under this Indenture and the Securities, valid and enforceable first
priority liens in and on all the Collateral, in favor of the Trustee, superior
to and prior to the rights of third Persons and subject to no other Liens.
SECTION 14.02. Recording and Opinions.
(a) The Issuers shall furnish to the Trustee simultaneously
with the execution and delivery of this Indenture an Opinion of Counsel either
(i) stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, financing
statements or other instruments necessary to make effective the Lien intended to
be created by the Security Agreement and reciting the details of such action,
except for the filing of any necessary UCC-1 financing statements, or (ii)
stating that in the opinion of such counsel no such action is necessary to make
such Lien effective.
(b) The Issuers shall furnish to the Escrow Agent and the
Trustee on July 30, 1997 (unless on such date the balance of the Interest Escrow
Account shall be zero) an Opinion of Counsel, dated as of such date, either (i)
stating that, except for the filing of any necessary UCC-1 financing statements,
(A) in the opinion of such counsel, action has been taken with respect to the
recording, registering, filing, re-recording, re-registering and refiling of all
supplemental indentures, financing statements, continuation statements or other
instruments of further assurance as are necessary to maintain the Lien of the
Security Agreement and reciting the details of such action or referring to prior
Opinions of Counsel in which such details are
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<PAGE> 101
given and (B) based on relevant laws as in effect on the date of such Opinion of
Counsel, all financing statements and continuation statements have been executed
and filed that are necessary as of such date and during the succeeding 12 months
fully to preserve and protect, to the extent such protection and preservation
are possible by filing, the rights of the Holders of Securities and the Trustee
hereunder and under each of the Collateral Documents with respect to the
security interests in the Collateral or (ii) stating that, in the opinion of
such counsel, no such action is necessary to maintain such Lien and assignment.
SECTION 14.03. Release of Collateral.
(a) Subject to subsections (b), (c) and (d) of this Section
14.03, Collateral may be released from the Lien and security interest created by
the Security Agreement only in accordance with the provisions of the Security
Agreement or the Interest Escrow Agreement.
(b) Except to the extent that any Lien on proceeds of
Collateral is automatically released by operation of Section 9-306 of the
Uniform Commercial Code or other similar law, no Collateral shall be released
from the Lien and security interest created by the Security Agreement pursuant
to the provisions of the Security Agreement, other than to the Holders pursuant
to the terms thereof or otherwise pursuant to the Interest Escrow Agreement,
unless there shall have been delivered to the Trustee the certificate required
by Section 14.03(d) and Section 14.04.
(c) At any time when an Event of Default shall have occurred
and be continuing and the maturity of the Securities shall have been accelerated
(whether by declaration or otherwise), no Collateral shall be released pursuant
to the provisions of the Security Agreement, and no release of Collateral in
contravention of this Section 14.03(c) shall be effective as against the Holders
of Securities, except for the disbursement of all Available Funds (as defined in
the Interest Escrow Agreement) and other Collateral to the Trustee pursuant to
Section 6(a) of the Interest Escrow Agreement.
(d) The release of any Collateral from the Liens and security
interests created by this Indenture and the Security Agreement shall not be
deemed to impair the security under this Indenture in contravention of the
provisions hereof if and to the extent the Collateral is released pursuant to
the terms hereof or pursuant to the terms of the Collateral Documents. To the
extent applicable, the Issuers shall cause TIA Section 314(d) relating to the
release of property or securities from the Lien and security interest of the
Security Agreement to be complied with. Any certificate or opinion required by
TIA Section 314(d) may be made by an Officer of each of the Issuers except in
cases where TIA Section 314(d) requires that such certificate or opinion be
made by an independent Person, which Person shall be an independent appraiser
or other expert selected or approved by the Trustee in the exercise of
reasonable care.
SECTION 14.04. Certificates of the Company.
The Issuers shall furnish to the Trustee, prior to any
proposed release of Collateral other than pursuant to the express terms of the
Interest Escrow Agreement, (i) all documents required by TIA Section 314(d)
and (ii) an Opinion of Counsel, which may be rendered by internal counsel to
either of the Issuers, to the effect that such accompanying documents
constitute all documents required by TIA Section 314(d). The Trustee may, to the
extent permitted
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<PAGE> 102
by Section 7.01 and Section 7.02, accept as conclusive evidence of compliance
with the foregoing provisions the appropriate statements contained in such
documents and such Opinion of Counsel.
SECTION 14.05. Authorization of Actions to Be Taken by the Trustee Under the
Interest Escrow Agreement and Security Agreement.
Subject to the provisions of Section 7.01 and Section 7.02,
the Trustee may, without the consent of the Holders of Securities, on behalf of
the Holders of Securities, take all actions it deems necessary or appropriate in
order to (a) enforce any of the terms of each of the Collateral Documents and
(b) collect and receive any and all amounts payable in respect of the
obligations of the Issuers hereunder. The Trustee shall have power to institute
and maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful or in violation of
either of the Collateral Documents or this Indenture, and such suits and
proceedings as the Trustee may deem expedient to preserve or protect its
interests and the interests of the Holders of Securities in the Collateral
(including power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the security interest hereunder or be prejudicial to the interests of the
Holders of Securities or of the Trustee).
SECTION 14.06. Authorization of Receipt of Funds by the Trustee Under the
Interest Escrow Agreement.
The Trustee is authorized to receive any funds for the benefit
of the Holders of Securities disbursed under the Interest Escrow Agreement, and
to make further distributions of such funds to the Holders of Securities
according to the provisions of this Indenture.
SECTION 14.07. Termination of Security Interest.
Upon the earliest to occur of (i) the date upon which the
balance in the Interest Escrow Account shall have been reduced to zero, (ii)
legal defeasance pursuant to Section 9.02, (iii) covenant defeasance pursuant to
Section 9.03 and (iv) the date upon which the first four semiannual Interest
Payments have been made, the Trustee shall, at the written request of each of
the Issuers, release the Liens pursuant to this Indenture, the Collateral
Documents upon the Company's compliance with the provisions of the TIA
pertaining to release of collateral.
[Signature Pages Follow]
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<PAGE> 103
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
DIGITAL TELEVISION SERVICES, LLC
DIGITAL TELEVISION SERVICES OF
CALIFORNIA, LLC
DIGITAL TELEVISION SERVICES OF
COLORADO, LLC
DIGITAL TELEVISION SERVICES OF
GEORGIA, LLC
DIGITAL TELEVISION SERVICES OF
KANSAS, LLC
DIGITAL TELEVISION SERVICES OF
KENTUCKY, LLC
DIGITAL TELEVISION SERVICES OF NEW
MEXICO, LLC
DIGITAL TELEVISION SERVICES OF NEW
YORK I, LLC
DIGITAL TELEVISION SERVICES OF SOUTH
CAROLINA I, LLC
DIGITAL TELEVISION SERVICES OF
VERMONT, LLC
By: DTS Management, LLC,
their Manager
By: /s/
------------------------------
Name:
Title:
S-1
<PAGE> 104
DTS MANAGEMENT, LLC
By: /s/
---------------------------------
Name:
Title:
SPACENET, INC.
By: /s/
---------------------------------
Name:
Title:
DTS CAPITAL, INC.
By: /s/
---------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee
By: /s/
---------------------------------
Name:
Title:
S-2
<PAGE> 105
EXHIBIT A
[FORM OF SERIES A SECURITY]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUERS THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(A) INSIDE THE UNITED STATES TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (B) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (D)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUERS SO REQUEST),
(2) TO THE ISSUERS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
A-1
<PAGE> 106
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
12 1/2% Senior Subordinated Note
due August 1, 2007, Series A
CUSIP No.:
No. 1 $
DIGITAL TELEVISION SERVICES, LLC, a Delaware limited liability company
(the "Company"), and DTS CAPITAL, INC., a Delaware corporation (collectively,
the "Issuers", which term includes any successor corporation to either Issuer),
for value received promises to pay to ___________ or registered assigns, the
principal sum of ____________ Dollars on August 1, 2007.
Interest Payment Dates: August 1 and February 1, commencing on
February 1, 1998.
Interest Record Dates: July 15 and January 15
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
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<PAGE> 107
IN WITNESS WHEREOF, the Issuers have caused this Security to
be signed manually or by facsimile by their respective duly authorized officers.
DIGITAL TELEVISION SERVICES, LLC
By: DTS Management, LLC,
its manager
By:
------------------------------
Name:
Title:
DTS CAPITAL, INC.
By:
------------------------------
Name:
Title:
Attest:
----------------------------
Name:
Title:
Attest:
----------------------------
Name:
Title:
A-3
<PAGE> 108
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 12 1/2% Senior Subordinated Notes due 2007,
Series A, described in the within-mentioned Indenture.
Dated:
The Bank of New York,
as Trustee
By:
---------------------------
Authorized Signatory
A-4
<PAGE> 109
(REVERSE OF SECURITY)
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
12 1/2% Senior Subordinated Note
due August 1, 2007, Series A
1. Interest.
DIGITAL TELEVISION SERVICES, LLC, a Delaware limited liability
company (the "Company"), and DTS CAPITAL, INC., a Delaware corporation
("Capital," and together with the Company, the "Issuers"), jointly and severally
promise to pay interest on the principal amount of this Security at the rate per
annum shown above. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from July
30, 1997. The Issuers will pay interest semi-annually in arrears on each
Interest Payment Date, commencing on February 1, 1998. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Issuers shall pay interest on overdue principal from time
to time on demand at the rate borne by the Securities and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful.
2. Method of Payment.
The Issuers shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Interest Record Date immediately preceding the Interest
Payment Date even if the Securities are canceled on registration of transfer or
registration of exchange after such Interest Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Issuers shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Issuers may pay principal and interest by wire transfer
of Federal funds (provided that the Paying Agent shall have received wire
instructions on or prior to the relevant Interest Record Date), or interest by
check payable in such U.S. Legal Tender. The Issuers may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar.
Initially, The Bank of New York (the "Trustee") will act as
Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar
without notice to the Holders. Either of the Issuers or any of the Company's
Subsidiaries may, subject to certain exceptions, act as Registrar.
A-5
<PAGE> 110
4. Indenture and Guaranties.
The Issuers issued the Securities under an Indenture, dated as
of July 30, 1997 (the "Indenture"), between the Issuers, certain Guarantors
named therein and the Trustee. Capitalized terms herein are used as defined in
the Indenture unless otherwise defined herein. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb)
(the "TIA"), as in effect on the date of the Indenture until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the date on
which the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Securities are subject to all such terms, and holders of
Securities are referred to the Indenture and the TIA for a statement of them.
The Securities are general obligations of the Issuers limited in aggregate
principal face amount to $155,000,000. Payment on each Security is guaranteed
(each, a "Guaranty") on a senior subordinated basis, jointly and severally, by
each Restricted Subsidiary (each, a "Guarantor") pursuant to Article Eleven and
Article Twelve of the Indenture.
5. Optional Redemption.
The Securities will be redeemable at the option of the
Issuers, in whole or in part, at any time or from time to time, on or after
August 1, 2002 at the redemption prices (expressed as a percentage of principal
amount) set forth below, plus accrued and unpaid interest (including Additional
Interest, if any) thereon, if any, to the redemption date, if redeemed during
the twelve-month period commencing on August 1 of the years set forth below:
Year Percentage
---- ----------
2002 106.250%
2003 104.167%
2004 102.083%
2005 and thereafter 100.000%
6. Optional Redemption upon Certain Equity Issuances.
At any time, or from time to time, prior to August 1, 2000,
the Issuers may, other than in any circumstance resulting in a Change of
Control, redeem up to 35% of the originally issued principal amount of the
Securities at a redemption price equal to 112.50% of the principal amount of the
Securities so redeemed, plus accrued and unpaid interest (including Additional
Interest, if any) thereon, if any, to the redemption date, with the net cash
proceeds of (a) one or more Public Equity Offerings of common equity of the
Company or (b) a sale or series of related sales of Qualified Equity Interests
of the Company to Strategic Equity Investors, in any such case resulting in
gross cash proceeds to the Company of at least $25.0 million in the aggregate;
provided, however, that at least 65% of the originally issued principal amount
of the Securities would remain outstanding immediately after giving effect to
any such redemption (excluding any Securities owned by the Company or any of its
Affiliates). Notice of any such redemption must be given within 90 days after
A-6
<PAGE> 111
the date of the consummation of such Public Equity Offering or such sale of
Qualified Equity Interests.
7. Notice of Redemption.
Notice of redemption will be mailed to each Holder by
first-class mail at least 30 days but not more than 60 days before the
Redemption Date of Securities to be redeemed at such Holder's registered
address; provided, however, that notice of redemption pursuant to paragraph 6 of
this Security will be mailed to each Holder of Securities to be redeemed no
later than 90 days following the consummation of the last Public Equity Offering
or sale of Qualified Equity Interests of the Company to Strategic Equity
Investors resulting in gross cash proceeds to the Company, when aggregated with
all prior Public Equity Offerings and sales of Qualified Equity Interests of the
Company to Strategic Equity Investors, of at least $25.0 million. In the event
that less than all of the Securities are to be redeemed at any time pursuant to
an optional redemption, selection of such Securities for redemption will be made
by the Trustee in compliance with the requirements of the national securities
exchange, if any, on which such Securities are listed or, if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Securities of a principal amount of $1,000 or less shall be
redeemed in part; provided further, however, that if a partial redemption is
made with the proceeds of a Public Equity Offering or sale or series of related
sales of Qualified Equity Interests of the Company to Strategic Equity
Investors, selection of the Securities or portions thereof for redemption shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to the procedures of The Depository), unless such
method is otherwise prohibited.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Issuers have deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture.
8. Change of Control Offer.
Following the occurrence of a Change of Control, the Issuers
will be required to offer to purchase all of the outstanding Securities at a
purchase price equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest (including Additional Interest, if any) thereon, if
any, to the Purchase Date.
9. Limitation on Disposition of Assets.
In connection with the disposition of assets of the Company or
its Restricted Subsidiaries, the Issuers are, subject to certain conditions,
obligated to make an offer to purchase Securities at a purchase price equal to
100% of the aggregate principal amount
A-7
<PAGE> 112
thereof, plus accrued and unpaid interest (including Additional Interest, if
any) thereon, if any, to the Purchase Date.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Issuers at their written request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Issuers and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guaranties except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guaranties, in each case upon satisfaction of certain conditions specified in
the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the Securities
and the Guaranties may be amended or supplemented with the written consent of
the Holders of at least a majority in aggregate principal amount of the
Securities then outstanding, and any existing Default or Event of Default or
compliance with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may amend or
supplement the Indenture, the Securities and the Guaranties to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Securities in addition to or in place of certificated Securities or comply with
any requirements of the Securities and Exchange Commission in connection with
the qualification of the Indenture under the TIA,
A-8
<PAGE> 113
or make any other change that does not materially adversely affect the rights of
any Holder of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets, to engage in transactions with affiliates or certain other related
persons or to engage in certain businesses. The limitations are subject to a
number of important qualifications and exceptions. The Company must quarterly
report to the Trustee on compliance with such limitations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guaranties except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guaranties unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
18. No Recourse Against Others.
No director, officer, employee, incorporator, manager, member
or stockholder of either Issuer or any of their Affiliates, as such, shall have
any liability for any obligations of such Issuer or any of its Affiliates under
the Securities, any Guaranty or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability.
19. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
A-9
<PAGE> 114
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), U/G/M/A
(= Uniform Gifts to Minors Act) and U/T/M/A (= Uniform Transfers to Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. Governing Law.
The laws of the State of New York shall govern the Indenture,
this Security and any Guaranty thereof without regard to principles of conflicts
of laws.
A-10
<PAGE> 115
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ____________________________________ agent to transfer
this Security on the books of the Company. The agent may substitute another to
act in its stead.
Dated: Signed:
-------------------------- ----------------------------------
(Signed exactly as name appears on
the other side of this Security)
Signature Guarantee:
----------------------------------------
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 116
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Issuers pursuant to Section 4.05 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Security
purchased by the Issuers pursuant to Section 4.05 or Section 4.14 of the
Indenture, state the amount: $__________
Dated: Your Signature:
---------------------- ----------------------------------
(Signed exactly as name appears on
the other side of this Security)
Signature Guarantee:
----------------------------------------
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 117
EXHIBIT B
(FORM OF SERIES B SECURITY)
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
12 1/2% Senior Subordinated Note
due August 1, 2007, Series B
CUSIP No.:
No. $
DIGITAL TELEVISION SERVICES, LLC, a Delaware limited liability
company (the "Company"), and DTS CAPITAL, INC., a Delaware corporation
(collectively, the "Issuers", which term includes any successor corporation to
either Issuer), for value received promises to pay to ____________ or registered
assigns, the principal sum of _______________ Dollars on August 1, 2007.
Interest Payment Dates: August 1 and February 1, commencing on
February 1, 1998.
Interest Record Dates: July 15 and January 15
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
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<PAGE> 118
IN WITNESS WHEREOF, the Issuers have caused this Security to
be signed manually or by facsimile by their respective duly authorized officers.
DIGITAL TELEVISION SERVICES, LLC
By: DTS Management, LLC,
its manager
By:
---------------------------------
Name:
Title:
DTS CAPITAL, INC.
By:
---------------------------------
Name:
Title:
Attest:
-------------------------------
Name:
Title:
Attest:
-------------------------------
Name:
Title:
B-2
<PAGE> 119
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 12 1/2% Senior Subordinated Notes due 2007,
Series B, described in the within-mentioned Indenture.
Dated:
The Bank of New York,
as Trustee
By:
------------------------------
Authorized Signatory
B-3
<PAGE> 120
(REVERSE OF SECURITY)
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
12 1/2% Senior Subordinated Note
due August 1, 2007, Series B
1. Interest.
DIGITAL TELEVISION SERVICES, LLC, a Delaware limited liability
company (the "Company"), and DTS CAPITAL, INC., a Delaware corporation
("Capital," and together with the Company, the "Issuers"), jointly and severally
promise to pay interest on the principal amount of this Security at the rate per
annum shown above. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from July
30, 1997. The Issuers will pay interest semi-annually in arrears on each
Interest Payment Date, commencing on February 1, 1998. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Issuers shall pay interest on overdue principal from time
to time on demand at the rate borne by the Securities and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful.
2. Method of Payment.
The Issuers shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Interest Record Date immediately preceding the Interest
Payment Date even if the Securities are canceled on registration of transfer or
registration of exchange after such Interest Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Issuers shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Issuers may pay principal and interest by wire transfer
of Federal funds (provided that the Paying Agent shall have received wire
instructions on or prior to the relevant Interest Record Date), or interest by
check payable in such U.S. Legal Tender. The Issuers may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar.
Initially, The Bank of New York (the "Trustee") will act as
Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar
without notice to the Holders. Either of the Issuers or any of the Company's
Subsidiaries may, subject to certain exceptions, act as Registrar.
B-4
<PAGE> 121
4. Indenture and Guaranties.
The Issuers issued the Securities under an Indenture, dated as
of July 30, 1997 (the "Indenture"), between the Issuers, certain Guarantors
named therein and the Trustee. Capitalized terms herein are used as defined in
the Indenture unless otherwise defined herein. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb)
(the "TIA"), as in effect on the date of the Indenture until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the date on
which the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Securities are subject to all such terms, and holders of
Securities are referred to the Indenture and the TIA for a statement of them.
The Securities are general obligations of the Issuers limited in aggregate
principal face amount to $155,000,000. Payment on each Security is guaranteed
(each, a "Guaranty") on a senior subordinated basis, jointly and severally, by
each Restricted Subsidiary (each, a "Guarantor") pursuant to Article Eleven and
Article Twelve of the Indenture.
5. Optional Redemption.
The Securities will be redeemable at the option of the
Issuers, in whole or in part, at any time or from time to time, on or after
August 1, 2002 at the redemption prices (expressed as a percentage of principal
amount) set forth below, plus accrued and unpaid interest (including Additional
Interest, if any) thereon, if any, to the redemption date, if redeemed during
the twelve-month period commencing on August 1 of the years set forth below:
Year Percentage
---- ----------
2002 106.250%
2003 104.167%
2004 102.083%
2005 and thereafter 100.000%
6. Optional Redemption upon Certain Equity Issuances.
At any time, or from time to time, prior to August 1, 2000,
the Issuers may, other than in any circumstance resulting in a Change of
Control, redeem up to 35% of the originally issued principal amount of the
Securities at a redemption price equal to 112.50% of the principal amount of the
Securities so redeemed, plus accrued and unpaid interest (including Additional
Interest, if any) thereon, if any, to the redemption date, with the net cash
proceeds of (a) one or more Public Equity Offerings of common equity of the
Company or (b) a sale or series of related sales of Qualified Equity Interests
of the Company to Strategic Equity Investors, in any such case resulting in
gross cash proceeds to the Company of at least $25.0 million in the aggregate;
provided, however, that at least 65% of the originally issued principal amount
of the Securities would remain outstanding immediately after giving effect to
any such redemption (excluding any Securities owned by the Company
B-5
<PAGE> 122
or any of its Affiliates). Notice of any such redemption must be given within 90
days after the date of the consummation of such Public Equity Offering or such
sale of Qualified Equity Interests.
7. Notice of Redemption.
Notice of redemption will be mailed to each Holder by
first-class mail at least 30 days but not more than 60 days before the
Redemption Date of Securities to be redeemed at such Holder's registered
address; provided, however, that notice of redemption pursuant to paragraph 6 of
this Security will be mailed to each Holder of Securities to be redeemed no
later than 90 days following the consummation of the last Public Equity Offering
or sale of Qualified Equity Interests of the Company to Strategic Equity
Investors resulting in gross cash proceeds to the Company, when aggregated with
all prior Public Equity Offerings and sales of Qualified Equity Interests of the
Company to Strategic Equity Investors, of at least $25.0 million. In the event
that less than all of the Securities are to be redeemed at any time pursuant to
an optional redemption, selection of such Securities for redemption will be made
by the Trustee in compliance with the requirements of the national securities
exchange, if any, on which such Securities are listed or, if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Securities of a principal amount of $1,000 or less shall be
redeemed in part; provided further, however, that if a partial redemption is
made with the proceeds of a Public Equity Offering or sale or series of related
sales of Qualified Equity Interests of the Company to Strategic Equity
Investors, selection of the Securities or portions thereof for redemption shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to the procedures of The Depository), unless such
method is otherwise prohibited.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Issuers have deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture.
8. Change of Control Offer.
Following the occurrence of a Change of Control, the Issuers
will be required to offer to purchase all of the outstanding Securities at a
purchase price equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest (including Additional Interest, if any) thereon, if
any, to the Purchase Date.
B-6
<PAGE> 123
9. Limitation on Disposition of Assets.
In connection with the disposition of assets of the Company or
its Restricted Subsidiaries, the Issuers are, subject to certain conditions,
obligated to make an offer to purchase Securities at a purchase price equal to
100% of the aggregate principal amount thereof, plus accrued and unpaid interest
(including Additional Interest, if any) thereon, if any, to the Purchase Date.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Issuers at their written request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Issuers and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guaranties except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guaranties, in each case upon satisfaction of certain conditions specified in
the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the Securities
and the Guaranties may be amended or supplemented with the written consent of
the Holders of at least a majority in aggregate principal amount of the
Securities then outstanding, and any existing Default or Event of Default or
compliance with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Securities then
B-7
<PAGE> 124
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture, the Securities and the Guaranties to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Securities in addition to or in place of certificated Securities
or comply with any requirements of the Securities and Exchange Commission in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets, to engage in transactions with affiliates or certain other related
persons or to engage in certain businesses. The limitations are subject to a
number of important qualifications and exceptions. The Company must quarterly
report to the Trustee on compliance with such limitations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Escrow Agreement, the Securities or the
Guaranties except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture, the Escrow Agreement, the Securities or the Guaranties
unless it has received indemnity satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a majority in
aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of certain continuing Defaults or Events of Default
if it determines that withholding notice is in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
18. No Recourse Against Others.
No director, officer, employee, incorporator, manager, member
or stockholder of either Issuer or any of their Affiliates, as such, shall have
any liability for any obligations of such Issuer or any of its Affiliates under
the Securities, any Guaranty or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability.
B-8
<PAGE> 125
19. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), U/G/M/A
(= Uniform Gifts to Minors Act) and U/T/M/A (= Uniform Transfers to Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. Governing Law.
The laws of the State of New York shall govern the Indenture,
this Security and any Guaranty thereof without regard to principles of conflicts
of laws.
B-9
<PAGE> 126
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint __________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act in
its stead.
Dated: Signed:
--------------------- ----------------------------------
(Signed exactly as name appears on
the other side of this Security)
Signature Guarantee:
--------------------------------------
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 127
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Issuers pursuant to Section 4.05 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Security
purchased by the Issuers pursuant to Section 4.05 or Section 4.14 of the
Indenture, state the amount: $___________
Dated: Your Signature:
----------------- ----------------------------------
(Signed exactly as name appears on
the other side of this Security)
Signature Guarantee:
--------------------------------------------
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 128
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required in
the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING
OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A
SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF
THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUERS OR THEIR AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN 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.
C-1
<PAGE> 129
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 12 1/2% Senior Subordinated Notes due 2007, Series A
and 12 1/2% Senior Subordinated Notes due 2007,
Series B (the "Securities"), of Digital Television
Services, LLC and DTS Capital, Inc.
This Certificate relates to $____________ principal amount of
Securities held in the form of* ____ a beneficial interest in a Global Security
or* ____ Physical Securities by ________________________________ (the
"Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depository a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[ ] has requested by written order that the Registrar exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.06 of such Indenture,
and that the transfer of such Security does not require registration under the
Securities Act of 1933, as amended (the "Act"), because*:
[ ] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture).
[ ] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
[ ] Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Act).
[ ] Such Security is being transferred in reliance on Regulation S
under the Act.
[ ] Such Security is being transferred in reliance on Rule 144 under
the Act.
D-1
<PAGE> 130
[ ] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act other than Rule
144A or Rule 144 or Regulation S under the Act to a person other than an
institutional "accredited investor."
---------------------------------
[INSERT NAME OF TRANSFEROR]
By:
------------------------------
[Authorized Signatory]
Date:
----------------------
*Check applicable box.
D-2
<PAGE> 131
EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
---------------, ----
[Date]
[Trustee's Name and Address]
Attention: Corporate Trust Administration
Re: Digital Television Services, LLC and DTS Capital,
Inc. (the "Issuers") Indenture (the "Indenture")
relating to 12 1/2% Senior Subordinated Notes due
2007, Series A, or 12 1/2% Senior Subordinated Notes
due 2007, Series B
Ladies and Gentlemen:
In connection with our proposed purchase of 12 1/2% Senior
Subordinated Notes due 2007, Series A, or 12 1/2% Senior Subordinated Notes due
2007, Series B (the "Securities"), of the Issuers, we confirm that:
1. We have received such information as we deem necessary in
order to make our investment decision.
2. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act").
3. We understand that the offer and sale of the Securities
have not been registered under the Securities Act, and that the Securities may
not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we sell any Securities, we will do so only (A) to
the Issuers or any subsidiary of either Issuer, (B) inside the United States in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to the Trustee a signed
letter substantially in the form hereof, (D) outside the United States in
accordance with Regulation S under the Securities Act, (E) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act (if
available), or (F) pursuant to an effective registration statement under the
Securities Act, and we further
E-1
<PAGE> 132
agree to provide to any person purchasing Securities from us a notice advising
such purchaser that resales of the Securities are restricted as stated herein.
4. We understand that, on any proposed resale of Securities,
we will be required to furnish to the Trustee and the Issuers such
certification, legal opinions and other information as the Trustee and the
Issuers may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Securities purchased
by us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Securities,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or their investment, as the case may be.
6. We are acquiring the Securities purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Issuers are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
---------------------------------
[Authorized Signatory]
E-2
<PAGE> 133
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
---------------, ----
[Date]
[Trustee's Name and Address]
Attention: Corporate Trust Administration
Re: Digital Television Services, LLC and DTS Capital,
Inc. (the "Issuers") 12 1/2% Senior Subordinated
Notes due 2007, Series A, and 12 1/2% Senior
Subordinated Notes due 2007, Series B (the
"Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $____________
aggregate principal amount of the Securities, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent
that:
(1) the offer of the Securities was not made to a person in
the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been prearranged with a buyer in the
United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Issuers are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative
F-1
<PAGE> 134
or legal proceedings or official inquiry with respect to the matters covered
hereby. Defined terms used herein without definition have the respective
meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-------------------------------
[Authorized Signatory]
F-2
<PAGE> 1
EXHIBIT 4.3
==============================================
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
----------------------
$155,000,000
12 1/2% SENIOR SUBORDINATED NOTES DUE 2007
----------------------
---------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF July 30, 1997
---------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES CORP.
J.P. MORGAN SECURITIES INC.
==============================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated
as of July 30, 1997, by and among Digital Television Services, LLC, a Delaware
limited liability company and DTS Capital, Inc., a Delaware corporation (the
"Issuers"), the parties listed on Schedule 1 attached hereto (each a "Guarantor"
and, collectively, the "Guarantors") and Donaldson, Lufkin & Jenrette Securities
Corporation, CIBC Wood Gundy Securities Corp. and J.P. Morgan Securities Inc.
(together, the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of July 25, 1997, among the Issuers, Guarantors and the
Initial Purchasers (the "Purchase Agreement") relating to the sale by the
Issuers to the Initial Purchasers of $155,000,000 aggregate principal amount of
their 12 1/2% Senior Subordinated Notes due 2007 (the "Notes"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers
have agreed to provide the registration rights set forth in this Agreement for
the equal benefit of the Initial Purchasers and their respective direct and
indirect transferees. The execution and delivery of this Agreement is a
condition to the Initial Purchasers' obligation to purchase the Notes under the
Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
Advice: See the last paragraph of Section 5.
Applicable Period: See Section 2(b).
Closing Date: The Closing Date as defined in the Purchase
Agreement.
Effectiveness Date: The 150th day after the Closing Date;
provided, however, that, with respect to the Initial Shelf Registration
Statement, (i) if the Filing Date in respect thereof is fewer than 60 days prior
to the 150th day after the Closing Date, then the Effectiveness Date in respect
thereof shall be the 60th day after such Filing Date and (ii) if the Filing Date
is after the filing of the Exchange Offer Registration Statement with the SEC,
then the Effectiveness Date in respect thereof shall be the 60th day after such
Filing Date.
Effectiveness Period: See Section 3.
<PAGE> 3
Event Date: See Section 4.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a).
Exchange Offer Registration Statement: See Section 2(a).
Exchange Securities: See Section 2(a).
Expiration Date: See Section 2(a).
Filing Date: The 120th day after the Closing Date; provided,
however, that, with respect to the Initial Shelf Registration Statement, (i) if
a Shelf Registration Event shall have occurred fewer than 30 days prior to the
120th day after the Closing Date, then the Filing Date in respect thereof shall
be the 30th day after such Shelf Registration Event and (ii) if a Shelf
Registration Event shall have occurred after the filing of the Exchange Offer
Registration Statement with the SEC, then the Filing Date in respect thereof
shall be the 45th day after such Shelf Registration Event.
Guarantors: The Guarantors defined in the preamble hereto and
any Person that becomes a guarantor after the date hereof pursuant to the terms
of the Indenture. See Section 10(d).
Holder: Any record holder of Registrable Securities.
Indemnified Person: See the third paragraph of Section 7.
Indemnifying Person: See the third paragraph of Section 7.
Indenture: The Indenture, dated as of July 30, 1997, between
the Issuers and Guarantors and The Bank of New York, as trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this
Agreement.
Initial Shelf Registration Statement: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date of original issuance of the Notes.
Issuers: See the introductory paragraph to this Agreement.
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Manager: Any officer or member of the board of managers or
similar governing body of Digital Television Services, LLC.
NASD: See Section 5(t).
Notes: See the second introductory paragraph to this
Agreement.
Participant: See the first paragraph of Section 7.
Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, limited or general
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
Private Exchange: See Section 2(b).
Private Exchange Securities: See Section 2(b).
Prospectus: The prospectus 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.
Purchase Agreement: See the second introductory paragraph to
this Agreement.
Records: See Section 5(o).
Registrable Securities: The Notes upon original issuance
thereof and at all times subsequent thereto, each Exchange Security as to which
Section 2(c)(v) hereof is applicable upon original issuance and at all times
subsequent thereto and, if issued, the Private Exchange Securities, until in the
case of any such Notes, Exchange Securities or Private Exchange Securities, as
the case may be, (i) a Registration Statement (other than, with respect to any
Exchange Security as to which Section 2(c)(v) hereof is applicable, the Exchange
Offer Registration Statement) covering such Notes, Exchange Securities or
Private Exchange Securities has been declared effective by the SEC and such
Notes, Exchange Securities or Private Exchange Securities, as the case may be,
have been disposed of in accordance with such effective Registration Statement,
(ii) such Notes, Exchange Securities or Private Exchange Securities, as the case
may be, are sold in compliance with Rule 144, (iii) such Note has been exchanged
for an Exchange Note pursuant to the Exchange Offer and Section 2(c)(v) is not
applicable thereto, or (iv) such Notes, Exchange Securities or Private Exchange
Securities, as the case may be, cease to be outstanding.
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Registration Statement: Any registration statement of the
Issuers and Guarantors (including, but not limited to, the Exchange Offer
Registration Statement) that covers any of the Registrable Securities pursuant
to the provisions of this Agreement, 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.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration Statement: See Section 3(b).
Shelf Registration Event: See Section 2(c).
Subsequent Shelf Registration Statement: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if applicable,
the trustee under any indenture governing the Exchange Securities and Private
Exchange Securities (if any).
Underwritten registration or underwritten offering: A
registration in which securities of the Issuers are sold to an underwriter for
reoffering to the public.
2. EXCHANGE OFFER
(a) The Issuers and Guarantors agree to file with the SEC on
or before the Filing Date an offer to exchange (the "Exchange Offer") any and
all of the Registrable Securities for
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a like aggregate principal amount of senior subordinated debt securities of the
Issuers that are identical to the Notes (the "Exchange Securities") (and that
are entitled to the benefits of a trust indenture that is identical to the
Indenture (other than such changes as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification of such trust
indenture under the TIA) and that has been qualified under the TIA), except that
the Exchange Securities shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no restrictive
legend thereon. The Exchange Offer will be registered under the Securities Act
on the appropriate form (the "Exchange Offer Registration Statement") and will
comply with all applicable tender offer rules and regulations under the Exchange
Act. The Issuers and Guarantors agree to use their commercially reasonable best
efforts (i) to cause the Exchange Offer Registration Statement to become
effective and to commence the Exchange Offer on or prior to the Effectiveness
Date, (ii) to keep the Exchange Offer open for 30 days (or longer if required by
applicable law) (the last day of such period, the "Expiration Date") and (iii)
to exchange Exchange Securities for all Notes validly tendered and not withdrawn
pursuant to the Exchange Offer on or prior to the fifth day following the
Expiration Date.
Each Holder who participates in the Exchange Offer will be
deemed to represent that any Exchange Securities received by it will be acquired
in the ordinary course of its business, that at the time of the consummation of
the Exchange Offer such Holder will have no arrangement with any person to
participate in the distribution of the Exchange Securities in violation of the
provisions of the Securities Act, and that such Holder is not an affiliate of
the Issuers within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Securities that are Private
Exchange Securities, Exchange Securities to which Section 2(c)(v) is applicable
and Exchange Securities held by Participating Broker-Dealers, and no Issuer or
Guarantor shall have any further obligation to register Registrable Securities
(other than Private Exchange Securities and other than Exchange Securities as to
which Section 2(c)(v) hereof applies) pursuant to Section 3 of this Agreement.
No securities other than the Exchange Securities shall be included in the
Exchange Offer Registration Statement.
(b) The Issuers and Guarantors shall include within the
Prospectus contained in the Exchange Offer Registration Statement a section
entitled "Plan of Distribution," reasonably acceptable to the Initial
Purchasers, which shall contain a summary statement of the positions taken or
policies made by the Staff of the SEC (and publicly disseminated) with respect
to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Securities received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"). Such "Plan of Distribution" section shall also
allow the use of the prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Securities.
The Issuers and Guarantors shall use their commercially
reasonable best efforts to keep the Exchange Offer Registration Statement
effective and to amend and supplement the Prospectus
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contained therein in order to permit such Prospectus to be lawfully delivered by
all persons subject to the prospectus delivery requirements of the Securities
Act for at least 180 days following the consummation of the Exchange Offer (or
such shorter time as such persons must comply with such requirements in order to
resell the Exchange Securities) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, any Initial
Purchaser holds any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Issuers upon the request of such Initial Purchaser
shall, simultaneously with the delivery of the Exchange Securities in the
Exchange Offer, issue and deliver to such Initial Purchaser, in exchange (the
"Private Exchange") for the Notes held by such Initial Purchaser, a like
principal amount of debt securities of the Issuers that are identical to the
Exchange Securities (the "Private Exchange Securities") (and which are issued
pursuant to the same indenture as the Exchange Securities) (except for the
placement of a restrictive legend on such Private Exchange Securities). The
Private Exchange Securities shall bear the same CUSIP number as the Exchange
Securities. Interest on the Exchange Securities and Private Exchange Securities
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the Issue Date.
Any indenture under which the Exchange Securities or the
Private Exchange Securities will be issued shall provide that the holders of any
of the Exchange Securities and the Private Exchange Securities will vote and
consent together on all matters to which such holders are entitled to vote or
consent as one class and that none of the holders of the Exchange Securities and
the Private Exchange Securities will have the right to vote or consent as a
separate class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the Staff of the SEC, the Issuers reasonably
determine in good faith, after consultation with counsel, that they are not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not commenced
on or prior to the Effectiveness Date, (iii) the Exchange Offer is not, for any
reason, consummated on or prior to the 180th day after the Closing Date, (iv)
any Holder of Private Exchange Securities so requests, or (v) in the case of any
Holder that participates in the Exchange Offer, such Holder does not receive
Exchange Securities on the date of the exchange that may be sold without
restriction under state and federal securities laws (the occurrence of any such
event, a "Shelf Registration Event"), then, in the case of each of clauses (i)
to and including (v) of this sentence, the Issuers shall promptly deliver to the
Holders and the Trustee notice thereof (the "Shelf Notice") and the Issuers and
Guarantors shall thereafter file an Initial Shelf Registration Statement
pursuant to Section 3.
3. SHELF REGISTRATION
If a Shelf Registration Event has occurred (and whether or not
an Exchange Offer Registration Statement has been filed with the SEC or has
become effective, or the Exchange Offer has been consummated), then:
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(a) Initial Shelf Registration Statement. The Issuers and
Guarantors shall promptly prepare and file with the SEC a Registration Statement
for an offering to be made on a continuous basis pursuant to Rule 415 covering
all of the Registrable Securities (the "Initial Shelf Registration Statement").
The Issuers and Guarantors shall file with the SEC the Initial Shelf
Registration Statement on or prior to the Filing Date. The Initial Shelf
Registration Statement shall be on Form S-1 or another appropriate form if
available, permitting registration of such Registrable Securities for resale by
such Holders in the manner designated by them (including, without limitation, in
one or more underwritten offerings). The Issuers and Guarantors shall not permit
any securities other than the Registrable Securities to be included in the
Initial Shelf Registration Statement or any Subsequent Shelf Registration
Statement. The Issuers and Guarantors shall use their commercially reasonable
best efforts to cause the Initial Shelf Registration Statement to be declared
effective under the Securities Act on or prior to the Effectiveness Date, and to
keep the Initial Shelf Registration Statement continuously effective under the
Securities Act until the date that is 24 months from the Issue Date, or such
shorter period ending when (i) all Registrable Securities covered by the Initial
Shelf Registration Statement have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration Statement or (ii) a Subsequent
Shelf Registration Statement covering all of the Registrable Securities has been
declared effective under the Securities Act (such 24 month or shorter period,
the "Effectiveness Period").
(b) Subsequent Shelf Registration Statements. If the Initial
Shelf Registration Statement or any Subsequent Shelf Registration Statement
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Issuers and Guarantors shall use their commercially reasonable
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event the Issuers and Guarantors shall within
45 days of such cessation of effectiveness amend the Shelf Registration
Statement in a manner reasonably expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional "shelf" Registration
Statement pursuant to Rule 415 covering all of the Registrable Securities (a
"Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration
Statement is filed, the Issuers and Guarantors shall use their commercially
reasonable best efforts to cause the Subsequent Shelf Registration Statement to
be declared effective as soon as reasonably practicable after such filing and to
keep such Registration Statement continuously effective until the end of the
Effectiveness Period. As used herein the term "Shelf Registration Statement"
means the Initial Shelf Registration Statement and any Subsequent Shelf
Registration Statement.
(c) Supplements and Amendments. The Issuers and Guarantors
shall promptly supplement and amend the Shelf Registration Statement if required
by the rules, regulations or instructions applicable to the registration form
used for such Shelf Registration Statement, if required by the Securities Act,
or if reasonably requested by the Holders of a majority in aggregate principal
amount of the Registrable Securities covered by such Registration Statement or
by any underwriter of such Registrable Securities.
(d) Hold-Back Agreements.
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(i) Restrictions on Public Sale by Holders of Registrable
Securities. Each Holder of Registrable Securities whose Registrable
Securities are covered by a Shelf Registration Statement (which
Registrable Securities are not being sold in the underwritten offering
described below) agrees, if requested (pursuant to a timely written
notice) by the Issuers and Guarantors or by the managing underwriter or
underwriters in an underwritten offering, not to effect any public sale
or distribution of any securities within the class of securities
covered by such Shelf Registration Statement or any similar class of
securities of any Issuer or Guarantor, including a sale pursuant to
Rule 144 or Rule 144A (except as part of such underwritten offering),
during the period beginning 10 days prior to, and ending 60 days after,
the closing date of each underwritten offering made pursuant to each
Shelf Registration Statement, to the extent timely notified in writing
by the Issuers or by the managing underwriter or underwriters;
provided, however, that each holder of Registrable Securities shall be
subject to the hold-back restrictions of this Section 3(d)(i) only once
during the term of this Agreement.
The foregoing provisions shall not apply to any Holder of
Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided,
however, that any such Holder shall undertake, in its request to
participate in any such underwritten offering, not to effect any public
sale or distribution of the class of securities covered by such Shelf
Registration Statement (except as part of such underwritten offering)
during such period unless it has provided 45 days' prior written notice
of such sale or distribution to the Issuers or the managing underwriter
or underwriters, as the case may be.
(ii) Restrictions on the Issuers, Guarantors and Others. The
Issuers and Guarantors agree (A) not to effect any public or private
sale or distribution (including, without limitation, a sale pursuant to
Regulation D under the Securities Act) of any securities the same as or
similar to those covered by a Shelf Registration Statement or any
securities convertible into or exchangeable or exercisable for such
securities, during the 10 days prior to, and during the 60-day period
beginning on, the commencement of an underwritten public distribution
of Registrable Securities, where the managing underwriter or
underwriters so requests pursuant to timely written notice; (B) to
include in any agreements entered into by any Issuer or Guarantor on or
after the date of this Agreement (other than any underwriting agreement
relating to a public offering registered under the Securities Act)
pursuant to which any Issuer or Guarantor issues or agrees to issue
securities the same as or similar to the Notes a provision
substantially identical to Section 3(d)(i); and (C) not to grant or
agree to grant any "piggy-back registration" or other similar rights to
any holder of any Issuer or Guarantor or any of their respective
subsidiaries' securities issued on or after the date of this Agreement
with respect to any Registration Statement.
(e) Limitations, Conditions and Qualifications to Obligations
Under Registration Covenants. The obligations of the Issuers and Guarantors set
forth in this Section 3 are subject to each of the following limitations,
conditions and qualifications:
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(i) Subject to the next sentence of this paragraph, the
Issuers and Guarantors shall be entitled to postpone, for a reasonable
period of time, the filing or effectiveness of, or suspend the rights
of any Holders to make sales pursuant to, any Registration Statement
otherwise required to be prepared, filed and made and kept effective by
them hereunder; provided, however, that the duration of such
postponement or suspension may not extend beyond the earlier to occur
of (A) the day after the cessation of the circumstances described in
the next sentence of this paragraph on which such postponement or
suspension is based or (B) 90 days after the date of the determination
of the Board of Directors referred to in the next sentence. Such
postponement or suspension may be effected only if the Manager and
Board of Directors, as applicable, of the Issuers determine reasonably
and in good faith that the filing or effectiveness of, or sales
pursuant to, such Registration Statement would materially impede, delay
or interfere with any financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction
involving the Issuers or any of their affiliates or require disclosure
of material information that the Issuers have a bona fide business
purpose for preserving as confidential; provided, however, that the
Issuers shall be entitled to such postponement or suspension only once
during the term of this Agreement. If the Issuers so postpone the
filing of a Registration Statement they shall, as promptly as possible,
deliver a certificate signed by the chief executive officer of each of
the Issuers to the Holders as to such determination. The exercise by
the Issuers of their rights under this Section 3(e) shall not relieve
them of their obligation to pay Additional Interest pursuant to Section
4 if the Registration Statement is not filed by the applicable Filing
Date or declared effective by the applicable Effectiveness Date or
postponed or suspended beyond the period specified therein.
4. ADDITIONAL INTEREST
(a) The Issuers, Guarantors and the Initial Purchasers agree
that the Holders of Notes will suffer damages if the Issuers and Guarantors fail
to fulfill their obligations under Section 2 or Section 3 hereof (including by
virtue of their exercise of their rights under Section 3(d) hereof) and that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, the Issuers and Guarantors agree jointly and severally to pay, as
liquidated damages, additional interest on the Registrable Securities
("Additional Interest") under the circumstances and to the extent set forth
below (each of which shall be given independent effect):
(i) if either the Exchange Offer Registration Statement or the
Initial Shelf Registration Statement required to be filed under this
Agreement has not been filed on or prior to the Filing Date (unless,
with respect to the Exchange Offer Registration Statement, a Shelf
Registration Event described in clause (i) of Section 2(c) shall have
occurred prior to the Filing Date), Additional Interest shall accrue on
the Registrable Securities over and above the stated interest in an
amount equal to $0.05 per week (or any part thereof), per $1,000 of
principal amount (as of the first day of each such week) of the
Registrable Securities for the first 90 days immediately following such
date, such Additional Interest rate increasing by an additional $0.05
per week (or any part thereof)
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per $1,000 of principal amount (as of the first day of each such week)
of the Registrable Securities for each subsequent 90-day period;
(ii) if either the Exchange Offer Registration Statement or
the Initial Shelf Registration Statement required to be filed under
this Agreement is not declared effective by the SEC on or prior to the
Effectiveness Date (unless, with respect to the Exchange Offer
Registration Statement, a Shelf Registration Event described in clause
(i) of Section 2(c) above shall have occurred), Additional Interest
shall accrue on the Registrable Securities over and above the stated
interest in an amount equal to $0.05 per week (or any part thereof) per
$1,000 of principal amount (as of the first day of each such week) of
the Registrable Securities for the first 90 days immediately following
the day after such date, such Additional Interest rate increasing by an
additional $0.05 per week (or any part thereof) per $1,000 of principal
amount (as of the first day of each such week) of the Registrable
Securities for each subsequent 90-day period; and
(iii) if (A) the Issuers have not exchanged Exchange
Securities for all Registrable Securities validly tendered and not
withdrawn in accordance with the terms of the Exchange Offer on or
prior to the fifth day after the Expiration Date, or (B) the Exchange
Offer Registration Statement ceases to be effective at any time prior
to the Expiration Date, or (C) if applicable, any Shelf Registration
Statement has been declared effective and such Shelf Registration
Statement ceases to be effective at any time during the Effectiveness
Period, then Additional Interest shall accrue on the Registrable
Securities (over and above any interest otherwise payable on the
Registrable Securities) in an amount equal to $0.05 per week (or any
part thereof) per $1,000 of principal amount (as of the first day of
each such week) of the Registrable Securities for the first 90 days
commencing on (x) the sixth day after the Expiration Date, in the case
of (A) above, or (y) the day the Exchange Offer Registration Statement
ceases to be effective in the case of (B) above, or (z) the day such
Shelf Registration Statement ceases to be effective in the case of (C)
above, such Additional Interest rate increasing by an additional $0.05
per week (or any part thereof) per $1,000 of principal amount (as of
the first day of each such week) of the Registrable Securities at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Registrable
Securities may not exceed at any one time in the aggregate $0.40 per week per
$1,000 of principal amount (as of the first day of each such week) of the
Registrable Securities; provided, further, that (1) upon the filing of the
Exchange Offer Registration Statement or a Shelf Registration Statement as
required hereunder (in the case of clause (i) of this Section 4(a)), (2) upon
the effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement as required hereunder (in the case of clause (ii) of this
Section 4(a)) or (3) upon the exchange of Exchange Securities for all
Registrable Securities validly tendered and not withdrawn (in the case of clause
(iii)(A) of this Section 4(a)), or upon the effectiveness of the Exchange Offer
Registration Statement that had ceased to remain effective (in the case of
clause (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf
Registration Statement that had ceased to remain effective (in the case of
clause (iii)(C) of this Section 4(a)), Additional Interest on the Registrable
Securities as a result of such clause (or the relevant subclause thereof), as
the case may be, shall cease to accrue (but any accrued amount shall be
payable).
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(b) The Issuers shall notify the Trustee within one business
day after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). The Issuers shall
jointly and severally pay the Additional Interest due on the Registrable
Securities by depositing with the Trustee, in trust, for the benefit of the
Holders thereof, on or before the applicable semi-annual interest payment date,
immediately available funds in sums sufficient to pay the Additional Interest
then due to Holders of Registrable Securities. Each obligation to pay Additional
Interest shall be deemed to accrue immediately following the occurrence of the
applicable Event Date. Any accrued Additional Interest amount shall be due and
payable on each interest payment date immediately after the applicable Event
Date to the record Holder of Registrable Securities entitled to receive the
interest payment to be made on such date as set forth in the Indenture. The
parties hereto agree that the Additional Interest provided for in this Section 4
constitutes a reasonable estimate of the damages that may be incurred by Holders
of Registrable Securities by reason of the failure of a Shelf Registration
Statement or Exchange Offer Registration Statement to be filed or declared
effective, or a Shelf Registration Statement to remain effective, as the case
may be, in accordance with this Section 4.
5. REGISTRATION PROCEDURES
In connection with the registration of any Registrable
Securities pursuant to Sections 2 or 3 hereof, the Issuers and Guarantors shall
use their commercially reasonable best efforts to effect such registrations to
permit the sale of such Registrable Securities in accordance with the intended
method or methods of disposition thereof, and pursuant thereto the Issuers and
Guarantors shall:
(a) prepare and file with the SEC on or before the Filing
Date, a Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and to use their commercially reasonable best efforts to cause
each such Registration Statement to become effective and remain effective as
provided herein, provided that, if such filing is pursuant to Section 3, before
filing any Registration Statement or Prospectus or any amendments or supplements
thereto, the Issuers shall furnish to and afford the Holders of the Registrable
Securities covered by such Registration Statement, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at least five
days prior to such filing); the Issuers and Guarantors shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto in
respect of which the Holders must be afforded a reasonable opportunity to review
prior to the filing of such document, if the Holders of a majority in aggregate
principal amount of the Registrable Securities covered by such Registration
Statement, their counsel, or the managing underwriters, if any, shall reasonably
object;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period, in
the case of a Shelf Registration Statement, or until the later of the Expiration
Date and the Applicable Period (if applicable), in the case of the Exchange
Offer Registration Statement; cause the related Prospectus to be supplemented by
any required
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Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to them with respect to
the disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus;
(c) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period that has notified the Issuers in writing
that it will be a Participating Broker-Dealer in the Exchange Offer, notify the
selling Holders of Registrable Securities, or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing underwriters,
if any, promptly (but in any event within five business days), and confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective
(including in such notice a written statement that any Holder may, upon request,
obtain, without charge, one conformed copy of such Registration Statement or
post-effective amendment including financial statements and schedules, documents
incorporated or deemed to be incorporated by reference and exhibits); (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that purpose;
(iii) if at any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Securities the
representations and warranties of the Issuers contained in any agreement
(including any underwriting agreement) contemplated by Section 5(n) below cease
to be true and correct; (iv) of the receipt by the Issuers of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Securities
or the Exchange Securities to be sold by any such Participating Broker-Dealer
for offer or sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; (v) of the happening of any event or any
information becoming known that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any 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
not misleading, and that in the case of the Prospectus, it will not contain any
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 provided,
however, that such notification need not specifically identify such event if
notification of the occurrence thereof would in the Issuers' reasonable
judgment, involve the disclosure of confidential non-public information; and
(vi) of the Issuers' reasonable determination that a post-effective amendment to
the Registration Statement would be appropriate;
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<PAGE> 14
(d) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, use their commercially reasonable best
efforts to prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from qualification) of
any of the Registrable Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, use their commercially reasonable best efforts to obtain the
withdrawal of any such order at the earliest possible moment;
(e) if a Shelf Registration Statement is filed pursuant to
Section 3 and if requested by the managing underwriters, if any, or the Holders
of a majority in aggregate principal amount of the Registrable Securities being
sold in connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or such Holders or their respective counsel
reasonably request to be included therein; and (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
reasonably practicable after the Issuers have received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment;
(f) if a Shelf Registration Statement is filed pursuant to
Section 3, furnish to each selling Holder of Registrable Securities and upon
request to its counsel and each managing underwriter, if any, without charge,
one conformed copy of the Registration Statement or Statements and each
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated or deemed to be incorporated therein by reference and
all exhibits;
(g) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, deliver to each selling Holder of
Registrable Securities, or each such Participating Broker-Dealer, as the case
may be, their counsel, and the underwriters, if any, without charge, as many
copies of the Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request; and,
subject to the last paragraph of this Section 5, the Issuers and Guarantors
hereby consent to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Securities covered by or the sale by Participating Broker-Dealers of
the Exchange Securities pursuant to such Prospectus and any amendment or
supplement thereto, provided that such use complies with all applicable laws and
regulations;
(h) prior to any public offering of Registrable Securities or
any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-
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<PAGE> 15
Dealer who seeks to sell Exchange Securities during the Applicable Period, use
their commercially reasonable best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any, and
their respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriters reasonably request in writing,
provided that where Exchange Securities held by Participating Broker-Dealers or
Registrable Securities are offered other than through an underwritten offering,
the Issuers and Guarantors shall cause their counsel to (i) perform Blue Sky
investigations and file registrations and qualifications required to be filed
pursuant to this Section 5(h); (ii) use their commercially reasonable best
efforts to keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective; and (iii) do any and all other acts or things necessary or advisable
to enable the disposition in such jurisdictions of the Exchange Securities held
by Participating Broker-Dealers or the Registrable Securities covered by the
applicable Registration Statement, provided further that no Issuer or Guarantor
shall in any case be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject, (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction or (D) conform its capitalization or the
composition of its assets to the securities or Blue Sky laws of any such
jurisdiction;
(i) if a Shelf Registration Statement is filed pursuant to
Section 3, cooperate with the selling Holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Securities to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or Holders may reasonably
request;
(j) use their commercially reasonable best efforts to cause
the Registrable Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof or the underwriters,
if any, to consummate the disposition of such Registrable Securities, except as
may be required solely as a consequence of the nature of such selling Holder's
business, in which case the Issuers and Guarantors will cooperate in all
reasonable respects with the filing of such Registration Statement and the
granting of such approvals;
(k) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly as practicable
prepare and (subject to Section 5(a) above) file with the SEC, solely at the
expense of the Issuers and Guarantors, a supplement or post-effective amendment
to the Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated
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<PAGE> 16
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder
or to the purchasers of the Exchange Securities to whom such Prospectus will be
delivered by a Participating Broker-Dealer, any such Prospectus will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(l) use their commercially reasonable best efforts to cause
the Registrable Securities covered by a Registration Statement or the Exchange
Securities, as the case may be, to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate principal
amount of Registrable Securities covered by such Registration Statement or the
Exchange Securities, as the case may be, or the managing underwriters, if any;
(m) prior to the effective date of the first Registration
Statement relating to the Registrable Securities, (i) provide the Trustee with
printed certificates for the Registrable Securities in a form eligible for
deposit with The Depository Trust Company; and (ii) provide a CUSIP number for
the Registrable Securities;
(n) in connection with an underwritten offering of Registrable
Securities pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings, provided such
agreement is reasonably acceptable to the Issuers and provided that the
underwriters are reasonably acceptable to the Issuers, 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 if reasonably requested, (i) make such
representations and warranties to the underwriters, with respect to the business
of the Issuers and their 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, and confirm the same if and when reasonably requested;
(ii) use their commercially reasonable best efforts to obtain opinions of
counsel to the Issuers and updates thereof in form and substance reasonably
satisfactory to the managing underwriters, addressed to the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by underwriters;
(iii) use their commercially reasonable best efforts to obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants of the
Issuers (and, if necessary, any other independent certified public accountants
of any subsidiary of any Issuer or of any business acquired by any Issuer or any
of their subsidiaries for which financial statements and financial data are, or
are required to be, included in the Registration Statement), addressed to each
of the underwriters, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by
underwriters; and (iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures comparable to those set
forth in Section 7 hereof (or such other provisions and procedures reasonably
acceptable to the Issuers and the Holders of a majority in aggregate principal
amount of Registrable Securities covered by such Registration Statement and the
managing underwriters or agents) with respect to all parties to be indemnified
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<PAGE> 17
pursuant to said Section, all of which shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
(o) if a Shelf Registration Statement is filed pursuant to
Section 3, subject to the prior receipt by the Issuers of undertakings to use
commercially reasonable efforts to preserve the confidentiality of any
information disclosed by the Issuers pursuant hereto in form and substance
reasonably satisfactory to the Issuers, make available for inspection by any
selling Holder of such Registrable Securities being sold, any underwriter
participating in any such disposition of Registrable Securities, if any, and any
attorney, accountant or other agent retained by any such selling holder or
underwriter (collectively, the "Inspectors"), at the offices where normally
kept, during reasonable business hours, all relevant financial and other
records, pertinent corporate documents and properties of the Issuers and their
subsidiaries (collectively, the "Records") as shall be necessary to enable them
to exercise any applicable due diligence responsibilities, and cause the
officers, directors and employees of the Issuers and their subsidiaries to
supply all information in each case requested by any such Inspector in
connection with such Registration Statement; however, records that the Issuers
determine, in good faith, to be confidential and any Records that the Issuers
notify the Inspectors are confidential shall not be disclosed by the Inspectors
unless (i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement; (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction; (iii) the information in such Records has been made
generally available to the public; or (iv) release thereof is necessary or
advisable in connection with any action, suit or proceeding involving any Holder
or other Inspector;
(p) provide for an indenture trustee for the Registrable
Securities or the Exchange Securities, as the case may be, and cause the
Indenture or the trust indenture provided for in Section 2(a), as the case may
be, to be qualified under the TIA not later than the effective date of the
Exchange Offer or the first Registration Statement relating to the Registrable
Securities; and in connection therewith, cooperate with the trustee under any
such indenture and the holders of the Registrable Securities, to effect such
changes to such indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use their
commercially reasonable best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner;
(q) comply with all applicable rules and regulations of the
SEC to the extent and so long as they are applicable to the Exchange Offer
Registration Statement or the Shelf Registration Statement and make generally
available to their securityholders earning 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) no 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) (i) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm commitment or
commercially reasonable best efforts underwritten offering; and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Issuers after the effective date of a Registration
Statement, which statements shall cover said 12-month periods;
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<PAGE> 18
(r) upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuers in customary form,
relating to the Exchange Securities or the Private Exchange Securities, as the
case may be, addressed to the Trustee for the benefit of all Holders of
Registrable Securities participating in the Exchange Offer or the Private
Exchange, as the case may be, and which includes an opinion that (i) the Issuers
have duly authorized, executed and delivered the Exchange Securities and Private
Exchange Securities and the related indenture; and (ii) each of the Exchange
Securities or the Private Exchange Securities, as the case may be, and related
indenture constitute legal, valid and binding obligations of the Issuers,
enforceable against the Issuers in accordance with their respective terms (with
customary exceptions);
(s) if an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to the
Issuers (or to such other Person as directed by the Issuers) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be,
mark, or caused to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be; in no event
shall such Registrable Securities be marked as paid or otherwise satisfied;
(t) cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD"); and
(u) use their commercially reasonable best efforts to take all
other steps necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Securities
or Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as the Issuers may, from time to time, reasonably request. The Issuers and
Guarantors may exclude from such registration the Registrable Securities of any
seller or Participating Broker-Dealer who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
Each Holder of Registrable Securities and each Participating
Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
that, upon receipt of any notice from the Issuers of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such
Holder will forthwith discontinue disposition of such Registrable Securities
covered by such Registration Statement or Prospectus or Exchange Securities to
be sold by such Participating Broker-Dealer, as the case may be, until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k), or until it is advised in writing (the "Advice")
by the Issuers that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto.
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<PAGE> 19
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers and Guarantors shall be borne
jointly and severally by the Issuers and Guarantors whether or not the Exchange
Offer Registration Statement or a Shelf 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) in
such jurisdictions (x) where the holders of Registrable Securities are located,
in the case of the Exchange Securities, or (y) as provided in Section 5(h), in
the case of Registrable Securities to be sold in a public offering or Exchange
Securities to be sold by a Participating Broker-Dealer during the Applicable
Period); (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities or Exchange Securities in a
form eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or, in respect of Registrable Securities or Exchange
Securities to be sold by any Participating Broker-Dealer during the Applicable
Period, by the Holders of a majority in aggregate principal amount of the
Registrable Securities included in any Registration Statement or of such
Exchange Securities, as the case may be); (iii) messenger, telephone and
delivery expenses incurred by the any Issuer or Guarantor; (iv) fees and
disbursements of counsel for any Issuer or Guarantor and reasonable fees and
disbursements of special counsel for the sellers of Registrable Securities but
only with respect to such counsel's review of the Registration Statement and
Prospectus, including, without limitation, any portions of the Registration
Statement and Prospectus relating to the Holders, and all documentation related
thereto, including any underwriting agreement and all related documentation
(subject to the provisions of Section 6(b)); (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(n)(iii)
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance); (vi) the
reasonable fees and expenses of any "qualified independent underwriter" or other
independent appraiser participating in an offering pursuant to Rule 2710 of the
Conduct Rules of the NASD; (vii) rating agency fees; (viii) Securities Act
liability insurance, if any Issuer or Guarantor desires such insurance; (ix)
fees and expenses of all other Persons retained by any Issuer or Guarantor; (x)
internal expenses of any Issuer or Guarantor (including, without limitation, all
salaries and expenses of officers and employees of any Issuer or Guarantor
performing legal or accounting duties); (xi) the expense of any annual audit of
any Issuer or Guarantor; (xii) the fees and expenses incurred by any Issuer or
Guarantor in connection with the listing of the Registrable Securities on any
securities exchange; and (xiii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other documents
necessary in order to comply with this Agreement. Anything contained herein to
the contrary notwithstanding, no Issuer or Guarantor shall have any obligation
whatsoever in respect of any underwriters' discounts or commissions, brokerage
commissions, dealers' selling concessions, transfer taxes or any other selling
expenses (other than those expressly enumerated in clauses (i) through (xiii)
above) incurred in connection with the underwriting, offering or sale of
Registrable Securities or Exchange Securities by or on behalf of any Person.
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<PAGE> 20
(b) In connection with any Shelf Registration Statement
hereunder, the Issuers and Guarantors shall jointly and severally reimburse the
Holders of the Registrable Securities being registered in such registration for
the reasonable fees and disbursements of not more than one counsel (in addition
to appropriate local counsel) chosen by the Holders of a majority in aggregate
principal amount of the Registrable Securities to be included in such
Registration Statement and other reasonable out-of-pocket expenses of the
Holders of Registrable Securities incurred in connection with the registration
of the Registrable Securities.
7. INDEMNIFICATION
The Issuers and Guarantors agree to jointly and severally
indemnify and hold harmless each Holder of Registrable Securities and each
Participating Broker-Dealer selling Exchange Securities during the Applicable
Period, the officers and directors of each such person, and each person, if any,
who controls any such person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other expenses actually
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
or Prospectus (as amended or supplemented if the Issuers and Guarantors shall
have furnished any amendments or supplements thereto) or any preliminary
prospectus, 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, in the light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
such Participant furnished to the Issuers and Guarantors in writing by such
Participant (or, if such Participant is not a Holder or a Participating
Broker-Dealer, furnished in writing by the Holder or Participating Broker-Dealer
in respect of which such person is a Participant relating to such Participant)
expressly for use therein; provided that (i) the foregoing indemnity with
respect to any preliminary prospectus shall not inure to the benefit of any
Participant (or to the benefit of any officer or director of, or of any person
controlling, such Participant) from whom the person asserting any such losses,
claims, damages or liabilities purchased Registrable Securities to the extent
that such untrue statement or omission or alleged untrue statement or omission
made in such preliminary prospectus is eliminated or remedied in the related
Prospectus (as amended or supplemented if the Issuers and Guarantors shall have
furnished any amendments or supplements thereto) and a copy of the related
Prospectus (as so amended or supplemented) shall not have been furnished to such
person at or prior to the sale of such Registrable Securities or Exchange
Securities, as the case may be, to such person and (ii) the foregoing indemnity
with respect to any Prospectus shall not inure to the benefit of a Holder of
Registrable Securities or Participating Broker-Dealer to the extent that such
Holder or Participating Broker-Dealer uses such Prospectus three business days
after such time as the Issuers shall have advised such Holder or Participating
Broker-Dealer in writing of the happening of any event that makes any statement
of a material fact made in such Prospectus untrue or which requires the making
of any additions to or changes in such Prospectus in order that it 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 are made, not misleading.
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<PAGE> 21
Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless each of the Issuers and Guarantors,
their respective managers, directors, and officers who sign the Registration
Statement and each person who controls any Issuer or Guarantor within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Issuers and Guarantors to
each Participant, but only with reference to information relating to such
Participant furnished to the Issuers and Guarantors in writing by such
Participant expressly for use in any Registration Statement or Prospectus, any
amendment or supplement thereto, or any preliminary prospectus. The liability of
any Participant under this paragraph shall in no event exceed the net proceeds
received by such Participant from sales of Registrable Securities giving rise to
such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the
reasonable fees and expenses incurred by such counsel related to such
proceeding, provided that the failure to so notify the Indemnifying Person shall
not relieve it of any obligation or liability which it may have hereunder or
otherwise (unless and only to the extent that such failure actually prejudices
the Indemnifying Person). In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but, other than in circumstances
involving a conflict among Indemnified Persons, the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have agreed to the
contrary; (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person; or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to an actual or
potential conflict of interest or because there may be legal defenses available
to an indemnified party that are different from or in addition to those
available to the indemnifying party. It is understood that, other than in
circumstances involving a conflict among Indemnified Persons, the Indemnifying
Person shall not, in connection with any proceeding or related proceeding in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed as they are incurred. Any such separate firm for
the Participants shall be designated in writing by Participants who sold a
majority in interest of Registrable Securities sold by all such Participants and
any such separate firm for any Issuer or Guarantor, their respective managers,
directors, and officers and such control persons of any Issuer or Guarantor
shall be designated in writing by such Issuer or Guarantor. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall
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<PAGE> 22
have requested an Indemnifying Person to reimburse the Indemnified Person for
reasonable fees and expenses incurred by counsel as contemplated by the third
sentence of this paragraph, the Indemnifying Person 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 60 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person
shall not have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement; provided, however, that the Indemnifying
Person shall not be liable for any settlement effected without its consent
pursuant to this sentence if the Indemnifying Party is contesting, in good
faith, the request for reimbursement. No Indemnifying Person shall, without the
prior written consent of the Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party, unless such settlement includes an unconditional
written release of such Indemnified Person in form and substance satisfactory to
the Indemnified Persons from all liability on claims that are the subject matter
of such proceeding.
If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the initial
offering of the Notes or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but also
the relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by the
Issuers and Guarantors on the one hand and the Participants on the other shall
be deemed to be in the same proportion as the total proceeds from the initial
offering (net of discounts and commissions but before deducting expenses) of the
Notes received by the Issuers bears to the total proceeds received by such
Participant from the sale of Registrable Securities. The relative fault of the
parties 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 any Issuer
or Guarantor, on the one hand, or such Participant or such other Indemnified
Person, as the case may be, on the other, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and any other equitable considerations appropriate in the
circumstances.
The parties shall agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants 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 preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by
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<PAGE> 23
such Indemnified Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, in no event
shall a Participant be required to contribute any amount in excess of the amount
by which net proceeds received by such Participant from sales of Registrable
Securities exceeds the amount of any damages that such Participant 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 indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. RULE 144 AND RULE 144A
Each Issuer and Guarantor covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
and, if at any time such Issuer or Guarantor is not required to file such
reports, it will, upon the request of any Holder of Registrable Securities, make
publicly available other information so long as necessary to permit sales
pursuant to Rule 144 and Rule 144A under the Securities Act. Each Issuer and
Guarantor further covenants that it will take such further action as any Holder
of Registrable Securities may reasonably request, to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 and Rule 144A under the Securities Act.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Holders of a majority in aggregate
principal amount of such Registrable Securities included in such offering and
reasonably acceptable to the Issuers.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements (however the terms applicable to each Holder shall be identical in
all respects) and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements applicable to all Holders.
10. MISCELLANEOUS
(a) Remedies. In the event of a breach by any Issuer or
Guarantor of any of its obligations under this Agreement, each Holder of
Registrable Securities, in addition to being entitled to exercise all rights
provided herein, in the Indenture or, in the case of the Initial
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<PAGE> 24
Purchasers, in the Purchase Agreement or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. Each Issuer and Guarantor agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Each Issuer and Guarantor has
not, as of the date hereof, entered into and shall not, after the date of this
Agreement, enter into any agreement with respect to any of its securities that
is inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof. Each Issuer
and Guarantor has not entered into and will not enter into any agreement with
respect to any of its securities which will grant to any Person "piggy-back"
rights with respect to a Registration Statement.
(c) Adjustments Affecting Registrable Securities. Each Issuer
and Guarantor shall not, directly or indirectly, take any action with respect to
the Registrable Securities as a class that would adversely affect the ability of
the Holders of Registrable Securities to include such Registrable Securities in
a registration undertaken pursuant to this Agreement.
(d) Guarantors. So long as any Registrable Securities remain
outstanding, each Issuer and Guarantor shall cause each of its subsidiaries that
becomes a guarantor of the Notes under the Indenture to execute and deliver a
counterpart to this Agreement which subjects such subsidiary to the provisions
of this agreement as a guarantor (all such subsidiaries, the "Guarantors"). Each
of the Guarantors agrees to join the Issuers in all of their undertakings
hereunder to effect the Exchange Offer for the Exchange Securities (which will
be guaranteed by each of the Guarantors with terms identical to such Guarantors'
guaranty of the Notes) and the filing of any Shelf Registration Statement
required hereunder (including, without limitation, the undertakings in Section 5
hereof).
(e) Amendments and Waivers. Except as provided in paragraph
(c) above, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of (A) the
Holders of not less than a majority in aggregate principal amount of the then
outstanding Registrable Securities and (B) in circumstances that would adversely
affect the Participating Broker-Dealers, the Participating Broker-Dealers
holding not less than a majority in aggregate principal amount of the Exchange
Securities held by all Participating Broker-Dealers; provided, however, that
Section 7 and this Section 10(e) may not be amended, modified or supplemented
without the prior written consent of each Holder and each Participating
Broker-Dealer (including any person who was a Holder or Participating
Broker-Dealer of Registrable Securities or Exchange Securities, as the case may
be, disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of
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<PAGE> 25
Registrable Securities may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Securities being sold by such
Holders pursuant to such Registration Statement.
(f) Notices. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most
current address given by the Trustee to the Issuers; and
(ii) if to the Issuers, at Digital Television Services, LLC,
Building C-200, 880 Holcomb Bridge Road, Roswell, Georgia 30076,
Attention: Chief Financial Officer.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day courier; and when receipt is
acknowledged by the addressee's telecopier machine, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the trustee
under the Indenture at the address specified in such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Securities.
(h) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or
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<PAGE> 26
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement, is intended by the parties as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(m) Securities Held by the Issuers and Guarantors or their
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities held by any Issuer or Guarantor or its respective affiliates (as such
term is defined in Rule 405 under the Securities Act) shall be deemed to be not
outstanding for purposes of determining whether such consent or approval was
given by the Holders of such required percentage.
[Signature Pages Follow]
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<PAGE> 27
Please confirm that the foregoing correctly sets forth the
agreement between the Issuers and the Guarantors and the Initial Purchasers.
Very truly yours,
DIGITAL TELEVISION SERVICES, LLC
DIGITAL TELEVISION SERVICES OF
CALIFORNIA, LLC
DIGITAL TELEVISION SERVICES OF
COLORADO, LLC
DIGITAL TELEVISION SERVICES OF
GEORGIA, LLC
DIGITAL TELEVISION SERVICES OF
KANSAS, LLC
DIGITAL TELEVISION SERVICES OF
KENTUCKY, LLC
DIGITAL TELEVISION SERVICES OF NEW
MEXICO, LLC
DIGITAL TELEVISION SERVICES OF NEW
YORK I, LLC
DIGITAL TELEVISION SERVICES OF SOUTH
CAROLINA I, LLC
DIGITAL TELEVISION SERVICES OF
VERMONT, LLC
By: DTS Management, LLC
their manager
By: /s/
-----------------------------
Name:
Title:
DTS MANAGEMENT, LLC
By: /s/
----------------------------------
Name:
Title:
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<PAGE> 28
SPACENET, INC.
By: /s/
----------------------------------
Name:
Title:
DTS CAPITAL, INC.
By: /s/
----------------------------------
Name:
Title:
Accepted and Agreed to as of
the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/
------------------------------
Name:
Title:
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/
------------------------------
Name:
Title:
J.P. MORGAN SECURITIES INC.
By: /s/
------------------------------
Name:
Title:
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<PAGE> 29
Schedule 1
Digital Television Services of New Mexico, LLC
Digital Television Services of Colorado, LLC
Digital Television Services of New York I, LLC
Digital Television Services of South Carolina I, LLC
Digital Television Services of Kentucky, LLC
Digital Television Services of Kansas, LLC
Digital Television Services of Vermont, LLC
Digital Television Services of Georgia, LLC
Digital Television Services of California, LLC
Spacenet, Inc.
-28-
<PAGE> 1
EXHIBIT 4.4
===============================================================================
INTEREST ESCROW AGREEMENT
Among
THE BANK OF NEW YORK
(as "Escrow Agent")
THE BANK OF NEW YORK
(as "Trustee" and "Collateral Agent")
and
DIGITAL TELEVISION SERVICES, LLC
and
DTS CAPITAL, INC.
(as "Issuers")
July 30, 1997
===============================================================================
<PAGE> 2
INTEREST ESCROW AGREEMENT
This INTEREST ESCROW AGREEMENT ("Agreement"), dated as of July 30,
1997, by and among THE BANK OF NEW YORK, as escrow agent ("Escrow Agent"), and
THE BANK OF NEW YORK as trustee for the benefit of the holders of the Notes (as
defined below) under the Indenture (as defined below) and as collateral agent
for the benefit of the holders of the Notes under the Security Agreement (in
such capacities, the "Trustee"), and DIGITAL TELEVISION SERVICES, LLC, a
Delaware limited liability company, and DTS CAPITAL, INC., a Delaware
corporation (the "Issuers").
RECITALS
A. Pursuant to that certain Indenture dated as of July 30, 1997, by and
among the Issuers and the Trustee (the "Indenture"), the Issuers have issued
$155,000,000 aggregate principal amount of their 12 1/2% Senior Subordinated
Notes due 2007 ("Notes").
B. As security for their obligations to repay the Notes, the Issuers
have executed and delivered to the Trustee, in addition to the Indenture, the
Security Agreement, in which the Issuers grant to the Trustee a security
interest in the Collateral (as defined in the Indenture).
C. The parties have entered into this Agreement to set forth the
conditions upon which, and the manner in which, funds will be disbursed from the
Interest Escrow Account (as defined herein).
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. Capitalized terms used herein but not defined herein
shall have the meaning given in the Indenture. In addition to any other defined
terms used herein, the following terms shall constitute defined terms for
purposes of this Agreement and shall have the meanings set forth below:
"Acceptable Replacement Escrow Agent" means a corporation
organized and doing business under the laws of the United States of America or
of any state thereof authorized under such laws to exercise corporate trustee
power, subject to supervision or examination by federal or state authority and
having a combined capital and surplus of at least $100 million as set forth in
its most recent published annual report of condition.
"Affiliates" 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
<PAGE> 3
terms "controlling," "controlled by" and "under common control with"), as
applied to any Person, means 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.
"Available Funds" means (a) the sum of (i) the Initial Escrow
Amount and (ii) interest earned or dividends paid on the funds in the Interest
Escrow Account (including holdings of Marketable Securities), less (b) the
aggregate disbursements previously made pursuant to this Agreement.
"Escrow Agent" has the meaning set forth in the preamble to
this Agreement.
"Escrow Account Statement" shall have the meaning given in
Section 2(g).
"Initial Escrow Amount" means $38,750,000 million.
"Interest Escrow Account" means the escrow account established
pursuant to Section 2.
"Interest Payment Date" means August 1 and February 1 of each
year, commencing on February 1, 1998 until August 1, 1999 (or if any such day is
not a Business Day the next succeeding Business Day).
"Issue Date" means July 30, 1997.
"Payment Notice and Disbursement Request" means a notice sent
by the Trustee to the Escrow Agent requesting a disbursement of funds from the
Interest Escrow Account, in substantially the form of Exhibit A hereto. Each
Payment Notice and Disbursement Request shall be signed by an officer of the
Trustee.
2. Interest Escrow Account, Escrow Agent.
(a) Appointment of Escrow Agent. The Issuers and the Trustee at the
direction of the Issuers, hereby appoint Escrow Agent, and Escrow Agent hereby
accepts appointment, as escrow agent under the terms and conditions of this
Agreement. The term "Escrow Agent" shall be deemed to include any substitute
escrow agent pursuant to Section 2(f).
(b) Establishment of Interest Escrow Account. Concurrently with the
execution and delivery hereof, Escrow Agent shall establish the Interest Escrow
Account at its office at 101 Barclay Street, Floor 21W, New York, New York
10286. Subject to the security interest granted therein for the benefit of the
Trustee, and subject to the other terms and conditions of this Agreement, all
funds accepted by Escrow Agent pursuant to this Agreement shall be held for the
exclusive benefit of the Trustee for the ratable benefit of the holders of the
Notes. All such funds shall be held in the Interest Escrow Account until
disbursed in accordance with the terms hereof. The Interest Escrow Account, the
funds held therein and any Marketable Securities held by the Escrow Agent shall
be under the sole dominion and control of Escrow Agent and the Trustee for the
ratable benefit of the holders of the Notes, and all such funds shall
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<PAGE> 4
be held by the Escrow Agent separate and apart from all other funds of or held
by the Escrow Agent. Concurrently with the execution and delivery hereof, the
Issuers shall deliver the Initial Escrow Amount to the Escrow Agent for deposit
into the Interest Escrow Account against the Escrow Agent's written
acknowledgment and receipt of the Initial Escrow Amount.
(c) Escrow Agent Compensation.
i. Escrow Agent shall be compensated pursuant to a separate
agreement between the Issuers and Escrow Agent.
ii. Escrow Agent shall be entitled to disburse from the
Interest Escrow Account all amounts due to Escrow Agent as compensation
for services to be performed by Escrow Agent under this Agreement (as
determined by agreement with the Issuers pursuant to this Section
2(c)(ii)). The final payment pursuant to this Section 2(c)(ii) shall be
prorated if for a partial month.
(d) Investment of Funds in Interest Escrow Account. Funds deposited in
the Interest Escrow Account shall be invested and reinvested by the Escrow Agent
upon the following terms and conditions:
i. Acceptable Investments. Funds deposited in the Interest
Escrow Account shall initially be invested as directed in writing by
the Issuers in Marketable Securities which the Issuers reasonably
determine at such time will produce without reinvestment of the funds
so deposited or reinvestment of income produced by such Marketable
Securities and without further deposit by the Issuers, funds sufficient
to cover all interest due on the outstanding Notes, as such interest
becomes due, for each Interest Payment Date occurring from the Issue
Date and ending on (and including) August 1, 1999. The Escrow Agent
shall have no responsibility for determining whether funds held in the
Interest Escrow Account shall have been invested in such a manner so as
to comply with the requirements of this clause (i).
ii. Security Interest in Investments. No investment of funds in
the Interest Escrow Account shall be made unless the Issuers have
certified to Escrow Agent upon advice of legal counsel that, upon such
investment, the Trustee will have a first perfected security interest
in the applicable investment (such advice of legal counsel relating
solely to the manner of perfecting a security interest in a particular
type of investment, but not to whether such perfection has been
achieved in the instance). A certificate as to a class of investments
need not be issued with respect to individual investments in securities
in that class if the certificate applicable to the class remains
accurate with respect to such individual investments, which continued
accuracy the Escrow Agent may conclusively assume. When and if the
Indenture is qualified under the Trust Indenture Act of 1939, as
amended (the "TIA"), on such date and on each anniversary of such date
until the date upon which the balance of the Available Funds shall have
been reduced to zero, each of the Trustee and the Escrow Agent shall
receive an opinion of counsel to the Issuers, dated each such date as
applicable, which opinion shall meet the requirements of Section 314(b)
of the TIA.
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<PAGE> 5
iii. Interest and Dividends. All interest earned and dividends
paid on funds invested in such Marketable Securities shall be deposited
in the Interest Escrow Account for the exclusive benefit of the Trustee
for the ratable benefit of the holders of the Notes and shall be
reinvested in accordance with the terms hereof at the Issuers' written
instruction and subject to disbursement as provided herein.
(e) Limitation on Escrow Agent's Responsibilities.
i. Escrow Agent's duties and responsibilities shall be limited
to those expressly set forth in this Agreement and are purely
ministerial in nature. Escrow Agent shall not be subject to, or
obligated to recognize, any other agreement to which the Issuers, the
Trustee, or either of them may be a party. References in this Agreement
to any such agreement are for identification and definitional purposes
only.
ii. Escrow Agent shall have no obligation with respect to the
Interest Escrow Account other than to follow faithfully instructions
contained in this Agreement or delivered to Escrow Agent in accordance
with this Agreement. Escrow Agent may rely and act upon any written
notice, instruction, direction, request, waiver, consent, receipt, or
other paper or document ("Instructions") that it believes in good faith
to be genuine and what it purports to be. Escrow Agent shall be subject
to no liability with respect to the form, execution, or validity of any
such Instruction. The Escrow Agent shall not be liable for verifying
the accuracy of any certifications made by the Issuers in any Payment
Notice and Disbursement Request.
iii. Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good
faith, or for any mistake of fact or law, or for doing anything which,
in good faith, it may do or refrain from doing in connection with the
Interest Escrow Account, except in each case in the event of Escrow
Agent's gross negligence or wilful misconduct.
(f) Substitution of Escrow Agent.
i. The Issuers shall have the right to cause Escrow Agent to
be relieved of its duties hereunder and to select a substitute escrow
agent to serve hereunder (provided such substitute escrow agent is an
Acceptable Replacement Escrow Agent), upon the expiration of 30 days
following delivery of written notice of substitution to Escrow Agent
and the Trustee. Upon selection of such substitute escrow agent, such
substitute escrow agent and the parties hereto other than the
substituted escrow agent shall enter into an agreement substantially
identical to this Agreement and, thereafter, Escrow Agent shall be
relieved of its duties and obligations to perform hereunder, except
that Escrow Agent shall transfer to the substitute escrow agent upon
request therefor all assets held in the Escrow Account and copies of
all books, records, plans and other documents in Escrow Agent's
possession relating to such assets or this Agreement.
ii. Escrow Agent, or any substitute escrow agent, may at any
time resign and be discharged of its duties and obligations under this
Agreement by giving at least 30 days' notice to the Issuers and the
Trustee. The Issuers shall appoint a substitute escrow
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<PAGE> 6
agent (provided such substitute escrow agent shall be an Acceptable
Replacement Escrow Agent) within such 30 day period and such substitute
escrow agent and the parties hereto (other than the resigning Escrow
Agent) shall enter into an agreement substantially identical to this
Agreement.
iii. If the Issuers fail to appoint a substitute escrow agent
as required under paragraph (ii) above, Escrow Agent shall deliver all
assets held in the Escrow Account and copies of all books, records,
plans and other documents in the Escrow Agent's possession relating to
such assets or this Agreement to a substitute escrow agent (provided
such substitute escrow agent shall be an Acceptable Replacement Escrow
Agent) of either its choosing or as appointed by a court upon
application therefor.
iv. Escrow Agent shall be discharged from any further duties
under this Agreement upon its transfer of the assets held in the Escrow
Account and copies of all books, records, plans and other documents in
the Escrow Agent's possession relating to such assets or this Agreement
to an Acceptable Replacement Escrow Agent.
(g) Interest Escrow Account Statement. At least 30 days prior to each
Interest Payment Date, the Escrow Agent shall deliver to the Issuers and the
Trustee a statement setting forth with reasonable particularity the Collateral
then held by the Escrow Agent, and the manner in which such funds are invested
(the "Escrow Account Statement"). The books and records of the Escrow Agent with
respect to the Interest Escrow Account shall be available upon written request
by the Trustee and the Issuers or their respective representatives. The parties
hereto irrevocably instruct Escrow Agent that on the first date upon which the
balance in the Interest Escrow Account (including the holdings of all Marketable
Securities) is reduced to zero, Escrow Agent shall deliver to the Issuers and to
the Trustee a notice that the balance in the Interest Escrow Account has been
reduced to zero.
(h) Other Powers of Escrow Agent.
i. Escrow Agent may register any investments held in the
Interest Escrow Account in its nominee name without increase or
decrease of liability.
ii. Escrow Agent may consult with and obtain advice from legal
counsel of its selection in the event of any dispute or question as to
the construction of any of the provisions of this Agreement or any of
Escrow Agent's duties under this Agreement, and Escrow Agent shall
incur no liability in acting in good faith in accordance with the
advice of such counsel. The fees and expenses for consultation with a
single firm of attorneys shall be a proper expense chargeable to the
Interest Escrow Account without a Payment Notice and Disbursement
Request, provided that Escrow Agent provides the Issuers with prior
written notice of any such charge.
(i) Incumbency Certificate. The Issuers and the Trustee each shall
provide a certificate to Escrow Agent as to the incumbency and signatures of
those individuals authorized to provide from time to time instructions relating
to the Interest Escrow Account or to execute documents to be provided to Escrow
Agent. The Issuers and the Trustee also shall promptly notify Escrow Agent of
any changes to such a certificate. Escrow Agent may rely on the
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<PAGE> 7
accuracy and completeness of any such certificate unless and until it has
received an acceptable replacement certificate. All certificates provided under
this Section 2(i) shall be executed by the applicable party's corporate
secretary or assistant secretary or, if the party does not have a corporate
secretary or assistant secretary, by a comparable officer.
3. Disbursements.
(a) Disbursements. At least three (3) Business Days prior to an
Interest Payment Date, the Trustee shall submit to the Escrow Agent a completed
Payment Notice and Disbursement Request substantially in the form of Exhibit A
hereto and the Escrow Agent shall, prior to 10:00 A.M. New York City time on the
Interest Payment Date for which the completed Payment Notice and Disbursement
Request was submitted, disburse the funds requested to the Paying Agent for the
benefit of the Holders of the Notes, or if either of the Issuers or the Escrow
Agent is the Paying Agent, to the Holders of the Notes. The Escrow Agent shall
notify the Trustee and the Issuers as soon as reasonably possible (but not later
than two (2) Business Days from the date of receipt of the Payment Notice and
Disbursement Request) if any Payment Notice and Disbursement Request is rejected
and the reason(s) therefor.
(b) Retired Notes. In the event that a portion of the Notes has been
retired by the Issuers and submitted to the Trustee for cancellation and there
is no Default or Event of Default under the Indenture, funds representing the
lesser of (i) the excess of the then Available Funds over the amount sufficient
to pay interest through and including August 1, 1999 on the Notes not so retired
and (ii) the interest payments which have not previously been made on such
retired Notes for each Interest Payment Date through the Interest Payment Date
to occur on August 1, 1999 shall, upon written request of the Trustee to the
Escrow Agent, be paid to the Issuers. The Trustee shall provide such notice to
the Escrow Agent (A) upon receipt of notice of similar effect from the Issuers
(which notice from the Issuers shall set forth the calculations to determine
such lesser amount) and (B) upon compliance with the release of collateral
provisions of the TIA to the extent required by the Indenture.
(c) Excess Amounts.
i. At any time on or before five business days after the date
hereof, the Issuers may instruct the Trustee in writing (and the
Trustee shall instruct the Escrow Agent) to disburse to, and (upon
receipt of such written instruction) the Escrow Agent shall disburse
to, the Issuers an amount equal to the excess of (A) the Available
Funds at such time over (B) an amount equal to the funds that are
sufficient to pay interest on the Notes through and including August 1,
1999 (after giving effect to the investment of funds in accordance
herewith), such disbursement to be conditioned upon the receipt by the
Issuers of the opinion contemplated by Section 14.01 of the Indenture.
ii. At such time as all interest due on the Notes through and
including August 1, 1999 has been paid to the Holders thereof pursuant
to the Indenture and in accordance herewith, the Escrow Agent shall
disburse all remaining funds in the Interest Escrow Account to the
Issuers. The Trustee shall provide notice to the Escrow Agent to such
effect upon receipt of notice from the Issuers after the
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<PAGE> 8
time all interest due on the Notes through and including August 1, 1999
has been paid to the Holders.
4. Escrow Agent. The Escrow Agent's responsibility and liability under
this Agreement shall be limited as follows: (a) the Escrow Agent does not
represent, warrant or guaranty to the holders of the Notes from time to time the
performance of the Issuers or the Trustee; (b) the Escrow Agent shall have no
responsibility to the Issuers or the holders of the Notes or the Trustee from
time to time as a consequence of performance or nonperformance by the Escrow
Agent hereunder, except for any gross negligence or wilful misconduct of the
Escrow Agent; (c) the Issuers shall remain solely responsible for all aspects of
the Issuers' business and conduct; and (d) the Escrow Agent is not obligated to
supervise, inspect or inform the Issuers or any third party of any matter
referred to above.
No implied covenants or obligations shall be inferred from this
Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the
provisions of any agreement beyond the specific terms hereof. Specifically and
without limiting the foregoing, the Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any funds or Marketable
Securities held by it hereunder, including, without limitation any liability for
any delay not resulting from gross negligence or wilful misconduct in such
investment, reinvestment or liquidation, or for any loss of principal or income
incident to any such delay.
The Escrow Agent shall be entitled to rely upon any judicial order or
judgment, upon any written opinion of counsel or upon any certification,
instruction, notice, or other writing delivered to it by the Issuers or the
Trustee in compliance with the provisions of this Agreement without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of service thereof. The Escrow Agent may
act in reliance upon any instrument comporting with the provisions of this
Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
The Escrow Agent may act pursuant to the advice of counsel chosen by it
with respect to any matter relating to this Agreement and (subject to clause (b)
of the first paragraph of Section 4) shall not be liable for any action taken or
omitted in accordance with such advice.
The Escrow Agent shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement with
respect to any funds or property deposited hereunder, the Escrow Agent shall be
entitled to refuse to comply with any and all claims, demands or instructions
with respect to such funds or property, and the Escrow Agent shall not be or
become liable for its failure or refusal to comply with conflicting claims,
demands or instructions. The Escrow Agent shall be entitled to refuse to act
until either any conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by agreement
between the conflicting claimants as evidenced
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<PAGE> 9
in a writing, satisfactory to the Escrow Agent, or the Escrow Agent shall have
received security or an indemnity satisfactory to the Escrow Agent sufficient to
save the Escrow Agent harmless from and against any and all loss, liability or
expense which the Escrow Agent may incur by reason of its acting. The Escrow
Agent may in addition elect in its sole option to commence an interpleader
action or seek other judicial relief or orders as the Escrow Agent may deem
necessary.
No provision of this Agreement shall require the Escrow Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
5. Indemnity. Each Issuer shall jointly and severally indemnify, hold
harmless and defend Escrow Agent and the Trustee, and their respective
directors, officers, agents and employees, from and against any and all claims,
actions, obligations, liabilities and expenses, including defense costs,
investigative fees and costs, legal fees, and claims for damages, arising from
Escrow Agent's and the Trustee's respective performance under this Agreement,
except to the extent that such liability, expense or claim is directly
attributable to the gross negligence or wilful misconduct of such indemnified
person. In connection with any claim, action, obligation, liability or expense
for which indemnification is sought by the Escrow Agent hereunder, the Escrow
Agent shall be entitled to recover its costs as incurred from funds available in
the Interest Escrow Account.
6. Instructions to Escrow Agent.
(a) Each Issuer and the Trustee hereby irrevocably instruct the Escrow
Agent to: (i) maintain all of the Collateral free and clear of all liens,
security interests, safekeeping or other charges, demands and claims against
Escrow Agent of any nature whatsoever now or hereafter existing, in favor of
anyone other than the Trustee; (ii) promptly notify the Trustee if Escrow Agent
becomes aware that any person other than the Trustee has a lien or security
interest upon any portion of the Collateral (other than any claim which Escrow
Agent may have against the Interest Escrow Account for unpaid fees and
expenses); and (iii) immediately disburse all funds held in the Interest Escrow
Account to the Trustee and transfer title to all Marketable Securities held by
Escrow Agent hereunder to the Trustee upon written notice by the Trustee to
Escrow Agent that as a result of an Event of Default under the Indenture, the
indebtedness represented by the Notes has been accelerated and has become due
and payable.
(b) Any money and Marketable Securities collected by the Trustee
pursuant to Section 6(a)(iii) shall be applied as provided in Section 6.10 of
the Indenture.
(c) Upon demand, the Issuers will execute and deliver to the Trustee
such instruments and documents as the Trustee may reasonably deem necessary or
advisable to confirm or perfect the rights of the Trustee under this Agreement
and the Trustee's interest in the Collateral. The Trustee will take all
necessary action within its power to preserve and protect the security interest
created hereby as a lien and encumbrance upon the Collateral.
(d) Each Issuer hereby appoints the Trustee as its attorney-in-fact
with full power of substitution to do any act which such Issuer is obligated
hereto to do, except that the Trustee shall not direct the investment of any
monies on deposit in the Interest Escrow Account, and the
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<PAGE> 10
Trustee may exercise such rights as each Issuer may exercise with respect to the
Collateral and take any action in each Issuer's name to protect the Trustee's
security interest hereunder.
7. Termination. This Agreement shall terminate automatically ten (10)
days following disbursement of all funds remaining in the Interest Escrow
Account (including the proceeds of any Marketable Securities), unless sooner
terminated by agreement of the parties hereto (in accordance with the terms
hereof, not in violation of the Indenture), provided, however, that the
obligations of each Issuer under Section 5 of this Agreement shall survive
termination of this Agreement or the resignation or removal of the Escrow Agent;
provided, further, however, that until such tenth day, the Issuers will cause
this Agreement (or any permitted successor agreement) to remain in effect and
will cause there to be an escrow agent (including any permitted successor
thereto) acting hereunder (or under any such permitted successor agreement).
8. Miscellaneous.
(a) Waiver. Any party hereto may specifically waive any breach of this
Agreement by any other party, but no such waiver shall be deemed to have been
given unless such waiver is in writing, signed by the waiving party and
specifically designating the breach waived, nor shall any such waiver constitute
a continuing waiver of similar or other breaches.
(b) Invalidity. If, for any reason whatsoever, any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties hereto, and
the rights and duties of any party hereunder shall not be assignable except with
the prior written consent of the other parties. In any event, this Agreement
shall inure to and be binding upon the parties and their successors and
permitted assigns.
(d) Benefit. The parties hereto, the holders of the Notes and their
permitted assigns, but no others, shall be bound hereby and entitled to the
benefits hereof.
(e) Time. Time is of the essence in each provision of this Agreement of
which time is an element.
(f) Choice of Law. The existence, validity, construction, operation and
effect of any and all terms and provisions of this Agreement shall be determined
in accordance with and governed by the laws of the State of New York, without
giving effect to conflict of law principles thereof.
(g) Entire Agreement; Amendments. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior
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<PAGE> 11
agreements, understandings and commitments, whether oral or written. This
Agreement may be amended only by a writing signed by duly authorized
representatives of all parties.
(h) Notices. All notices and other communications required or permitted
to be given or made under this Agreement shall be in writing and shall be deemed
to have been duly given and received, regardless of when and whether received:
(i) on the day of hand delivery; (ii) upon confirmation when sent by facsimile
transmission; (iii) on the next business day after the day sent when sent by
overnight mail; or (iv) three business days following the day sent, when sent by
United States certified mail, postage and certification fee prepaid, return
receipt requested, addressed as follows:
To Escrow Agent:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
To the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
To the Issuers:
Digital Television Services, LLC
880 Holcomb Bridge Road
Building C-200
Roswell, Georgia 30076
Attention: Chief Financial Officer
or at such other address as the specified entity most recently may have
designated in writing in accordance with this section to the others.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(j) Captions. Captions in this Agreement are for convenience only and
shall not be considered or referred to in resolving questions of interpretation
of this Agreement.
(k) Authority of the Issuers; Valid and Binding Agreement. Each Issuer
hereby represents and warrants that this Agreement has been duly authorized,
executed and delivered on its behalf and constitutes the legal, valid and
binding obligation of such Issuer. The execution, delivery and performance of
this Agreement by such Issuer does not violate any
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<PAGE> 12
applicable law or regulation to which such Issuer is subject and does not
require the consent of any governmental or other regulatory body to which such
Issuer is subject, except for such consents and approvals as have been obtained
and are in full force and effect.
(l) Authority of the Escrow Agent and the Trustee; Valid and Binding
Agreement. Each of the Escrow Agent and the Trustee hereby represents and
warrants that this Agreement has been duly authorized, executed and delivered on
its behalf and constitutes its legal, valid and binding obligation.
IN WITNESS WHEREOF, the parties have executed and delivered this
Interest Escrow Agreement as of the date first above written.
ESCROW AGENT: THE BANK OF NEW YORK
By: /s/
---------------------------
Name:
Title:
TRUSTEE AND
COLLATERAL AGENT: THE BANK OF NEW YORK
By: /s/
---------------------------
Name:
Title:
ISSUERS: DIGITAL TELEVISION SERVICES, LLC
By: DTS Management, LLC,
its manager
By: /s/
---------------------------
Name:
Title:
DTS CAPITAL, INC.
By: /s/
---------------------------
Name:
Title:
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<PAGE> 13
Exhibit A
Form of Payment Notice and Disbursement Request
[Letterhead of the Trustee and Collateral Agent]
[Date]
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Disbursement Request No. ___
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Interest Escrow Agreement
("Escrow Agreement") dated as of July 30, 1997 by and among The Bank of New
York, as Trustee and Collateral Agent, The Bank of New York as Escrow Agent, and
Digital Television Services, LLC, a Delaware limited liability company, and DTS
Capital, Inc., a Delaware corporation (the "Issuers"). Unless otherwise
specified, capitalized terms used herein shall have the respective meanings
given in the Escrow Agreement.
This letter constitutes a Payment Notice and
Disbursement Request under the Escrow Agreement.
[Choose one of the following, as applicable]
[The undersigned hereby notifies you that a
scheduled interest payment in the amount of $_________ will become due on
___________, 199_ and requests a disbursement of funds contained in the Interest
Escrow Account in such amount to the Paying Agent or the Holders of the Notes
pursuant to Section 3(a) of the Escrow Agreement.]
[The undersigned hereby notifies you that
Notes equaling $_________ in aggregate principal amount have been retired and
authorizes you to release $________ of funds in the Interest Escrow Account to
the Issuers (to an account designated by the Issuers in writing), which amount
represents the amount permitted to be released in accordance with Section 3(b)
of the Escrow Agreement.] [Note: In the event any of the Notes are to be
redeemed or purchased other than on an Interest Payment Date, the Payment Notice
may also request payment from the Interest Escrow Account of accrued interest on
such Notes to the Redemption Date or Purchase Date.]
A-1
<PAGE> 14
[The undersigned hereby notifies you that
all amounts due on the Notes up to and through August 1, 1999 have been paid in
accordance with the Indenture (as defined in the Escrow Agreement) and
authorizes you to release to the Issuers all remaining assets contained in the
Interest Escrow Account.]
[In accordance with Section 6(a)(iii) of the
Escrow Agreement, the undersigned hereby notifies you that there has been an
acceleration of the maturity of the Notes. Accordingly, you are hereby requested
to disburse all remaining funds contained in the Interest Escrow Account to the
Trustee such that the balance in the Interest Escrow Account is reduced to
zero.]
In connection with the requested
disbursement, the undersigned hereby notifies you that [Insert one or more of
the following if applicable]:
1. [The Notes have not, as a result
of an Event of Default (as defined in the
Indenture), been accelerated and become due
and payable.]
2. All prior disbursements to the
Trustee from the Interest Escrow Account
have been applied.
3. [Add wire instructions for
payment to Trustee (if different from Escrow
Agent).]
The Escrow Agent is entitled to rely on the
foregoing in disbursing funds relating to this Payment Notice and Disbursement
Request.
THE BANK OF NEW YORK,
as Trustee and Collateral Agent
By:
-------------------------------
Name:
Title:
A-2
<PAGE> 1
EXHIBIT 4.5
ESCROW SECURITY AGREEMENT
Between
THE BANK OF NEW YORK
("Collateral Agent")
and
DIGITAL TELEVISION SERVICES, LLC
and
DTS CAPITAL, INC.
("Grantors")
July 30, 1997
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<PAGE> 2
This ESCROW SECURITY AGREEMENT ("Agreement"), dated as of July 30,
1997, by and between THE BANK OF NEW YORK, as secured party and as Trustee (as
defined below) for the benefit of the holders of the Notes (as defined below)
under the Indenture (as defined below) (the "Collateral Agent"), and DIGITAL
TELEVISION SERVICES, LLC, a Delaware limited liability company, and DTS CAPITAL,
INC., a Delaware corporation, as grantors ("Grantors").
RECITALS
A. Pursuant to that certain Indenture dated as of July 30, 1997 (the
"Indenture"), by and between Grantors and The Bank of New York, as trustee (the
"Trustee"), Grantors have issued their 12 1/2 Senior Subordinated Notes due 2007
(the "Notes").
B. Pursuant to the Interest Escrow Agreement (as defined below), the
Grantors will be entitled, subject to certain conditions, to instruct the
Collateral Agent to draw upon certain proceeds from the sale of the Notes to pay
the first four semi-annual interest payments on the Notes.
C. The Indenture requires that Grantors execute and deliver this
Agreement.
AGREEMENT
In consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Grantors hereby agree with the Collateral Agent as follows:
1. Definitions. Unless otherwise defined, all terms used herein shall
have the meanings given in the Indenture. The following terms shall have the
respective meanings given:
"Collateral Documents" has the meaning given in the Indenture.
"Interest Escrow Agreement" means the Interest Escrow
Agreement dated as of the date hereof among The Bank of New York, as Escrow
Agent, The Bank of New York, as Trustee, and Grantors.
"Governmental Authorities" means any national, state or local
government (whether domestic or foreign), any political subdivision thereof or
any other governmental or quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, bureau or entity, or any arbitrator
with authority to bind a party at law.
"Person" means any natural person, corporation, partnership,
firm, association, Governmental Authority, or any
<PAGE> 3
other entity whether acting in an individual, fiduciary or other capacity.
2. Assignment, Pledge and Grant of Security Interest.
(a) To secure the timely payment and performance of the
Obligations (as defined below), each Grantor does hereby assign as collateral,
grant a security interest in, and pledge, to the Collateral Agent for the
benefit of the holders of the Notes, all the estate, right, title and interest
of each such Grantor, whether now owned or hereafter acquired, in, to and under:
(i) the Interest Escrow Account (as defined in the
Interest Escrow Agreement) and all funds and investments held
or contained in the Interest Escrow Account, including all
investments of such funds.
(ii) the Interest Escrow Agreement, as amended or
modified from time to time (the "Assigned Agreement").
(iii) the proceeds of all of the foregoing (all of
the collateral described in clauses (i) and (ii) and this
clause (iii) being herein collectively referred to as the
"Collateral"), including (A) all rights of Grantors to receive
moneys due and to become due under or pursuant to the
Collateral, (B) all claims of Grantors for damages arising out
of or for breach of or default under the Assigned Agreement or
any other Collateral, (C) all rights of Grantors under the
Assigned Agreement, including any rights to perform thereunder
and to compel performance and otherwise exercise all remedies
thereunder and (D) to the extent not included in the
foregoing, all proceeds receivable or received when any and
all of the foregoing Collateral is sold, collected, exchanged
or otherwise disposed of, whether voluntarily or
involuntarily.
(b) Anything herein contained to the contrary notwithstanding,
each Grantor shall remain liable under the Assigned Agreement, to perform all of
the obligations undertaken by it thereunder, all in accordance with and pursuant
to the terms and provisions thereof, and the Collateral Agent shall have no
obligation or liability under such Assigned Agreement by reason of or arising
out of this Agreement, nor shall the Collateral Agent be required or obligated
in any manner to perform or fulfill any obligations of either Grantor thereunder
or to make any payment, or to make any inquiry as to the nature or sufficiency
of any payment received by it, or present or file any claim, or take any action
to collect or enforce the payment of any amounts which may have been assigned to
it or to which it may be entitled at any time or times.
(c) Subject to the terms of the Indenture, upon the occurrence
and during the continuance of an Event of Default, each Grantor does hereby
constitute the Collateral Agent, acting for and on behalf of the holders of the
Notes, the true and lawful attorney
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<PAGE> 4
of such Grantor, irrevocably, with full power (in the name of such Grantor or
otherwise) to ask, require, demand, receive, compound and give acquittance for
any and all moneys and claims for moneys due and to become due under or arising
out of the Assigned Agreement or any of the other Collateral, to elect remedies
thereunder, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
in connection therewith which the Collateral Agent may deem to be necessary or
advisable; provided, however, that the Collateral Agent shall give each Grantor
notice of any action taken by it as such attorney-in-fact within two (2)
Business Days after taking any such action.
(d) If any default by either Grantor under the Assigned
Agreement shall occur, the Collateral Agent shall, at its option, be permitted
(but shall not be obligated) to remedy any such default by giving written notice
of such intent to such Grantor and to the other parties to the Assigned
Agreement. Any curing by the Collateral Agent of such Grantor's default under
the Assigned Agreement shall not be construed as an assumption by the Collateral
Agent of any obligations, covenants or agreements of such Grantor under such
Assigned Agreement, and the Collateral Agent shall not incur any liability to
such Grantor or any other Person as a result of any actions undertaken by the
Collateral Agent in curing or attempting to cure any such default. This
Agreement shall not be deemed to release or to affect in any way the obligations
of such Grantor under the Assigned Agreement.
3. Obligations Secured. This Agreement secures the payment and
performance of all obligations (now existing or hereafter arising) of each
Grantor owing to the holders of the Notes under the Notes and the Indenture
(such obligations being herein called the "Obligations").
4. Events of Default. The occurrence of an Event of Default under and
as defined in the Indenture, whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body, shall constitute an Event
of Default hereunder.
5. Remedies.
(a) If any Event of Default has occurred and is continuing,
the Collateral Agent may, (i) apply the Collateral to any Obligations due and
payable, (ii) proceed to protect and enforce the rights vested in it by this
Agreement, including the right to cause all revenues hereby pledged as security
and all other moneys pledged hereunder to be paid directly to it, and to enforce
its rights hereunder to such payments and all other rights hereunder by such
appropriate judicial proceedings as it shall deem most effective to protect and
enforce any of such rights, either at law or in equity or otherwise, whether for
specific enforcement of
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<PAGE> 5
any covenant or agreement contained in the Assigned Agreement, or in aid of the
exercise of any power therein or herein granted, or for any foreclosure
hereunder and sale under a judgment or decree in any judicial proceeding, or to
enforce any other legal or equitable right vested in it by this Agreement or by
law; (iii) cause any action at law or suit in equity or other proceeding to be
instituted and prosecuted to collect or enforce any Obligations or rights
included in the Collateral, or to foreclose or enforce any other agreement or
other instrument by or under or pursuant to which such Obligations are issued or
secured, subject in each case to the provisions and requirements thereof; (iv)
sell or otherwise dispose of any or all of the Collateral or cause the
Collateral to be sold or otherwise disposed of in one or more sales or
transactions, at such prices as the Collateral Agent may deem best, and for cash
or on credit or for future delivery, without assumption of any credit risk, at
any broker's board or at public or private sale, without demand of performance
or notice of intention to sell or of time or place of sale (except such notice
as is required by applicable statute, rule or regulation and cannot be waived),
it being agreed that the Collateral Agent may be a purchaser on behalf of the
holders of Notes at any such sale and that the Collateral Agent or anyone else
who may be the purchaser of any or all of the Collateral so sold shall
thereafter hold the same absolutely, free from any claim or right of whatsoever
kind, including any equity of redemption, of either Grantor, any such demand,
notice or right and equity being hereby expressly waived and released to the
extent permitted by law; (v) incur expenses, including attorneys' fees,
consultants' fees, and other costs appropriate to the exercise of any right or
power under this Agreement; (vi) perform any obligation of either Grantor
hereunder, and make payments, purchase, contest or compromise any Lien, and pay
taxes and expenses, without, however, any obligation so to do; (viii) take
possession of the Collateral, control and manage the Collateral, collect all
income from the Collateral and apply the same to reimburse the Trustee,
Collateral Agent and the holders of Notes for any cost or expenses incurred
hereunder or under the Indenture and to the payment or performance of each
Grantor's obligations hereunder or under the Indenture, and apply the balance to
the Notes as provided in the Indenture and any remaining excess balance to
whomsoever is legally entitled thereto; (viii) secure the appointment of a
receiver of the assets of either such Grantor or any part thereof and/or the
Collateral or any party thereof; or (ix) exercise any other or additional rights
or remedies granted to a secured party under the Uniform Commercial Code. If,
pursuant to applicable law, rule or regulation prior notice of any such action
is required to be given to either such Grantor, each such Grantor hereby
acknowledges that the minimum time required by such applicable law, rule or
regulation or if no minimum is specified, ten (10) Business Days, shall be
deemed a reasonable notice period.
(b) All costs and expenses (including reasonable attorneys'
fees and expenses) incurred by the Collateral Agent in connection with any such
suit or proceeding, or in connection with the performance by the Collateral
Agent of any of such Grantor's
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<PAGE> 6
agreements pursuant to any exercise of its rights or remedies hereunder,
including the Assigned Agreement pursuant to the terms of this Agreement,
together with interest thereon (to the extent permitted by law) computed at a
rate per annum equal to the interest rate on the Notes from the date on which
such costs or expenses are incurred to the date of payment thereof, shall
constitute additional indebtedness secured by this Agreement and shall be paid
by such Grantor to the Collateral Agent on behalf of the holders of Notes on
demand.
6. Remedies Cumulative; Delay Not Waiver.
(a) No right, power or remedy herein conferred upon or
reserved to the Collateral Agent is intended to be exclusive of any other right,
power or remedy, and every such right, power and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right, power 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. Resort to any or all security now or hereafter held
by the Collateral Agent, may be taken concurrently or successively and in one or
several consolidated or independent judicial actions or lawfully taken
nonjudicial proceedings, or both.
(b) No delay or omission of the Collateral Agent to exercise
any right or power accruing upon the occurrence and during the continuance of
any Event of Default as aforesaid shall impair any such right or power or shall
be construed to be a waiver of any such Event of Default or an acquiescence
therein; and every power and remedy given by this Agreement may be exercised
from time to time, and as often as shall be deemed expedient, by the Collateral
Agent.
7. Covenants. Each Grantor covenants as follows:
(a) Grantor will not directly or indirectly create, incur,
assume or suffer to exist any Liens (except for Permitted Liens) on or with
respect to any property or assets constituting a part of the Collateral and
Grantor will at its own cost and expense promptly take such action as may be
necessary to discharge any such Liens (other than Permitted Liens) on or with
respect to any properties or assets constituting a part of the Collateral.
(b) Any action or proceeding to enforce this Agreement or the
Assigned Agreement may be taken by the Collateral Agent either in Grantor's name
or in the Collateral Agent's name, as the Collateral Agent may deem necessary.
(c) Grantor shall not modify, amend, terminate, waive or
supplement any provision of the Assigned Agreement if any such modification,
amendment, termination, waiver or supplement would adversely affect the interest
of the Collateral Agent on behalf of
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<PAGE> 7
the holders of the Notes in a degree greater than the manner in which it
adversely affects Grantor.
(d) Grantor shall pay, before the imposition of any fine,
penalty, interest or cost attached thereto, all taxes, assessments and other
governmental or non-governmental charges or levies now or hereafter assessed or
levied against the Collateral or upon the security interest provided for herein
(except for Liens for taxes and assessments not then delinquent or which Grantor
may, pursuant to the definition of "Permitted Liens" in the Indenture, permit to
remain unpaid or any charge being contested in good faith for which an adequate
reserve has been established), as well as pay, or cause to be paid, all claims
for labor, materials or supplies which, if unpaid, might become a prior Lien
(other than a Permitted Lien) thereon.
8. Representations and Warranties. Each Grantor represents and warrants
as follows:
(a) The Assigned Agreement in effect on the date hereof has
been duly authorized, executed and delivered by each Grantor and is in full
force and effect and is binding upon and enforceable against each Grantor in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the general principles of
equity. There exists no default under the Assigned Agreement by Grantor, or to
the best of Grantor's knowledge, by the other parties thereto.
(b) No effective financing statement or other instrument
similar in effect covering all or any part of Grantor's interest in the
Collateral is on file in any recording office, except such as may have been
filed pursuant to this Agreement or pursuant to the documents evidencing
Permitted Liens. The provisions of this Agreement are effective to create in
favor of the Collateral Agent a valid security interest in the Collateral (to
the extent that the Grantor has rights therein) and, upon the filing of UCC-1
Financing Statements in the filing offices identified on Schedule I in respect
of such portions of the Collateral in which a security interest may be perfected
as a result of such filing, the Collateral Agent will have a valid and perfected
security interest in the Collateral, to the extent that the Grantor has rights
therein (other than proceeds, to the extent Section 9-306 of the Uniform
Commercial Code as in effect in the relevant jurisdiction(s) is not complied
with respect to such proceeds), subject to no other Liens except Permitted
Liens, and first priority except to the extent of Permitted Liens described in
the Indenture.
(c) Grantor is lawfully possessed of ownership of the
Collateral. Grantor has full power and lawful authority to grant and assign the
Collateral hereunder. Grantor will, so long as any Obligations shall be
outstanding, warrant and defend its title to the Collateral against the claims
and demands of all Persons whomsoever.
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<PAGE> 8
(d) Grantor has not assigned any of its rights under the
Assigned Agreement except as provided in this Agreement. Grantor will not make
any other assignment of its rights under the Assigned Agreement.
(e) All subsidiaries of Grantor are listed in Paragraph 1 of
Schedule II; all names of Grantor's predecessors-in-interest are listed in
Paragraph 2 of Schedule II; and all names under which Grantor does business are
listed in Paragraph 3 of Schedule II.
(f) Grantor's place of business, or if Grantor has more than
one place of business, Grantor's chief executive office, is set forth in
Paragraph 4 of Schedule II.
(g) Except for the filing or recording of the UCC Financing
Statements described in Section 8(b) and except as otherwise described in
Section 11, no authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the grant by Grantor of the security interest in the Collateral pursuant
to this Agreement or for the execution, delivery or performance of this
Agreement by Grantor, or (ii) for the perfection of such security interest or
the exercise by the Collateral Agent of the rights and remedies provided for in
this Agreement.
(h) The execution, delivery and performance by Grantor of this
Agreement and the consummation of the transactions contemplated hereby
(including the creation of the Liens granted hereunder) will not (i) violate
Grantor's constituent organizational documents, (ii) violate any order, judgment
or decree of any Governmental Authorities binding on Grantor or any property or
assets of Grantor, (iii) violate or conflict with any law, rule, regulation, or
Permit applicable to Grantor or any of its properties, (iv) conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any agreement, indenture, mortgage, deed of trust, equipment
lease, instrument or other document to which Grantor is a party or pursuant to
which any of its properties or assets are bound, (v) result in or require the
creation or imposition of any Lien upon any material properties or assets of
Grantor (other than the creation of the Liens granted hereunder, including
Permitted Liens described in the Indenture), or (vi) require any approval or
consent of Grantor's owners.
9. Further Assurances.
(a) Each Grantor agrees that from time to time, at the expense
of such Grantor, such Grantor will promptly execute and file such financing or
continuation statements, or amendments thereto, and such other instruments,
endorsements or notices, and take such other actions, as may be reasonably
necessary or as the Collateral Agent may reasonably request, in order to perfect
and preserve the assignments and security interests granted or purported to be
granted hereby.
-7-
<PAGE> 9
(b) Each Grantor hereby authorizes the Collateral Agent to
file one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of such
Grantor where permitted by law. Copies of any such statement or amendment
thereto shall promptly be delivered to such Grantor.
(c) Each Grantor shall pay all filing, registration and
recording fees or refiling, re-registration and re-recording fees, and all
expenses incident to the execution and acknowledgment of this Agreement, any
assurance, and all federal, state, county and municipal stamp taxes and other
taxes, duties, imports, assessments and charges arising out of or in connection
with the execution and delivery of this Agreement, any agreement supplemental
hereto and any instruments of further assurance.
10. Place of Perfection. Each Grantor shall give the Collateral Agent
at least thirty (30) business days' notice before it changes the location of its
chief executive office, or its name, identity or organizational form, and shall
at the expense of such Grantor execute and deliver such instruments and
documents as are required to maintain the priority and perfection of the
security interest granted hereby. Each Grantor shall not change the location of
its principal place of business or chief executive office to any location
outside of the United States unless the Collateral Agent is reasonably satisfied
(based upon advice of legal counsel) that the security interest created under
this Agreement will not be adversely affected or impaired.
11. Miscellaneous.
(a) Notices. All notices and other communications required or
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received, regardless of when and whether
received: (i) on the day of hand delivery; (ii) upon confirmation when sent by
facsimile transmission; (iii) on the next business day after the day sent, when
sent by overnight mail; or (iv) on the third business day after the day sent,
when sent by United States certified mail, postage and certification fee
prepaid, return receipt requested, addressed as follows:
To the Collateral Agent:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attn: Corporate Trust Trustee Administration
To Grantors:
Digital Television Services, LLC
880 Holcomb Bridge Road
Building C-200
-8-
<PAGE> 10
Roswell, Georgia 30076
Attn: Chief Financial Officer
or at such other address as the specified entity most recently may have
designated in writing in accordance with this section to the others.
(b) Headings. The headings in this Agreement are for purposes
of reference only and shall not affect the meaning or construction of any
provision of this Agreement.
(c) Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
(d) Amendments, Waivers and Consents. Any amendment or waiver
of any provision of this Agreement and any consent to any departure by either
Grantor from any provision of this Agreement shall be effective only if made or
given in compliance with all of the terms and provisions of the Indenture.
(e) Interpretation of Agreement. Time is of the essence
in each provision of this Agreement of which time is an element.
(f) Continuing Security Interest. This Agreement shall create
a continuing security interest in the Collateral and shall (i) remain in full
force and effect until the earlier of (x) the payment and performance in full of
the Obligations and (y) the termination of the Interest Escrow Agreement, (ii)
be binding upon each Grantor, its successors and assigns, and (iii) inure,
together with the rights and remedies of the Collateral Agent hereunder, to the
benefit of the Collateral Agent and its successors, transferees and assigns.
(g) Reinstatement. To the extent permitted by law, this
Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any amount received out of the proceeds of the Collateral or
otherwise prior to the termination of the Interest Escrow Agreement by the
holders of the Notes, the Collateral Agent or the Trustee in respect of the
Obligations is rescinded or must otherwise be restored or returned by the
Collateral Agent, upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of either Grantor or upon the appointment of any receiver,
intervenor, conservator, trustee or similar official for either Grantor or any
substantial part of such Grantor's assets, or otherwise, all as though such
payments had not been made.
-9-
<PAGE> 11
(h) Survival of Provisions. All representations, warranties
and covenants of each Grantor contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by Grantors of the Obligations secured hereby.
(i) Authority of the Collateral Agent. The Collateral Agent
shall have and be entitled to exercise all powers hereunder which are
specifically granted to the Collateral Agent by the terms hereof, together with
such powers as are reasonably incident thereto. The Collateral Agent may perform
any of its duties hereunder or in connection with the Collateral by or through
agents or employees and shall be entitled to retain counsel and to act in
reliance upon the advice of counsel concerning all such matters. Neither the
Collateral Agent nor any director, officer, employee, attorney or agent of the
Collateral Agent shall be liable to either Grantor for any action taken or
omitted to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct, nor shall the Collateral Agent be responsible
for the validity, effectiveness or sufficiency of this Agreement or of any
document or security furnished pursuant hereto. The Collateral Agent and its
directors, officers, employees, attorneys and agents shall be entitled to rely
on any communication, instrument or document reasonably believed by it or them
to be genuine and correct and to have been signed or sent by the proper person
or persons. Each Grantor agrees jointly and severally to indemnify and hold
harmless the Collateral Agent from and against any and all costs, expenses
(including reasonable fees, expenses and disbursements of attorneys and
paralegals (including, without duplication, reasonable charges of inside
counsel)), claims and liabilities incurred by the Collateral Agent hereunder,
unless such claim or liability shall be due to willful misconduct or gross
negligence on the part of the Collateral Agent.
(j) Release; Termination of Agreement. Subject to the
provisions of Section 11(g), this Agreement shall terminate upon the earlier to
occur of (x) the full and final payment and performance of all the Obligations
and (y) the termination of the Interest Escrow Agreement. At such time, the
Collateral Agent shall, at the request and expense of Grantors, promptly
reassign and redeliver to Grantors all of the Collateral hereunder which has not
been sold, disposed of, retained or applied by the Collateral Agent in
accordance with the terms hereof and of the Interest Escrow Agreement. Such
reassignment and redelivery shall be without warranty by or recourse to the
Collateral Agent, except as to the absence of any prior assignments by the
Collateral Agent of its interest in the Collateral, and shall be at the expense
of Grantors.
(k) Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be deemed an original but all of
which shall together constitute one and the same agreement.
-10-
<PAGE> 12
(l) WAIVERS. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) EXCEPT AS EXPRESSLY PROVIDED IN SECTION 5(a),
WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND PRIOR TO THE
EXERCISE BY THE COLLATERAL AGENT OF ITS RIGHTS FROM AND AFTER AN EVENT
OF DEFAULT TO REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESS OR TO
REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL. GRANTOR WAIVES THE POSTING
OF ANY BOND OTHERWISE REQUIRED OF THE COLLATERAL AGENT IN CONNECTION
WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF,
REPLEVY, ATTACH OR LEVY UPON COLLATERAL, TO ENFORCE ANY JUDGMENT OR
OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF SUCH PARTY OR TO ENFORCE BY SPECIFIC
PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT
INJUNCTION, THIS AGREEMENT;
(ii) WAIVES THE RIGHT TO ASSERT ANY SETOFF,
COUNTERCLAIM OR CROSS-CLAIM IN RESPECT OF, AND ALL STATUTES OF
LIMITATIONS WHICH MAY BE RELEVANT TO, SUCH ACTION OR PROCEEDING;
(iii) WAIVES DILIGENCE, DEMAND, PRESENTMENT AND
PROTEST AND ANY NOTICES THEREOF AS WELL AS NOTICE OF NONPAYMENT; AND
(iv) WAIVES PRESENTMENT AND DEMAND FOR PAYMENT OF ANY
OF THE OBLIGATIONS, PROTEST AND NOTICE OF DISHONOR OR DEFAULT WITH
RESPECT TO ANY OF THE OBLIGATIONS.
(m) Governing Law. The validity, interpretation and
enforcement of this Agreement shall be governed by the laws of the State of New
York without giving effect to the conflict of law principles thereof.
-11-
<PAGE> 13
IN WITNESS WHEREOF, Grantors and the Collateral Agent have
caused this Escrow Security Agreement to be duly executed as of the day and year
first above written.
DIGITAL TELEVISION SERVICES, LLC,
a Delaware limited liability company
By: DTS Management, LLC,
its manager
By: /s/
-------------------------------------
Name:
Title:
DTS CAPITAL, INC.,
a Delaware corporation
By: /s/
-------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Collateral
Agent
By: /s/
-------------------------------------
Name:
Title:
-12-
<PAGE> 1
EXHIBIT 10.1
CONFORMED COPY
================================================================================
DIGITAL TELEVISION SERVICES, LLC
------------------------------------
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of July 30, 1997
------------------------------------
$90,000,000
Credit Facility
------------------------------------
CIBC WOOD GUNDY SECURITIES CORP.,
as Arranger,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Syndication Agent,
FLEET NATIONAL BANK,
as Documentation Agent
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent
================================================================================
<PAGE> 2
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 30,
1997, among DIGITAL TELEVISION SERVICES, LLC, a Delaware limited liability
company formerly known as Columbia DBS Holdings, LLC (the "Borrower"), the
several banks and other financial institutions from time to time parties to this
Agreement (the "Lenders"), CIBC WOOD GUNDY SECURITIES CORP. ("CIBCWG"), as
arranger (the "Arranger"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MGT"), a
New York banking corporation, as syndication agent (in such capacity, the
"Syndication Agent"), FLEET NATIONAL BANK ("Fleet"), as documentation agent (in
such capacity, the "Documentation Agent"), and CANADIAN IMPERIAL BANK OF
COMMERCE, a Canadian-chartered bank acting through its New York Agency, as
administrative agent for the Lenders hereunder (in such capacity, the
"Administrative Agent").
W I T N E S S E T H :
WHEREAS, the Borrower and its Subsidiaries are in the business
of providing direct broadcast services and related equipment pursuant to the
Contracts (as hereinafter defined);
WHEREAS, the Borrower, certain Lenders (the "Existing
Lenders") and the Administrative Agent are parties to the Amended and Restated
Credit Agreement, dated as of May 9, 1997 (as the same has been amended,
supplemented or otherwise modified through the date hereof, the "Existing Credit
Agreement");
WHEREAS, the parties hereto wish to amend and restate the
Existing Credit Agreement pursuant to this Agreement in order to effect certain
modifications to the terms and conditions of the Existing Credit Agreement;
WHEREAS, the parties hereto have elected to amend and restate
the Existing Credit Agreement pursuant to this Agreement rather than amend the
Existing Credit Agreement or enter into a new credit agreement for their
convenience and intend that all indebtedness, obligations and liens created
under the Existing Credit Agreement and the other Loan Documents be continued
hereunder and thereunder and remain in full force and effect and not be
discharged, paid, satisfied or cancelled except to the extent otherwise provided
herein and therein; and
WHEREAS, on the Closing Date (as hereinafter defined), (i) all
amounts owing under or in connection with the Existing Credit Agreement will be
paid in full, (ii) the Existing Credit Agreement will be amended and restated in
its entirety as set forth in this Agreement and (iii) the Borrower may then and
thereafter obtain extensions of credit from the Lenders under this Agreement in
accordance with the Commitments hereunder;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto hereby agree that, effective on
the Closing Date, the Existing Credit Agreement shall be and hereby is amended
and restated in its entirety to read as follows:
<PAGE> 3
2
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings (such terms to be equally applicable to the singular
and plural forms thereof):
"ABR Loans": Loans the rate of interest applicable to which is
based upon the CIBC Alternate Base Rate.
"Adjusted EBITDA": for any period, with respect to the
Borrower and its Subsidiaries on a consolidated basis, EBITDA for such
period plus the following expenses of the Borrower and its Subsidiaries
for such period: (a) payroll expense in respect of employees or agents
of the Borrower and such Subsidiaries engaged exclusively in sales and
marketing, (b) sales expense, and (c) the excess, if any, of (i) the
sum of (x) the cost of equipment and (y) the expenses incurred in
generating installation revenue over (ii) equipment and installation
revenue.
"Adjusted Interest Coverage Ratio": as of the end of each
calendar quarter of the Borrower, the ratio of (a) Annualized Adjusted
EBITDA for such calendar quarter to (b) Cash Interest Expense
(excluding the first four payments of interest on the Subordinated
Notes to the extent paid in cash from amounts on deposit in the
Subordinated Notes Escrow Account) for the twelve month period ending
on the last day of such calendar quarter.
"Adjusted Leverage Ratio": at the end of each calendar quarter
of the Borrower, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the ratio of (a) Total Indebtedness on such date to
(b) Annualized Adjusted EBITDA for such calendar quarter.
"Adjustment Date": each date on or after December 31, 1997,
that is the second Business Day following receipt by the Administrative
Agent of both (i) the financial statements required to be delivered
pursuant to subsection 7.1(a) or 7.1(b), as applicable, for the then
most recently completed fiscal period and (ii) the related Compliance
Certificate required to be delivered pursuant to subsection 7.2(b) with
respect to such fiscal period.
"Affiliate": as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either
to (a) vote 10% or more of the securities having ordinary voting power
for the election of directors of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by
contract or otherwise.
"Aggregate Outstanding Revolving Credit": as to any Revolving
Credit Lender at any time, an amount equal to the sum of (a) the
aggregate principal amount of all Revolving Credit Loans made by such
Revolving Credit Lender then outstanding and
<PAGE> 4
3
(b) such Revolving Credit Lender's Revolving Credit Commitment
Percentage of the L/C Obligations then outstanding.
"Agreement": this Second Amended and Restated Credit
Agreement, as amended, supplemented or otherwise modified from time to
time.
"Annualized Adjusted EBITDA": for any calendar quarter, four
times Adjusted EBITDA for such quarter.
"Annualized Contribution": for any calendar quarter, four
times Contribution for such quarter.
"Annualized EBITDA": for any calendar quarter, four times
EBITDA for such quarter.
"Applicable Margin": during the period from the Closing Date
until the first Adjustment Date, the Applicable Margin in respect of
Loans shall equal (i) with respect to Revolving Credit Loans which are
ABR Loans, 2.25% per annum, (ii) with respect to Revolving Credit Loans
which are Eurodollar Loans, 3.50% per annum, (iii) with respect to Term
Loans which are ABR Loans, 2.50% per annum and (iv) with respect to
Term Loans which are Eurodollar Loans 3.75% per annum; provided such
Applicable Margin will be adjusted on each Adjustment Date to the
applicable rate per annum set forth under the applicable heading on
Schedule 2 which corresponds to the Leverage Ratio determined from the
financial statements and Compliance Certificate relating to the end of
the calendar quarter immediately preceding such Adjustment Date; and
provided, further that in the event that the financial statements
required to be delivered pursuant to subsection 7.1(a) or 7.1(b), as
applicable, and the related Compliance Certificate required to be
delivered pursuant to subsection 7.2(b), are not delivered when due,
then
(a) if such financial statements and Compliance
Certificate are delivered after the date such financial
statements and Compliance Certificate were required to be
delivered (without giving effect to the thirty-day cure period
provided in Section 9(d) but prior to the expiration of the
thirty-day cure period provided in Section 9(d), and the
Applicable Margin increases (or decreases) from that
previously in effect as a result of the delivery of such
financial statements and Compliance Certificate, then the
Applicable Margin in respect of Loans during the period from
the date upon which such financial statements and Compliance
Certificate were required to be delivered (without giving
effect to any applicable cure period) until the date upon
which they actually are delivered shall, except as otherwise
provided in clause (b) below, be the Applicable Margin as so
increased (or decreased); or
(b) if such financial statements and Compliance
Certificate are not delivered prior to the expiration of the
thirty-day cure period provided in Section 9.1(d), then,
effective upon such expiration, for the period from the
<PAGE> 5
4
date upon which such financial statements and Compliance
Certificate were required to be delivered (after the
expiration of the applicable cure period) until two Business
Days following the date upon which such financial statements
and Compliance Certificate actually are delivered, the
Applicable Margin in respect of all Loans shall be the highest
rate which could then be applicable thereto as set forth on
Schedule 2.
"Assignee": as defined in subsection 11.6(c).
"Assignment and Assumption Agreement": the Assignment and
Assumption Agreement to be entered into by the Borrower and/or certain
of its Subsidiaries, substantially in the form of Exhibit A to the
Existing Credit Agreement, (i) entered into pursuant to the Guarantee
and Collateral Agreement and (ii) for each Contract and rights therein
assigned to the Administrative Agent, for the ratable benefit of the
Lenders, by the Borrower and/or certain of its Subsidiaries and
consented to by DirecTv, Inc. and the NRTC.
"Assignment and Consent": the Assignment and Consent, dated as
of November 27, 1996 substantially in the form of Exhibit A to the
Original Credit Agreement, for each Contract and rights therein
assigned to the Administrative Agent, for the ratable benefit of the
Lenders, by the Borrower and/or its Subsidiaries and consented to by
DirecTv, Inc. and the NRTC, as the same has been amended, supplemented
or otherwise modified to the date hereof and as may be further amended,
supplemented or otherwise modified from time to time.
"Available Revolving Credit Commitment": as to any Revolving
Credit Lender at any time, an amount equal to the excess, if any, of
(a) the amount of such Revolving Credit Lender's Revolving Credit
Commitment at such time over (b) the sum of (i) the aggregate unpaid
principal amount at such time of all Revolving Credit Loans made by
such Revolving Credit Lender, and (ii) an amount equal to such
Revolving Credit Lender's Revolving Credit Commitment Percentage of the
outstanding L/C Obligations at such time; collectively, as to all the
Revolving Credit Lenders, the "Available Revolving Credit Commitments".
"Board of Directors": with respect to any Person, the board of
directors, board of managers or similar governing body of such Person
or of the general partner or of the Manager of such Person.
"Borrower": as defined in the preamble hereto.
"Borrower's Service Areas": the Service Areas in which the
Borrower and its Subsidiaries have rights to market direct DirecTv
pursuant to the NRTC Agreements.
"Borrower's Subscriber Base": collectively, the Subscriber
Bases of the Borrower and its Subsidiaries.
<PAGE> 6
5
"Borrowing Base": at any time, the sum of (i) $1050 times the
number of Paying Subscribers within the Borrower's Service Areas (other
than any Paying Subscriber which is the obligor on accounts receivable
upon which the Administrative Agent, for the ratable benefit of the
Lenders, does not have a first perfected Lien) plus (ii) $40 times the
number of households within the Borrower's Service Areas; provided that
if the Borrower fails to deliver any Borrowing Base Certificate in the
form and at the times required by subsection 7.2(e), the Borrowing Base
shall, at the close of business on the fifteenth day following notice
to the Borrower of the failure to deliver such Borrowing Base
Certificate, be reduced to $0 and shall remain $0 until such time as a
Borrowing Base Certificate in proper form is delivered, at which time
the Borrowing Base shall be calculated as set forth herein.
"Borrowing Base Certificate": as defined in subsection 7.2.
"Borrowing Certificate": as defined in subsection 2.3.
"Borrowing Date": any Business Day specified in a notice
pursuant to subsection 2.3, 2.8 or 3.2 as a date on which the Borrower
requests the Lenders to make Loans hereunder or the Issuing Lender to
issue Letters of Credit hereunder.
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close, except that, when used in connection with a
Eurodollar Loan, "Business Day" shall mean any Business Day on which
dealings in Dollars between banks may be carried on in London, England
and New York, New York.
"Capital": DTS Capital, Inc., a Delaware corporation and a
wholly owned subsidiary of the Borrower.
"Capital Expenditure": as defined in subsection 8.10.
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"Cash Equivalents": (a) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b)
certificates of deposit and eurodollar time deposits with maturities of
one year or less from the date of acquisition and overnight bank
deposits and demand deposits of any Lender or of any commercial bank
having capital and surplus in excess of $500,000,000, (c) repurchase
obligations of any Lender or of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not
more than 30 days with respect to securities issued or fully guaranteed
or insured by the United States Government, (d) commercial paper of a
domestic issuer rated at least A-2 by Standard and Poor's Ratings
Services ("S&P") or
<PAGE> 7
6
P-2 by Moody's Investors Service, Inc. ("Moody's"), (e) securities
with maturities of one year or less from the date of acquisition issued
or fully guaranteed by any state, commonwealth or territory of the
United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may
be) are rated at least A by S&P or A by Moody's, (f) securities with
maturities of one year or less from the date of acquisition backed by
standby letters of credit issued by any Lender or any commercial bank
satisfying the requirements of clause (b) of this definition or (g)
shares of money market mutual or similar funds substantially all of the
assets of which are invested in assets satisfying the requirements of
clauses (a) through (f) of this definition.
"Cash Interest Expense": for any period and without
duplication, with respect to the Borrower and its Subsidiaries on a
consolidated basis, Interest Expense paid or payable in cash in respect
of Total Indebtedness during such period.
"Change of Control": the occurrence of any of the following
events:
(i) the Control Group, as a whole, shall at any time
cease to own, directly or indirectly, free and clear of all
Liens, 30% of the Capital Stock of the Borrower, determined on
a fully diluted basis; or
(ii) the Control Group, as a whole, shall at any time
cease to own, determined on a fully diluted basis, sufficient
shares of the Capital Stock of the Borrower, determined on a
fully diluted basis, to elect a majority of the Board of
Directors of the Borrower or otherwise cease to have the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of
the Borrower; or
(iii) Senior Management ceases to be employed by
Management, the Borrower or any Subsidiary of the Borrower;
(iv) Senior Management ceases both to be employed by
Management and to be responsible for the overall operation of
the Borrower and its Subsidiaries; or
(v) a Change in Control (as defined in the
Subordinated Notes Indenture).
"CIBC": Canadian Imperial Bank of Commerce, a
Canadian-chartered bank, acting through its New York Agency.
"CIBC Alternate Base Rate": on any particular date, a
rate of interest per annum equal to the highest of:
<PAGE> 8
7
(a) the rate of interest most recently announced by
CIBC as its base rate (the "CIBC Prime Rate"); and
(b) the Federal Funds Rate for such date plus 1/2 of
1%.
The CIBC Alternate Base Rate is not necessarily intended to be
the lowest rate of interest charged by CIBC in connection with
extensions of credit.
"Closing Date": the date on which the conditions precedent set
forth in subsection 6.1 shall be satisfied.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": all assets (including rights under the Contracts
and assets constituting shares of Capital Stock) of the Loan Parties,
now owned or hereinafter acquired, upon which a Lien is purported to be
created by any Security Document; provided, however, that Collateral
shall not include the Interest Escrow Agreement, any amounts held in
the Subordinated Notes Escrow Account or any proceeds thereof.
"Columbia": the collective reference to Columbia Capital
Corporation, and, so long as such Persons remain shareholders of
Columbia Capital Corporation, James B. Murray, Jr., Mark Kington, David
Mixer, Mark Warner, Robert Blow, Harry F. Hopper, Jr., and their
respective Affiliates.
"Columbia Capital Corporation": Columbia Capital Corporation,
a Virginia corporation.
"Commitment Percentage": as to any Lender, the percentage of
the aggregate Revolving Credit Commitments and Term Loan Commitments
constituted by such Lender's Revolving Credit Commitment and Term Loan
Commitment, or following the Closing Date, the percentage representing
a fraction the numerator of which is the sum of (i) the aggregate
principal amount of such Lender's Term Loans then outstanding plus (ii)
the Revolving Credit Commitment of such Lender (or, following the
termination or expiration of the Revolving Credit Commitments, the sum
of (x) the aggregate principal amount of such Lender's Revolving Credit
Loans then outstanding plus (y) such Lender's Revolving Credit
Commitment Percentage of all L/C Obligations then outstanding), and the
denominator of which is the sum of (i) the aggregate principal amount
of Term Loans of all Lenders then outstanding plus (ii) the aggregate
Revolving Credit Commitments of all Lenders (or, following the
termination or expiration of the Revolving Credit Commitments, the sum
of (x) the aggregate principal amount of all Revolving Credit Loans
then outstanding plus (y) the aggregate principal amount of all L/C
Obligations then outstanding).
"Commitments": the collective reference to the Revolving
Credit Commitments, the Term Loan Commitments and the L/C Commitment;
individually, a "Commitment".
<PAGE> 9
8
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414 of the Code.
"Compliance Certificate": as defined in subsection 7.2(b).
"Consolidated Current Assets": on any date, with respect to
the Borrower and its Subsidiaries on a consolidated basis, all assets
of the Borrower and its Subsidiaries on such date which, in accordance
with GAAP would be classified on a consolidated balance sheet of the
Borrower as "current assets".
"Consolidated Current Liabilities": on any date, with respect
to the Borrower and its Subsidiaries on a consolidated basis, all
liabilities of the Borrower and its Subsidiaries on such date which, in
accordance with GAAP, would be classified on a consolidated balance
sheet of the Borrower as "current liabilities".
"Consolidated Net Income": for any period, the net income (or
deficit) of the Borrower and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital": on any date, with respect to
the Borrower and its Subsidiaries on a consolidated basis, the
Consolidated Current Assets (other than cash and Cash Equivalents) of
the Borrower and its Subsidiaries on such date minus the Consolidated
Current Liabilities (other than the current portion of long-term
Indebtedness) of the Borrower and its Subsidiaries on such date.
"Contract": the collective reference to the contracts and
agreements listed on Schedule 5.20 and any other contractual
arrangements or agreements entered into by the Borrower or any of its
Subsidiaries with the NRTC providing rights to market, distribute
and/or sell DirecTv and other broadcast services and related equipment.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its property is bound.
"Contribution": for any period, with respect to the Borrower
and its Subsidiaries on a consolidated basis, EBITDA for such period
plus the following expenses of the Borrower and its Subsidiaries for
such period: (a) payroll and benefits expenses, (b) administrative
expenses, (c) sales expenses, and (d) the excess, if any, of (i) the
sum of (x) the cost of equipment and (y) the expenses incurred in
generating installation revenue over (ii) equipment and installation
revenue.
"Control Group": collectively, Columbia, Donald A. Doering,
Douglas S. Holladay, Jr., William J. Dorran, Earle A. MacKenzie and
their respective Affiliates.
<PAGE> 10
9
"Default": any of the events specified in Section 9, whether
or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"DirecTv": the direct broadcast satellite and programming
services available from DirecTv, Inc.
"DirecTv, Inc.": DirecTv, Inc., a California corporation.
"DirecTv Obligations": the obligations of the Borrower and its
Subsidiaries to the NRTC and DirecTv, Inc. in respect of certain
programming services provided by the NRTC and DirecTv, Inc.
"Documentation Agent": Fleet, as documentation agent for the
Lenders under this Agreement and the other Loan Documents.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"EBITDA": for any period, with respect to the Borrower and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, an amount equal to the sum of (a) Net Income for such period,
plus (b) income taxes, excluding income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or
losses or sales or other dispositions of assets permitted under
subsection 8.7, plus (c) Interest Expense for such period, plus (d)
depreciation for such period, plus (e) amortization for such period.
"Environmental Costs": any and all costs or expenses
(including, without limitation, attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and
litigation expenses, fines, penalties, damages, settlement payments,
judgments and awards), of whatever kind or nature, contingent or
otherwise, arising out of, or in any way relating to, any violation of,
noncompliance with or liability under any Environmental Laws or any
orders, requirements, demands, or investigations of any person related
to any Environmental Laws. Environmental Costs include any and all of
the foregoing, without regard to whether they arise out of or are
related to any past, pending or threatened proceeding of any kind.
"Environmental Laws": any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, or other legally
enforceable requirements (including, without limitation, common law) of
any foreign government, the United States, or any state, local,
municipal or other Governmental Authority, regulating, relating to or
imposing liability or standards of conduct concerning protection of the
environment or of human health, or employee health and safety, as has
been, is now, or may at any time hereafter be, in effect.
<PAGE> 11
10
"Environmental Permits": any and all permits, licenses,
registrations, notifications, exemptions and any other authorization
required under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Escrow Security Agreement": the Escrow Security Agreement,
dated as of July ___, 1997 among the Borrower and Capital, as grantors
and The Bank of New York, as Collateral Agent for the benefit of the
holders of the Subordinated Notes.
"Eurocurrency Reserve Requirements": for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by
a member bank of such System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined by the Administrative Agent to be the arithmetic mean of the
offered rates for deposits in Dollars with a term comparable to such
Interest Period that appears on the Telerate British Bankers Assoc.
Interest Settlement Rates Page (as defined below) at approximately
11:00 A.M., London time, on the second full Business Day preceding the
first day of such Interest Period; provided, however, that if there
shall at any time no longer exist a Telerate British Bankers Assoc.
Interest Settlement Rates Page, "Eurodollar Base Rate" shall mean, with
respect to each day during each Interest Period pertaining to a
Eurodollar Loan, the rate per annum equal to the rate at which CIBC is
offered Dollar deposits at or about 10:00 A.M., New York City time, two
Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where the eurodollar and foreign currency
and exchange operations in respect of its Eurodollar Loans are then
being conducted for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to
the amount of its Eurodollar Loan to be outstanding during such
Interest Period. "Telerate British Bankers Assoc. Interest Settlement
Rates Page" shall mean the display designated as Page 3750 on the
Telerate System Incorporated Service (or such other page as may replace
such page on such service for the purpose of displaying the rates at
which Dollar deposits are offered by leading banks in the London
interbank deposit market).
"Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
<PAGE> 12
11
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Excess Cash Flow": with respect to any fiscal year of the
Borrower, an amount equal to (a) Consolidated Net Income for such
fiscal year, plus (b) amortization and depreciation for such fiscal
year, plus (c) extraordinary, unusual or non-recurring losses for such
fiscal year, plus (d) interest paid from the Subordinated Notes Escrow
Account to the extent deducted in the calculation of Consolidated Net
Income, minus (e) extraordinary, unusual or non-recurring gains for
such fiscal year, minus (f) capital expenditures made in accordance
with subsection 8.9 during such fiscal year, minus (g) payments of
principal on Indebtedness resulting in a permanent reduction of such
Indebtedness during such fiscal year (other than mandatory prepayments
pursuant to subsection 4.3), minus (h) amounts arising from sales of
assets permitted by subsection 8.7 during such fiscal year to the
extent included in Consolidated Net Income and paid to the Lenders as a
mandatory prepayment pursuant to subsection 4.3(a), minus (i) increases
in Consolidated Working Capital for such fiscal year, plus (j)
decreases in Consolidated Working Capital for such fiscal year.
"Exchange Act": the Securities Exchange Act of 1934, as
amended from time to time.
"Existing Credit Agreement": as defined in the second recital
hereto.
"Existing Lender": as defined in the second recital hereto.
"Facility": as defined in the third recital hereto.
"Federal Funds Rate": for any particular date, an interest
rate per annum equal to the interest rate (rounded upwards, if
necessary, to the nearest 1/16th of 1%) offered in the interbank market
to the Administrative Agent as the overnight Federal Funds Rate at or
about 10:00 A.M. New York City time, on such day (or if such day is not
a Business Day, for the next preceding Business Day).
"Financing Lease": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
<PAGE> 13
12
"Fleet": as defined in the preamble hereto.
"Funded Indebtedness": at any date, an amount equal to all
Indebtedness of any Person other than that described in clause (e) of
the definition of Indebtedness. "Funded Indebtedness" with respect to
the Borrower shall include, among other things, the principal balance
of all then outstanding Loans under this Agreement.
"GAAP": generally accepted accounting principles in the United
States of America as in effect at the time of preparation of the
financial statements referred to in subsection 5.1, applied on a
consistent basis, provided, however, that, for purposes of the
financial statements required to be delivered pursuant to subsection
7.1, GAAP shall mean generally accepted accounting principles in the
United States of America as in effect at the time of the applicable
financial statements.
"General and Administrative Expenses": for any period for the
Borrower and its Subsidiaries, (i) all general and administrative
expenses of the Borrower and such Subsidiaries for such period and (ii)
all payroll expenses of the Borrower and such Subsidiaries for such
period other than payroll expenses with respect to employees of the
Borrower and such Subsidiaries engaged exclusively in the marketing and
sales of DirecTv and related services of the Borrower and such
Subsidiaries, including in the case of clauses (i) and (ii) above
management fees paid by the Borrower and/or its Subsidiaries to
Columbia Capital Corporation to the extent permitted hereunder.
"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity (including,
without limitation, any central bank) exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government. For purposes of subsections 4.9, 4.10 and
11.15, the term "Governmental Authority" shall be deemed to include,
without limitation, the National Association of Insurance
Commissioners.
"Guarantee": as defined in the definition of "Guarantor."
"Guarantee and Collateral Agreement": the Guarantee and
Collateral Agreement, dated as of November 27, 1996, as amended and
restated through the Closing Date pursuant to a Second Amended and
Restated Guarantee and Collateral Agreement to be executed and
delivered by Management, the Borrower and each of its Subsidiaries,
substantially in the form of Exhibit A, as the same may be amended,
supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
any third Person (the "primary obligor") in any manner, whether
directly or indirectly, including,
<PAGE> 14
13
without limitation, any obligation of the guaranteeing person, whether
or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities
or services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in
respect thereof; provided, however, that the term Guarantee Obligation
shall not include endorsements of instruments for deposit or collection
in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Guarantee Obligation is
made and (b) the maximum amount for which such guaranteeing person may
be liable pursuant to the terms of the instrument embodying such
Guarantee Obligation, unless such primary obligation and the maximum
amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as determined by the Borrower in good
faith.
"Guarantor": any Person which is now or hereafter a party to
(a) the Guarantee and Collateral Agreement or (b) any other guarantee
(a "Guarantee") hereafter delivered to the Administrative Agent
guaranteeing the obligations and liabilities of each of the Loan
Parties hereunder or under any other Loan Documents, including, without
limitation, any guarantee delivered pursuant to subsection 7.10.
"Households": for any Service Area, the estimated number of
households in such Service Area as of April 1, 1996 and as defined by
the U.S. Census Bureau, provided to the Borrower by Claritas, a
demographic data provider based in Arlington, Virginia; provided that,
for any Service Area as to which the Borrower and its Subsidiaries have
acquired, or have proposed to acquire, the rights to market DirecTv
solely to households not passed by a cable television operator,
"Households" shall mean the number of households estimated by the NRTC
in connection with the original grant, by the NRTC, of the rights to
market DirecTv to households in such Service Area as set forth in the
related NRTC Agreement.
"Indebtedness": as to any Person, at any date, an amount equal
to (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations of such Person
under Financing Leases, (d) all obligations of such Person in respect
of bankers acceptances issued or created for the account of such
Person, (e) for purposes of subsection 8.3 and Section 9(e), all
obligations of such Person in respect of interest rate protection
agreements, interest
<PAGE> 15
14
rate futures, interest rate options, interest rate caps and any other
interest rate, currency, commodity or other hedging arrangement and (f)
all liabilities of another Person secured by any Lien on any property
owned by such Person whether or not such Person has assumed or
otherwise become liable for the payment thereof.
"Information Memorandum": the Information Memorandum, dated
July ___, 1997, issued by the Borrower with respect to the Subordinated
Notes.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in subsection 5.9.
"Interest Coverage Ratio": as of the end of each calendar
quarter of the Borrower, the ratio of (a) Annualized EBITDA for such
calendar quarter to (b) cash Interest Expense (excluding the first four
payments of interest on the Subordinated Notes to the extent paid in
cash from amounts on deposit in the Subordinated Notes Escrow Account)
for the twelve month period ending on the last day of such calendar
quarter.
"Interest Escrow Agreement": the Interest Escrow Agreement,
dated as of July __, 1997 among the Borrower and Capital, as the
issuers, and The Bank of New York, as trustee and as escrow agent.
"Interest Expense": for any period and without duplication,
with respect to the Borrower and its Subsidiaries on a consolidated
basis, the aggregate amount of interest which would be set forth
opposite the caption "interest expense" or any like caption on an
income statement for such period for the Borrower and its Subsidiaries
on a consolidated basis, determined in accordance with GAAP (as such
term is defined herein without reference to the proviso to such
definition).
"Interest Payment Date": (a) as to any ABR Loan, the last day
of each March, June, September and December, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the last day of
such Interest Period, and (c) as to any Eurodollar Loan having an
Interest Period longer than three months, (x) each day which is three
months, or a whole multiple thereof, after the first day of such
Interest Period and (y) the last day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing
or conversion date, as the case may be, with respect to such
Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of
<PAGE> 16
15
borrowing or notice of conversion, as the case may be, given
with respect thereto; and
(ii) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such
Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice
to the Administrative Agent not less than three Business Days
prior to the last day of the then current Interest Period with
respect thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period pertaining to a Eurodollar
Loan would otherwise end on a day that is not a Business Day,
such Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately
preceding Business Day;
(2) any Interest Period that would otherwise extend
beyond (a) the Revolving Credit Commitment Termination Date
(in the case of Revolving Credit Loans) shall end on the
Revolving Credit Commitment Termination Date or (b) the Term
Loan Maturity Date (in the case of the Term Loans) shall end
on the Term Loan Maturity Date;
(3) any Interest Period pertaining to a Eurodollar
Loan that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month; and
(4) the Borrower shall select Interest Periods so as
not to require a payment or prepayment of any Eurodollar Loan
during an Interest Period for such Loan on account of
scheduled reductions of the Revolving Credit Commitments and
related required amortization of the Revolving Credit Loans or
on account of scheduled amortization of the Term Loans.
"Interest Rate Protection Agreement": any interest rate
protection agreement, interest rate future, interest rate option,
interest rate swap, interest rate cap or collar or other interest rate
hedge arrangement or other similar agreement or arrangement, to or
under which the Borrower or any of its Subsidiaries is a party or a
beneficiary.
"Investment": as defined in subsection 8.11.
"Issuing Lender": CIBC or any of its affiliates.
"JPMSI": J.P. Morgan Securities Corporation.
<PAGE> 17
16
"L/C Commitment": $50,000,000.
"L/C Fee Payment Date": the last day of each March, June,
September and December.
"L/C Obligations": at any date, the sum of (a) the aggregate
amount then available to be drawn under all outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not then been reimbursed by the Borrower pursuant to
subsection 3.5.
"L/C Participants": the collective reference to all the
Revolving Credit Lenders other than the Issuing Lender.
"L/C Participating Interest": with respect to any Letter of
Credit (a) in the case of the Issuing Lender with respect thereto, its
interest in such Letter of Credit and any Letter of Credit Application
relating thereto after giving effect to the granting of participating
interests therein, if any, pursuant hereto and (b) in the case of each
L/C Participant, its undivided participating interest in such Letter of
Credit and any Letter of Credit Application relating thereto.
"Lenders": as defined in the preamble hereto and including,
without limitation, the Issuing Lender.
"Letter of Credit Application": an application in such form as
the Issuing Lender may specify from time to time, requesting the
Issuing Lender to open a Letter of Credit.
"Letters of Credit": as defined in subsection 3.1.
"Lien": any mortgage, pledge, hypothecation, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"Loan Documents": this Agreement, any Note, any Letter of
Credit Application, any Letters of Credit, the Security Documents and
any Guarantees.
"Loan Parties": Management, the Borrower and each Subsidiary
of the Borrower which is a party to a Loan Document, individually, a
"Loan Party".
"Loans": collectively, the Revolving Credit Loans and the Term
Loans.
"Management": DTS Management, LLC, a Georgia limited liability
company, formerly known as Columbia DBS Management, LLC, and its
successors and assigns.
<PAGE> 18
17
"Manager": any officer or member of the Board of Directors of
Management.
"Managing Agents": the collective reference to the
Administrative Agent, the Syndication Agent and the Documentation
Agent.
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise)
or (with respect to Section 6.1(i) only) prospects of the Borrower and
its Subsidiaries taken as a whole or (b) the validity or enforceability
of this Agreement or any of the other Loan Documents or the rights or
remedies of the Administrative Agent or the Lenders hereunder or
thereunder.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Member": as defined in any NRTC Agreement.
"MGT": Morgan Guaranty Trust Company of New York, a New York
banking corporation.
"Moody's": as defined in the definition of "Cash Equivalents."
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": with respect to any sale or other
disposition of assets by the Borrower or any of its Subsidiaries, the
net amount equal to the aggregate amount received in cash (including
any cash received by way of deferred payment pursuant to a note
receivable, other non-cash consideration or otherwise, but only as and
when such cash is so received) minus the sum of (i) the reasonable
fees, commissions and other out-of-pocket expenses incurred by the
Borrower or such Subsidiary in connection with such sale or other
disposition, (ii) federal, state and local taxes incurred in connection
with such sale or other disposition, whether payable at such time or
thereafter and (iii) in the case of any such sale or other disposition
of assets subject to a Lien securing any Indebtedness (which Lien and
Indebtedness are permitted by this Agreement), any amounts required to
be repaid by the Borrower or such Subsidiary in respect of such
Indebtedness (other than Indebtedness under this Agreement and any
Notes) in connection with such sale or other disposition.
"Net Income": for any period, the aggregate of the net income
of the Borrower and its Subsidiaries for such period on a consolidated
basis, determined in accordance with GAAP but before any deduction of
the minority interest therein of any Guarantor, for such period;
provided, however, that there shall be excluded from Net Income (a) the
net income of a Person whose net income is not consolidated with the
Borrower's
<PAGE> 19
18
under GAAP (other than the amount of dividends and other distributions
paid or made by such Person to the Borrower or any of its Subsidiaries
during such period), (b) the net income of any Person for such period
acquired in a pooling of interests transaction for any period prior to
the date of such acquisition, (c) any net gain or loss for such period
(net of the related tax effect thereof) resulting from any sale or
other disposition of assets or any sale or other disposition of any
Capital Stock of any Person by the Borrower or any of its Subsidiaries,
in each case, other than in the ordinary course of business or
otherwise permitted by subsection 8.7, (d) extraordinary gains and
losses for such period (net of the related tax effect thereof), (e)
non-recurring and unusual gains and losses for such period (net of the
related tax effect thereof) and (f) cash returns on or on account of
Investments permitted under subsection 8.11(g).
"Non-Excluded Taxes": as defined in subsection 4.11.
"Notes": the collective reference to the Revolving Credit
Notes and the Term Notes.
"NRTC": National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreement": any agreement for the marketing and
distribution of DirecTv and for retail sales of DirecTv related
equipment between the Borrower or any Subsidiary, as the case may be,
as a "Member" or "Affiliate" and the NRTC listed on Schedule 5.20 and
any other such agreements entered into or assumed by the Borrower or
any of its Subsidiaries from time to time; provided that for purposes
of determining the number of households in a Service Area as to which
the Borrower and its Subsidiaries have acquired, or have proposed to
acquire, the right to market DirecTv solely to households not passed by
a cable television operator, "NRTC Agreement" shall mean and include
any such agreement pursuant to which the NRTC initially granted such
rights to any "Member" or "Affiliate."
"Original Credit Agreement": the Credit Agreement, dated as of
November 27, 1996.
"Participant": as defined in subsection 11.6(b).
"Paying Subscribers": all Subscribers of the Borrower or any
Subsidiary other than Subscribers currently under promotional plans for
free basic DirecTv .
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
"Permitted Business Acquisitions": any acquisition of the
rights to provide DirecTv pursuant to any Contract or acquisition of
all or substantially all the assets of, or shares or other equity
interests in, a Person or division or line of business of a Person or
other significant assets of a Person which includes the acquisition of
such
<PAGE> 20
19
rights in additional Service Areas on or before December 31, 1998
provided that: (a) the purchase price of such acquisition does not
exceed the greater of (i) $120 times the number of Households in the
acquired Service Area, or (ii) $1800 times the number of Subscribers in
the acquired Service Area, (b) immediately after giving effect to such
acquisition, the Borrower's Subscriber Base does not increase by more
than 50%; (c) immediately after giving effect to such acquisition the
total number of Households within the Borrower's Service Areas does not
increase by more than 30%, (d) upon the consummation of such
acquisition, the Available Revolving Credit Commitments of all Lenders
are greater than (i) $10,000,000 if such acquisition is consummated on
or before December 31, 1997, or (ii) $5,000,000 if such acquisition is
consummated after December 31, 1997, (e) no Default or Event of Default
shall have occurred and be continuing or result therefrom, (f) all
transactions related thereto shall have been consummated in all
material respects in accordance with applicable laws and (g) all
actions required to be taken, if any, with respect to such acquired
assets or newly formed subsidiary under subsection 7.10 shall have been
taken.
"Permitted Junior Debt": Subordinated Debt of the Borrower (i)
no amount of the principal of which shall be stated to mature or be the
subject of a mandatory prepayment prior to June 30, 2005 (other than
from the proceeds of Subordinated Debt), (ii) no interest on which
shall be required to be paid in cash prior to the maturity thereof,
(iii) which contains no covenant, event of default or other provision
which would entitle the holder thereof to accelerate the maturity
thereof prior to the acceleration or payment in full of the Loans and
other obligations of the Borrower to which such Permitted Junior Debt
is subordinate and (iv) all the other terms and conditions of which
shall have been approved in writing by the Required Lenders.
"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Recently Acquired Households": as at any date, the number of
Households within Service Areas acquired by the Borrower or any of its
Subsidiaries during the twelve month period ending on such date.
"Register": as defined in subsection 11.6(d).
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Reimbursement Obligations": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to subsection 3.5 for amounts
drawn under Letters of Credit.
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"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .13, .14, .16, .18, .19 or
.20 of PBGC Reg. Section 2615.
"Required Lenders": at any time, Lenders the Commitment
Percentages of which aggregate more than 66 2/3%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Responsible Officer": as to any Loan Party, the chief
executive officer, the president, a vice president, a managing
director, the general counsel or a Manager of such Person or, with
respect to certifications of due authorization and correctness of Loan
Documents, the Secretary of such Person, or, with respect to financial
matters (including the execution of the Borrowing Base Certificate),
the chief financial officer, the treasurer or a Manager of such Person,
or, in any such case, of an entity which is the managing general
partner or the Manager of such Person.
"Revolving Credit Commitment": as to any Revolving Credit
Lender, its obligation to make Revolving Credit Loans to, and/or issue
or participate in Letters of Credit issued on behalf of, the Borrower
in an aggregate amount not to exceed at any one time outstanding the
amount set forth under such Revolving Credit Lender's name in Schedule
1 opposite the heading "Revolving Credit Commitment" or, in the case of
any Revolving Credit Lender that is an Assignee, the amount of the
assigning Revolving Credit Lender's Revolving Credit Commitment
assigned to such Assignee pursuant to subsection 11.6 (in each case as
such amount may be adjusted from time to time as provided herein).
"Revolving Credit Commitment Percentage": as to any Revolving
Credit Lender, the percentage of the aggregate Revolving Credit
Commitments constituted by its Revolving Credit Commitment (or, if the
Revolving Credit Commitments have terminated or expired, the percentage
which (i) the sum of (a) such Revolving Credit Lender's then
outstanding Revolving Credit Loans plus (b) such Revolving Credit
Lender's interests in the aggregate L/C Obligations then outstanding
then constitutes of (ii) the sum of (a) the aggregate Revolving Credit
Loans of all the Revolving Credit Lenders then outstanding plus (b) the
aggregate L/C Obligations then outstanding).
"Revolving Credit Commitment Period": the period from and
including the Closing Date to but not including the Revolving Credit
Commitment Termination Date.
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"Revolving Credit Commitment Termination Date": the earlier of
(a) July 31, 2003 or, if such date is not a Business Day, the Business
Day next preceding such date and (b) the date upon which the Revolving
Credit Commitments shall be terminated pursuant hereto.
"Revolving Credit Lender": any Lender having a Revolving
Credit Commitment or that holds outstanding Revolving Credit Loans or
L/C Participating Interests hereunder.
"Revolving Credit Loans": as defined in subsection 2.1.
"Revolving Credit Note": as defined in subsection 2.2.
"Securities Act": the Securities Act of 1933, as amended from
time to time.
"Security Documents": the collective reference to the
Guarantee and Collateral Agreement, the Assignment and Consent, the
Assignment and Assumption Agreement and all other security documents
previously and hereafter delivered to the Administrative Agent granting
a Lien on any asset or assets of any Person to secure the obligations
and liabilities of the Borrower hereunder or under any of the other
Loan Documents or to secure any guarantee of any such obligations and
liabilities, including, without limitation, any security document
delivered pursuant to subsection 7.10.
"Seller Notes": promissory notes of the Borrower or its
Subsidiaries issued to sellers of the rights to provide DirecTv to the
Borrower or such Subsidiaries, including the Seller Notes listed on
Schedule 4.
"Senior Debt": with respect to the Borrower and its
Subsidiaries, at any date, all then outstanding Funded Indebtedness of
the Borrower and its Subsidiaries other than Subordinated Debt and
Permitted Junior Debt.
"Senior Leverage Ratio": as at the last day of each calendar
quarter of the Borrower, with respect to the Borrower and its
Subsidiaries on a consolidated basis, the ratio of (a) Total
Indebtedness (other than the Subordinated Notes, Permitted Junior Debt
and Subordinated Debt) on such date to (b) Annualized EBITDA for such
quarter.
"Senior Management": at least two of Douglas S. Holladay, Jr.,
Donald A. Doering, William J. Dorran and Earle A. MacKenzie, each
employed by Management in a senior management capacity and, in such
capacity, responsible for the day-to-day operations of the Borrower and
its Subsidiaries.
"Service Area": the specific residences listed or geographic
area described in an NRTC Agreement in which a Member has exclusive
DirecTv distribution rights pursuant to and to the extent provided in
such NRTC Agreement.
<PAGE> 23
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"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"S&P": as defined in the definition of "Cash Equivalents."
"Subordinated Debt": at any date, all then outstanding
Indebtedness of the Borrower under unsecured notes and debentures of
the Borrower which are subordinated to the prior payment of the Loans
and the other obligations and liabilities of the Borrower hereunder,
under the Loan Documents and under any Interest Rate Protection
Agreements entered into by the Borrower with any Lender or any
Affiliate thereof, all on terms and conditions approved in writing by
the Required Lenders.
"Subordinated Notes": the senior subordinated notes of the
Borrower and Capital, due 2007, having the terms and conditions
described in, and which are to be issued in an aggregate principal
amount not to exceed $155,000,000 in accordance with, the Information
Memorandum and any senior subordinated notes of the Borrower and
Capital due 2007 issued in exchange for the Subordinated Notes that are
identical to the Subordinated Notes and which are entitled to the
benefit of a trust indenture that is identical to the Subordinated
Notes Indenture.
"Subordinated Notes Escrow Account": the escrow account to be
funded by the Borrower on the date of issuance of the Subordinated
Notes with a portion of the Net Cash Proceeds of the issuance thereof
in an amount sufficient to pay at least (but no more than) the first
four interest payments due thereon and to be maintained with the escrow
agent under the Interest Escrow Agreement and the Escrow Security
Agreement as contemplated by the Subordinated Notes Indenture as
collateral security for the obligations of the Borrower in respect of
the Subordinated Notes, all as described in the Information Memorandum.
"Subordinated Notes Indenture": the Subordinated Notes
Indenture, dated as of July __, 1997 among the Borrower and Capital, as
joint and several obligors, the Guarantors and The Bank of New York, as
trustee, as amended, supplemented or otherwise modified from time to
time in accordance with subsection 8.17.
"Subscriber Base": the number of households and commercial
establishments in the Service Areas with the capacity to receive direct
broadcast services.
"Subscribers": for any Service Area, the sum of (i) the number
of active subscribers to direct broadcast services in such Service Area
which pay at least the minimum standard monthly fees and charges for
basic direct broadcast services and which are not more than 60 days
past due in such payments plus (ii) the number obtained by dividing (x)
the total monthly charges paid by bulk and commercial subscribers to
such direct broadcast services by (y) the average minimum standard
monthly fees and charges for basic direct broadcast services paid by
households subscribing to such services in such Service Area. If one
Person subscribes to multiple subscriptions, then each such
subscription shall be considered a separate Subscriber;
<PAGE> 24
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provided, however, that multiple connections within a Household for
which there is only one subscription shall count as only one
Subscriber.
"Subsidiary": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or
other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the
Board of Directors of such corporation, partnership or other entity
("Voting Stock") are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this Agreement
shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Syndication Agent": MGT, as syndication agent for the Lenders
under this Agreement and the other Loan Documents.
"Term Loans": as defined in subsection 2.6.
"Term Loan Commitment": as to any Term Loan Lender, its
obligation to make a Term Loan to the Borrower pursuant to subsection
2.6 in an aggregate amount equal to the amount set forth under such
Lender's name in Schedule 1 opposite the heading "Term Loan
Commitment", collectively, the "Term Loan Commitments."
"Term Loan Commitment Percentage": as to any Term Loan Lender,
the percentage of the aggregate Term Loan Commitments constituted by
its Term Loan Commitment or, following the Closing Date, the percentage
of the aggregate outstanding Term Loans constituted by its Term Loan.
"Term Loan Lender": any Lender having a Term Loan Commitment
hereunder or that holds outstanding Term Loans.
"Term Loan Maturity Date": July 21, 2003.
"Term Note" and "Term Notes": as defined in subsection 2.7.
"Total Indebtedness": with respect to the Borrower and its
Subsidiaries, at any date, without duplication, (a) all then
outstanding Funded Indebtedness of the Borrower and its Subsidiaries
plus (b) all then outstanding Guarantee Obligations of the Borrower and
its Subsidiaries with respect to Funded Indebtedness.
"Total Leverage Ratio": as of the last day of each calendar
quarter of the Borrower, with respect to the Borrower and its
Subsidiaries on a consolidated basis, the ratio of (a) Total
Indebtedness on such date to (b) Annualized EBITDA for such calendar
quarter.
"Total Outstandings": as defined in subsection 4.3(c).
<PAGE> 25
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"Tranche": the collective reference to Eurodollar Loans the
then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Loans
shall originally have been made on the same day).
"Transferee": as defined in subsection 11.6(f).
"Type": as to any Loan, its nature as an ABR Loan or a
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"Voting Stock": as defined in the definition of "Subsidiary".
"Wholly Owned Subsidiary": means any Subsidiary, all of the
outstanding Voting Stock (other than directors' qualifying shares or
shares owned by Management, which in the aggregate are not more than 1%
of the outstanding Voting Stock) of which are owned, directly or
indirectly, by the Borrower.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes, any other Loan Documents or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in any Notes, any other Loan Documents and any
certificate or other document made or delivered pursuant hereto, accounting
terms relating to the Borrower and its Subsidiaries not defined in subsection
1.1 and accounting terms partly defined in subsection 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
AND TERM LOAN COMMITMENTS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans (each a "Revolving Credit Loan", collectively, "Revolving
Credit Loans") to the Borrower from time
<PAGE> 26
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to time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Revolving Credit
Lender's Revolving Credit Commitment Percentage of the then outstanding L/C
Obligations, does not exceed the amount of such Revolving Credit Lender's
Revolving Credit Commitment, provided that in no event shall any Revolving
Credit Lender be obligated to make any Revolving Credit Loan prior to the time
when the aggregate amount of the Term Loans made hereunder first equals
$20,000,000. During the Revolving Credit Commitment Period, the Borrower may use
the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit
Loans in whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the
Borrower and of which the Administrative Agent has been advised in accordance
with subsections 2.3 and 4.4, provided that no Revolving Credit Loan shall be
made as a Eurodollar Loan after May 31, 2003.
2.2 Revolving Credit Notes. The Borrower agrees that, upon the request
to the Administrative Agent by any Revolving Credit Lender made on or prior to
the Closing Date or in connection with any assignment pursuant to subsection
11.6, to evidence such Lender's Revolving Credit Loans the Borrower will execute
and deliver to such Lender a promissory note substantially in the form of
Exhibit B-1, with appropriate insertions therein as to payee, date and principal
amount (each, as amended, supplemented, replaced or otherwise modified from time
to time, a "Revolving Credit Note"), payable to the order of such Lender and in
a principal amount equal to the lesser of (a) the amount set forth under such
Lender's name in Schedule 1 opposite the heading "Revolving Credit Commitment"
and (b) the aggregate unpaid principal amount of all Revolving Credit Loans made
by such Lender to such Borrower. Each Revolving Credit Note shall (x) be dated
the Closing Date, (y) be stated to mature on the Revolving Credit Commitment
Termination Date and (z) provide for the payment of interest in accordance with
subsection 4.1.
2.3 Procedure for Revolving Credit Borrowing. The Borrower may borrow
under the Revolving Credit Commitments during the Revolving Credit Commitment
Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 11:00 A.M., New York City time, (a) three Business
Days prior to the requested Borrowing Date, if all or any part of the requested
Revolving Credit Loans are to be initially Eurodollar Loans or (b) one Business
Day prior to the requested Borrowing Date, otherwise), specifying (i) the amount
to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing
is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the respective amount
of each Type of Loan and the respective length of the initial Interest Period
therefor. Each borrowing under the Revolving Credit Commitments shall be in an
amount equal to (x) in the case of ABR Loans, $500,000 or a whole multiple of
$100,000 in excess thereof (or, if the aggregate Available Revolving Credit
Commitments then in effect are less than $500,000, such lesser amount) and (y)
in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $100,000 in
excess thereof. Upon receipt of any such notice in a certificate of the
Borrower, substantially in the form of
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Exhibit D, with appropriate insertions and attachments, executed by a
Responsible Officer of the Borrower (such certificate, a "Borrowing
Certificate"), the Administrative Agent shall promptly notify each Revolving
Credit Lender thereof. Each Revolving Credit Lender will make the amount of its
pro rata share of each borrowing available to the Administrative Agent for the
account of the Borrower at the office of the Administrative Agent specified in
subsection 11.2 prior to 1:00 P.M., New York City time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent crediting the account of the Borrower on the books of such
office with the aggregate of the amounts made available to the Administrative
Agent by the Lenders and in like funds as received by the Administrative Agent.
2.4 Commitment Fees. The Borrower agrees to pay to the Administrative
Agent, for the account of each Revolving Credit Lender, a commitment fee for the
period from and including the first day of the Revolving Credit Commitment
Period to the Revolving Credit Commitment Termination Date, computed at the rate
of 1/2 of 1% per annum on the average daily amount of the Available Revolving
Credit Commitment of such Lender during the period for which payment is made, in
each case payable quarterly in arrears on the last day of each March, June,
September and December and on the Revolving Credit Commitment Termination Date,
commencing on the first of such days to occur after the Closing Date.
2.5 Termination or Reduction of Revolving Credit Commitments. (a) The
Borrower shall have the right, upon not less than three Business Days' notice to
the Administrative Agent (which will promptly notify the Lenders thereof), to
terminate the Revolving Credit Commitments or, from time to time, to reduce the
amount of the Revolving Credit Commitments; provided that no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayments of the Revolving Credit Loans made on the effective date thereof,
the aggregate principal amount of the Revolving Credit Loans then outstanding
when added to the sum of the then outstanding L/C Obligations, would exceed the
Revolving Credit Commitments then in effect. Any such reduction shall be in an
amount equal to $1,000,000 or a whole multiple of $500,000 in excess thereof and
shall reduce permanently the Revolving Credit Commitments then in effect.
(b) The total amount of the Revolving Credit Commitments on the Closing
Date shall be $70,000,000, and shall be reduced (i) on December 31, 1998 by an
amount equal to the Available Revolving Credit Commitments of all Revolving
Credit Lenders on such date minus $10,000,000 provided that the reduction
provided for in this subsection 2.5(b)(i) shall not be made unless the Available
Revolving Credit Commitments of all Revolving Credit Lenders on such date
exceeds $10,000,000, and (ii) on each of the dates specified below by an amount
equal to (x) the Revolving Credit Commitments as of January 1, 1999 minus
$10,000,000 multiplied by (y) the percentage set forth opposite such date:
Date Percentage
---- ----------
September 30, 1999 3.500%
December 31, 1999 3.500%
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March 31, 2000 5.75%
June 30, 2000 5.75%
September 30, 2000 5.75%
December 31, 2000 5.75%
March 31, 2001 7.000%
June 30, 2001 7.000%
September 30, 2001 7.000%
December 31, 2001 7.000%
March 31, 2002 9.000%
June 30, 2002 9.000%
September 30, 2002 9.000%
December 31, 2002 9.000%
March 31, 2003 3.000%
June 30, 2003 3.000%;
and, in any event, the total amount of the Revolving Credit Commitments shall be
reduced to $0 on the Revolving Credit Commitment Termination Date.
(c) The Revolving Credit Commitments shall also be automatically
reduced in accordance with subsection 4.3(d). Any such reduction shall reduce
permanently the Revolving Credit Commitments then in effect.
2.6 Term Loans. Subject to the terms and conditions hereof, each Term
Loan Lender severally agrees to make term loans to the Borrower (collectively,
the "Term Loans") from time to time during the period from the Closing Date to
and including the date which is twelve months following the Closing Date in an
aggregate principal amount not to exceed the amount set forth under such
Lender's name in Schedule 1 opposite the heading "Term Loan Commitment". The
Term Loans may from time to time be (a) Eurodollar Loans, (b) ABR Loans or (c) a
combination thereof, as determined by the Borrower and notified to the
Administrative Agent in accordance with subsection 4.4. Amounts paid on account
of the Term Loans pursuant to subsection 2.7 may not be reborrowed.
2.7 Term Notes. (a) The Borrower agrees that, upon the request to the
Administrative Agent by any Term Loan Lender made on or prior to the Closing
Date or in connection with any assignment pursuant to subsection 11.6, to
evidence such Term Loan Lender's Term Loan the Borrower will execute and deliver
to such Term Loan Lender a promissory note substantially in the form of Exhibit
B-2 (each, as amended, supplemented, replaced or otherwise modified from time to
time, a "Term Note"), with appropriate insertions therein as to payee, date and
principal amount, payable to the order of such Term Loan Lender and in a
principal amount equal to the amount set forth under such Lender's name on
Schedule 1 opposite the heading "Term Loan Commitment." Any Term Note shall (i)
be dated the Closing Date, (ii) be payable as provided in subsection 2.7(b) and
(iii) provide for the payment of interest in accordance with subsection 4.1.
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(b) The Term Loans shall be payable in 20 consecutive quarterly
installments, commencing on September 30, 1998, on each of the dates and in the
aggregate principal amount set forth below (together with all accrued interest
thereon) opposite the applicable installment date (or, if less, the aggregate
amount of the Term Loans then outstanding):
Installment Amount
----------- ------
September 30, 1998 $200,000.00
December 31, 1998 $200,000.00
March 31, 1999 $200,000.00
June 30, 1999 $200,000.00
September 30, 1999 $200,000.00
December 31, 1999 $200,000.00
March 31, 2000 $200,000.00
June 30, 2000 $200,000.00
September 30, 2000 $200,000.00
December 31, 2000 $200,000.00
March 31, 2001 $200,000.00
June 30, 2001 $200,000.00
September 30, 2001 $200,000.00
December 31, 2001 $200,000.00
March 31, 2002 $200,000.00
June 30, 2002 $200,000.00
September 30, 2002 $200,000.00
December 31, 2002 $200,000.00
March 31, 2003 $200,000.00
June 30, 2003 $200,000.00
July 31, 2003 the unpaid balance
2.8 Procedure for Term Loan Borrowing. The Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 11:00 A.M., New York City time, (a) three Business
Days prior to the Closing Date, if all or any part of the Term Loans are to be
initially Eurodollar Loans or (b) one Business Day prior to the requested
Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii) the
requested Borrowing Date, (iii) whether the Term Loans are to be initially
Eurodollar Loans, ABR Loans or a combination thereof, and (iv) if the Term Loans
are to be entirely or partly Eurodollar Loans, the amount of such Type of Loan
and the length of the initial Interest Periods therefor. Each borrowing under
the Term Loan Commitments shall be in an amount equal to (x) in the case of ABR
Loans, $500,000 or a whole multiple of $100,000 in excess thereof (or, if the
then available Term Loan Commitments are less than $500,000, such lesser amount)
and (y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple of
$100,000 in excess thereof. Upon receipt of such notice the Administrative Agent
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shall promptly notify each Term Loan Lender thereof. Each Term Loan Lender will
make the amount of its pro rata share of each borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in subsection 11.2 prior to 1:00 P.M., New York
City time, on the Borrowing Date requested by the Borrower in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Borrower by the Administrative Agent crediting the account of
the Borrower on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
2.9 Repayment of Loans. (a) The Borrower hereby unconditionally
promises to pay to the Administrative Agent for the account of: (i) each
Revolving Credit Lender, the then unpaid principal amount of each Revolving
Credit Loan of such Lender made to the Borrower, on the Revolving Credit
Commitment Termination Date (or such earlier date on which the Revolving Credit
Loans become due and payable pursuant to Section 9); and (ii) each Term Loan
Lender, the amounts specified in subsection 2.7(b) on the dates specified in
subsection 2.7(b) (or such earlier date on which the Term Loans become due and
payable pursuant to Section 9). The Borrower hereby further agrees to pay
interest on the unpaid principal amount of the Loans from time to time
outstanding from the date of the making of the Loans until payment in full
thereof at the rates per annum, and on the dates, set forth in subsection 4.1.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including, without
limitation, the amounts of principal and interest payable and paid to such
Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register (as defined in
subsection 11.6(d)), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Loan made hereunder, the Type thereof and each
Interest Period, if any, applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) both the amount of any sum received by the
Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 2.9(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
the Borrower by such Lender in accordance with the terms of this Agreement.
<PAGE> 31
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SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the
Issuing Lender, in reliance on the agreements of the other Revolving Credit
Lenders set forth in subsection 3.4(a), agrees to issue letters of credit
("Letters of Credit") for the account of the Borrower on any Business Day during
the Revolving Credit Commitment Period in such form as may be approved from time
to time by the Issuing Lender; provided that the Issuing Lender shall have no
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the
Available Revolving Credit Commitment of all Revolving Credit Lenders would be
less than zero. Each Letter of Credit issued pursuant to the Existing Credit
Agreement shall, at all times on and after the Closing Date, be deemed to be a
"Letter of Credit" for all purposes of this Agreement and the other Loan
Documents.
(b) Each Letter of Credit shall (i) be denominated in Dollars, (ii) be
a standby letter of credit issued to support obligations of the Borrower or any
of its Subsidiaries, contingent or otherwise, including Seller Notes and DirecTv
Obligations, or to finance the working capital and business needs of the
Borrower or any of its Subsidiaries in the ordinary course of business and (iii)
expire no later than the earlier of (x) the date that is 12 months after the
date of its issuance and (y) the fifth Business Day prior to July 31, 2003;
provided that any Letter of Credit with an expiration date occurring up to
twelve months after such Letter of Credit's date of issuance may be
automatically renewable for subsequent 12-month periods (but in no event later
than the fifth Business Day prior to July 31, 2003); provided, further, that the
aggregate amount of L/C Obligations outstanding at any time supporting DirecTv
Obligations shall in no event exceed $10,000,000 and may be in the form of
Exhibit J to the Existing Credit Agreement; and provided, further, that
notwithstanding anything to the contrary in this Agreement, (a) the Letter of
Credit supporting the principal amount of the promissory note issued by Digital
Television Services of Georgia, LLC, a Georgia limited liability company and a
wholly owned subsidiary of Management ("DTS Georgia"), to Washington Electric
Membership Corporation, as more fully described on Schedule 8.4(o), shall expire
on January 15, 2001 and (b) the Letter of Credit supporting the principal amount
of the $9,427,984 original principal amount promissory note issued by DTS
Georgia to Mitchell Electric Membership Corporation on the date hereof shall
expire on January 15, 2001.
(c) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of New York.
(d) The Issuing Lender shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letters of Credit. The Borrower may
request that the Issuing Lender issue a Letter of Credit at any time prior to
the fifth Business Day prior to July 31, 2003 by delivering to the Issuing
Lender at its address for notices specified herein a Letter of Credit
Application therefor, completed to the satisfaction of the Issuing
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Lender, and such other certificates, documents and other papers and information
as the Issuing Lender may reasonably request. Upon receipt of any Letter of
Credit Application, the Issuing Lender will process such Letter of Credit
Application and the certificates, documents and other papers and information
delivered to it in connection therewith in accordance with its customary
procedures and shall promptly issue the Letter of Credit requested thereby (but
in no event shall the Issuing Lender be required to issue any Letter of Credit
earlier than three Business Days after its receipt of the Letter of Credit
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing
Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter
of Credit to the Borrower promptly following the issuance thereof.
3.3 Fees, Commissions and Other Charges. (a) The Borrower shall pay to
the Administrative Agent, for the account of the Issuing Lender and the L/C
Participants, a letter of credit fee with respect to each Letter of Credit,
computed for the period from and including the date of issuance of such Letter
of Credit to the expiration date of such Letter of Credit, computed at a rate
per annum equal to the Applicable Margin then in effect for Revolving Credit
Loans that are Eurodollar Loans calculated on the basis of the actual number of
days elapsed over a 360-day year, of the aggregate face amount of Letters of
Credit outstanding, payable in arrears on each L/C Fee Payment Date and on the
Revolving Credit Commitment Termination Date. Such fee shall be payable to the
Administrative Agent to be shared ratably among the Revolving Credit Lenders in
accordance with their respective Revolving Credit Commitment Percentages. In
addition, the Borrower shall pay to the Administrative Agent, for the account of
the Issuing Lender, a fee equal to 0.25% per annum of the aggregate face amount
of outstanding Letters of Credit, payable quarterly in arrears on each L/C Fee
Payment Date and on the Revolving Credit Commitment Termination Date and
calculated on the basis of the actual number of days elapsed over a 360-day
year.
(b) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
(c) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the L/C Participants all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Commitment Percentage from time to time in effect
in the Issuing Lender's obligations and rights under each Letter of Credit
issued hereunder and the amount of each draft paid by the Issuing Lender
thereunder. Each L/C Participant unconditionally and irrevocably agrees with the
Issuing Lender that, if a draft is paid under
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any Letter of Credit for which the Issuing Lender is not reimbursed in full by
the Borrower in accordance with the terms of this Agreement, such L/C
Participant shall pay to the Issuing Lender upon demand at the Issuing Lender's
address for notices specified herein an amount equal to such L/C Participant's
then Revolving Credit Commitment Percentage of the amount of such draft, or any
part thereof, which is not so reimbursed; provided that, if such demand is made
prior to 12:00 Noon, New York City time, on a Business Day, such L/C Participant
shall make such payment to the Issuing Lender prior to the end of such Business
Day and otherwise such L/C Participant shall make such payment on the next
succeeding Business Day.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to paragraph 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on demand
an amount equal to the product of (i) such amount, times (ii) the daily average
Federal funds rate, as quoted by the Issuing Lender, during the period from and
including the date such payment is required to the date on which such payment is
immediately available to the Issuing Lender, times (iii) a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by any L/C
Participant pursuant to paragraph 3.4(a) is not in fact made available to the
Issuing Lender by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Lender shall be entitled to recover from such
L/C Participant, on demand, such amount with interest thereon calculated from
such due date at the rate per annum applicable to Revolving Credit Loans that
are ABR Loans hereunder. A certificate of the Issuing Lender submitted to any
L/C Participant with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with subsection 3.4(a), the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Lender), or any payment of interest on account thereof, the
Issuing Lender will, if such payment is received prior to 12:00 Noon, New York
City time, on a Business Day, distribute to such L/C Participant its pro rata
share thereof prior to the end of such Business Day and otherwise the Issuing
Lender will distribute such payment on the next succeeding Business Day;
provided, however, that in the event that any such payment received by the
Issuing Lender and distributed to the L/C Participants shall be required to be
returned by the Issuing Lender, each such L/C Participant shall return to the
Issuing Lender the portion thereof previously distributed by the Issuing Lender
to it.
3.5 Reimbursement Obligation of the Borrower. (a) The Borrower agrees
to reimburse the Issuing Lender on the same Business Day on which a draft is
presented under any Letter of Credit and paid by the Issuing Lender, provided
that the Issuing Lender provides notice to the Borrower prior to 12:00 Noon, New
York City time, on such Business Day and otherwise the Borrower will reimburse
the Issuing Lender on the next succeeding Business Day; provided, further, that
the failure to provide such notice shall not affect the
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Borrower's absolute and unconditional obligation to reimburse the Issuing Lender
for any draft paid under any Letter of Credit. The Issuing Lender shall provide
notice to the Borrower on such Business Day as a draft is presented and paid by
the Issuing Lender indicating the amount of (i) such draft so paid and (ii) any
taxes, fees, charges or other costs or expenses incurred by the Issuing Lender
in connection with such payment. Each such payment shall be made to the Issuing
Lender at its address for notices specified herein in lawful money of the United
States of America and in immediately available funds.
(b) Interest shall be payable on any and all amounts remaining unpaid
by the Borrower under this subsection from the date such amounts become payable
until payment in full at the rate which would be payable on any outstanding
Revolving Credit Loans that are ABR Loans which were then overdue.
(c) Each drawing under any Letter of Credit shall constitute a request
by the Borrower to the Administrative Agent for a borrowing pursuant to
subsection 2.3 of ABR Loans in the amount of such drawing. The Borrowing Date
with respect to such borrowing shall be the date of such drawing.
3.6 Obligations Absolute. (a) The Borrower's obligations under
subsection 3.5(a) shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing Lender, any
L/C Participant or any beneficiary of a Letter of Credit.
(b) The Borrower also agrees with the Issuing Lender that the Issuing
Lender shall not be responsible for, and the Borrower's Reimbursement
Obligations under subsection 3.5(a) shall not be affected by, among other
things, (i) the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or (ii) any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or (iii) any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee.
(c) Neither the Issuing Lender nor any L/C Participant shall be liable
for any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any
Letter of Credit, except for errors or omissions caused by the Issuing Lender's
gross negligence or willful misconduct.
(d) The Borrower agrees that any action taken or omitted by the Issuing
Lender under or in connection with any Letter of Credit or the related drafts or
documents, if done in the absence of gross negligence or willful misconduct and
in accordance with the standards of care specified in the Uniform Commercial
Code of the State of New York, shall be binding on the Borrower and shall not
result in any liability of the Issuing Lender or any L/C Participant to the
Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the responsibility of the Issuing Lender to
the Borrower in
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connection with such draft shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
3.8 Application. To the extent that any provision of any Letter of
Credit Application related to any Letter of Credit is inconsistent with the
provisions of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. GENERAL PROVISIONS
4.1 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the
CIBC Alternate Base Rate plus the Applicable Margin.
(c) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), the principal of the Loans and any such overdue
interest, commitment fee or other amount shall bear interest at a rate per annum
which is (x) in the case of principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this subsection plus
2% or (y) in the case of any such overdue interest, commitment fee or other
amount, the rate described in paragraph (b) of this subsection plus 2%, in each
case from the date of such non-payment until such overdue principal, interest,
commitment fee or other amount is paid in full (as well after as before
judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (c) of this subsection
shall be payable from time to time on demand.
4.2 Optional Prepayments. The Borrower may at any time and from time to
time prepay the Loans made to it in whole or in part, without premium or penalty
on any Business Day, provided that (i) the Borrower shall have given (x) at
least three Business Days' irrevocable notice to the Administrative Agent (in
the case of Eurodollar Loans) or (y) same-day irrevocable notice to the
Administrative Agent (in the case of ABR Loans), (ii) such notice specifies the
date and amount of prepayment and whether the prepayment is of (x) Term Loans or
Revolving Credit Loans, and if a combination thereof, the principal amount
allocable to each and (y) Eurodollar Loans, ABR Loans or a combination thereof,
and, in each case if a combination thereof, the principal amount allocable to
each and (iii) each prepayment is in a minimum principal amount of $1,000,000
and a multiple of $100,000 in excess thereof (or, if the Loans outstanding are
less than $1,000,000, such lesser amount). Upon the receipt of any such notice
the Administrative Agent shall promptly notify each of
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the Lenders thereof. If any such notice is given, the amount specified in such
notice shall be due and payable on the date specified therein, together with any
amounts payable pursuant to subsection 4.12 and, in the case of prepayments of
the Term Loans only, accrued interest to such date on the amount prepaid.
Partial prepayments of (i) the Term Loans pursuant to this subsection shall be
applied to the respective installments of the principal thereof in the inverse
order of their maturity and (ii) the Revolving Credit Loans and the Letters of
Credit pursuant to this subsection shall be applied, first, to payment of the
Revolving Credit Loans then outstanding and, second, to cash collateralize any
outstanding L/C Obligation upon terms reasonably satisfactory to the
Administrative Agent. On the Business Day next succeeding the date on which a
payment has caused the Aggregate Outstanding Revolving Credit with respect to
all Revolving Credit Lenders to be equal to or less than the Revolving Credit
Commitments then in effect, the Administrative Agent shall return to the
Borrower the cash used to cash collateralize the then outstanding L/C
Obligations pursuant to the preceding sentence.
4.3 Mandatory Prepayments and Reduction of Revolving Credit
Commitments. (a) If, subsequent to the Closing Date, the Borrower or any of its
Subsidiaries shall receive Net Cash Proceeds from any asset sales or other
dispositions permitted by subsection 8.7(b), then 100% of the portion of such
Net Cash Proceeds required by subsection 8.7(b) to be so applied shall on the
first Business Day after receipt thereof, be applied toward the prepayment of
the Loans and the permanent reduction of the Revolving Credit Commitments in
accordance with subsection 4.3(d); provided that such Net Cash Proceeds from any
such asset sales or other dispositions shall not be required to be so applied
(i) until the amount of such unapplied Net Cash Proceeds exceeds $5,000,000 in
the aggregate, at which time 100% of such unapplied Net Cash Proceeds shall be
applied immediately toward the permanent reduction of the Revolving Credit
Commitments and, to the extent required by subsection 4.3(d), the prepayment of
the Loans or (ii) to the extent that such Net Cash Proceeds from any such asset
sales or other dispositions may be used by the Borrower and its Subsidiaries to
acquire fixed or capital assets within 180 days of receipt thereof and otherwise
in accordance with subsection 8.7(b), but to the extent such Net Cash Proceeds
are not so used, such Net Cash Proceeds shall be applied toward the permanent
reduction of the Revolving Credit Commitments and, to the extent required by
subsection 4.3(d), the prepayment of the Loans on the earlier of (x) the 180th
day after receipt of such Net Cash Proceeds and (y) the date on which the
Borrower has reasonably determined that such Net Cash Proceeds shall not be so
used.
(b) If, at any time during the Revolving Credit Commitment Period, the
Aggregate Outstanding Revolving Credit with respect to all Revolving Credit
Lenders exceeds the aggregate Revolving Credit Commitments then in effect, the
Borrower shall, without notice or demand, immediately repay the Revolving Credit
Loans in an aggregate principal amount equal to the lesser of (x) the amount of
then outstanding Revolving Credit Loans and (y) the amount of such excess,
together with interest accrued to the date of such payment or prepayment and any
amounts payable under subsection 4.12. To the extent that after giving effect to
any prepayment of the Revolving Credit Loans required by the preceding sentence,
the Aggregate Outstanding Revolving Credit with respect to all Revolving Credit
Lenders exceeds the aggregate Revolving Credit Commitments then in effect, the
Borrower shall, without notice or demand, immediately cash collateralize the
then outstanding L/C Obligations
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in an amount equal to such excess upon terms reasonably satisfactory to the
Administrative Agent. On the Business Day next succeeding the date on which a
payment has caused the Aggregate Outstanding Revolving Credit with respect to
all Revolving Credit Lenders to be equal to or less than the Revolving Credit
Commitments then in effect, the Administrative Agent shall return to the
Borrower the cash used to cash collateralize the then outstanding L/C
Obligations pursuant to the preceding sentence.
(c) If, at any time during the Revolving Credit Commitment Period, (i)
the sum (the "Total Outstandings") of (1) the aggregate amount of Total
Indebtedness (other than in respect of the undrawn portion of any Letters of
Credit under this Agreement) minus (2) the aggregate amount then on deposit in
the Subordinated Notes Escrow Account exceeds (ii) the Borrowing Base then in
effect, the Borrower shall, without notice or demand, immediately prepay the
Revolving Credit Loans in an aggregate principal amount equal to the lesser of
(x) the amount of then outstanding Revolving Credit Loans and (y) the amount of
such excess, together with interest accrued to the date of such prepayment on
the amount prepaid and any amounts payable under subsection 4.12. To the extent
that after giving effect to any prepayment of the Revolving Credit Loans
required by the preceding sentence, the Total Outstandings exceed the Borrowing
Base then in effect, the Borrower shall, without notice or demand, immediately
cash collateralize the then outstanding L/C Obligations in an amount equal to
such excess upon terms reasonably satisfactory to the Administrative Agent.
(d) Prepayments of the Loans and permanent reductions of the Revolving
Credit Commitments pursuant to subsection 4.3(a) shall be applied, on a pro rata
basis, to the permanent reduction of the Revolving Credit Commitments then in
effect and to prepay the Term Loans then outstanding. Prepayments of the Term
Loans pursuant to subsection 4.3(a) shall be applied to the respective
installments of principal thereof, in the inverse order of their maturity.
(e) Amounts prepaid on account of Term Loans pursuant to subsection
4.3(a) may not be reborrowed.
(f) Beginning in March 31, 2000 if there shall be Excess Cash Flow with
respect to any fiscal year of the Borrower, commencing with the fiscal year
ending December 31, 1999, an amount equal to 50% of such Excess Cash Flow shall
be applied first, to the permanent reduction of the Revolving Credit Commitments
then in effect and, second to payments of the Term Loans then outstanding, in
each case applied to the respective installments of principal thereof, in the
inverse order of their maturity.
4.4 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least three Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of
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any such notice the Administrative Agent shall promptly notify each Lender
thereof. All or any part of outstanding Eurodollar Loans and ABR Loans may be
converted as provided herein, provided that (i) no Loan may be converted into a
Eurodollar Loan when any Event of Default has occurred and is continuing and the
Administrative Agent has or the Required Lender have determined that such a
conversion is not appropriate and (ii) no ABR Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Revolving Credit
Commitment Termination Date (in the case of conversions of Revolving Credit
Loans) or the date of the final installment of principal of the Term Loans (in
the case of conversions of Term Loans).
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
notice to the Administrative Agent, in accordance with the applicable provisions
of the term "Interest Period" set forth in subsection 1.1, of the length of the
next Interest Period to be applicable to such Loans, provided that no Eurodollar
Loan may be continued as such (i) when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Required Lenders have
determined that such a continuation is not appropriate or (ii) after the date
that is one month prior to the Revolving Credit Commitment Termination Date (in
the case of continuations of Revolving Credit Loans) or the date of the final
installment of principal of the Term Loans (in the case of continuations of Term
Loans) and provided, further, that if the Borrower shall fail to give such
notice or if such continuation is not permitted such Loans shall be
automatically converted to ABR Loans on the last day of such then expiring
Interest Period.
(c) Each notice provided for under subsection 4.4 shall be
substantively in the form of Exhibit H hereto.
4.5 Minimum Amounts and Maximum Number of Tranches. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Tranche shall be equal to $1,000,000 or a whole
multiple of $100,000 in excess thereof. In no event shall there be more than
seven Tranches outstanding at any time.
4.6 Computation of Interest and Fees. (a) Interest (other than interest
on ABR Loans) on all Loans payable pursuant hereto shall be calculated on the
basis of a year of 360 days for the actual days elapsed; interest on ABR Loans
and commitment fees shall be calculated on the basis of a 365-(or 366-, as the
case may be) day year for the actual days elapsed. The Administrative Agent
shall as soon as practicable notify the Borrower and the Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on the Loans
resulting from a change in the CIBC Alternate Base Rate or the Eurocurrency
Reserve Requirements shall become effective as of the opening of business on the
day on which such change shall become effective, provided that such change
becomes effective prior to 5:00 P.M., New York City time, on such day. The
Administrative Agent shall as soon as practicable notify the Borrower and each
Lender of the effective date and the amount of each such change.
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(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to subsection 4.1.
4.7 Inability to Determine Interest Rate. If prior to the first day of
any Interest Period:
(a) the Administrative Agent shall have reasonably determined
(which determination shall be conclusive and binding upon the Borrower)
that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from
the Required Lenders that the Required Lenders have reasonably
determined that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to
such Lenders (as certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as ABR Loans, (y) any Loans that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
converted to or continued as ABR Loans and (z) any outstanding Eurodollar Loans
shall be converted, on the first day of such Interest Period, to ABR Loans.
Until such notice has been withdrawn by the Agent, no further Eurodollar Loans
shall be made or continued as such, nor shall the Borrower have the right to
convert Loans to Eurodollar Loans.
4.8 Pro Rata Treatment and Payments. (a) Each borrowing of Revolving
Credit Loans by the Borrower from the Revolving Credit Lenders hereunder shall
be made, each payment by the Borrower on account of any commitment fee in
respect of the Revolving Credit Commitments hereunder shall be allocated by the
Administrative Agent, and any reduction of the Revolving Credit Commitments of
the Revolving Credit Lenders shall be allocated by the Administrative Agent, pro
rata according to the Revolving Credit Commitment Percentages of the Revolving
Credit Lenders. Each payment (including each prepayment) by the Borrower on
account of principal of and interest on any Revolving Credit Loan shall be
allocated by the Administrative Agent pro rata according to the respective
outstanding principal amounts of such Revolving Credit Loans then held by the
Revolving Credit Lenders. Each payment (including each prepayment) by the
Borrower on account of principal of and interest on any Term Loan shall be
allocated by the Administrative Agent pro rata according to the respective
outstanding principal amounts of such Term Loans then held by the Term Loan
Lenders. All payments (including prepayments) to be made by the Borrower
hereunder and under any Notes, whether on account of principal, interest, fees,
Reimbursement Obligations or otherwise, shall be made without set-off or
counterclaim and
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shall be made prior to 12:00 Noon, New York City time, on the due date thereof
to the Administrative Agent, for the account of the Lenders holding the relevant
Loans or the Issuing Lender and L/C Participants, as the case may be, at the
Administrative Agent's office specified in subsection 11.2, in Dollars and in
immediately available funds. Payments received by the Administrative Agent after
such time shall be deemed to have been received on the next Business Day. If any
payment hereunder (other than payments on Eurodollar Loans) becomes due and
payable on a day other than a Business Day, the maturity of such payment shall
be extended to the next succeeding Business Day, and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity of such payment shall
be extended to the next succeeding Business Day (and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension) unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its applicable share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Rate for the period until such
Lender makes such amount immediately available to the Administrative Agent. A
certificate of the Administrative Agent submitted to any Lender with respect to
any amounts owing under this subsection shall be conclusive in the absence of
manifest error. If such Lender's applicable share of such borrowing is not made
available to the Administrative Agent by such Lender within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with the interest accrued thereon at the rate applicable to
such borrowing.
4.9 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender (or any affiliate of
such Lender from which such Lender customarily obtains funds) to make or
maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment
of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as
such and convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and
(b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to ABR Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Loan occurs on
a day which is prior to the last day of the then current Interest Period with
respect thereto, the Borrower shall pay to such Lender such amounts, if any, as
may be required pursuant to subsection 4.12.
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4.10 Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note, any Letter of Credit, any
Letter of Credit Application or any Eurodollar Loan made by it, or
change the basis of taxation of payments to such Lender in respect
thereof (except for taxes covered by subsection 4.11 and changes in the
rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender (or any affiliate of
such Lender from which such Lender customarily obtains funds) which is
not otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender (or such affiliate) any
other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender
such additional amount or amounts as will compensate such Lender for such
increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the Borrower shall
promptly pay to such Lender such additional amount or amounts as will compensate
such Lender or such corporation for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, such Lender shall promptly notify the Borrower
(with a copy to the Administrative Agent) of the event by reason of which it has
become so entitled. A certificate as to any additional amounts payable pursuant
to this subsection submitted by such Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the
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absence of manifest error. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
4.11 Taxes. (a) Except as otherwise provided herein, all payments made
by the Borrower under this Agreement, any Notes, any Letters of Credit or any
Letter of Credit Applications shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority, excluding net income taxes and franchise taxes
(imposed in lieu of net income taxes) imposed on the Administrative Agent or any
Lender as a result of a present or former connection between the Administrative
Agent or such Lender and the jurisdiction of the Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from the Administrative Agent or
such Lender having executed, delivered or performed its obligations or received
a payment under, or enforced, this Agreement or any Note). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any Note,
any Letters of Credit or any Letter of Credit Applications, the amounts so
payable to the Administrative Agent or such Lender shall be increased to the
extent necessary to yield to the Administrative Agent or such Lender (after
payment of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement, provided,
however, that the Borrower shall not be required to increase (and the Borrower
shall be entitled to deduct) any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state thereof if
such Lender fails to comply with the requirements of paragraph (b) of this
subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the Administrative
Agent for its own account or for the account of such Lender, as the case may be,
a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders
for any incremental taxes, interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(X)(i) in the case of any such Lender that is a "bank" within
the meaning of Section 881(c)(3)(A) of the Code, deliver to the
Borrower and the Administrative Agent (A) two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be certifying that it is entitled to
receive payments under this Agreement without deduction or withholding
of any United States federal income taxes and withholding taxes, and
(B) an Internal
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42
Revenue Service Form W-8 or W-9, or successor applicable form, as the
case may be, certifying that it is entitled to an exemption from United
States backup withholding tax;
(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the date
that any such form or certification expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Administrative Agent; or
(Y) in the case of any such Lender that is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Code, (i) represent to the
Borrower (for the benefit of the Borrower and the Administrative Agent)
that it is not a bank within the meaning of Section 881(c)(3)(A) of the
Code, (ii) furnish to the Borrower on or before the date of any payment
by the Borrower, with a copy to the Administrative Agent, (A) a
certificate substantially in the form of Exhibit C (any such
certificate a "U.S. Tax Compliance Certificate") and (B) two accurate
and complete original signed copies of Internal Revenue Service Form
W-8, or successor applicable form certifying to such Lender's legal
entitlement at the date of such certificate to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Code with
respect to payments to be made under this Agreement and any Notes (and
to deliver to the Borrower and the Administrative Agent two further
copies of such form on or before the date it expires or becomes
obsolete and after the occurrence of any event requiring a change in
the most recently provided form and, if necessary, obtain any
extensions of time reasonably requested by the Borrower or the
Administrative Agent for filing and completing such forms), and (iii)
upon reasonable request by the Borrower, to provide to the Borrower
(for the benefit of the Borrower and the Administrative Agent) such
other forms as may be reasonably required in order to establish the
legal entitlement of such Lender to an exemption from withholding with
respect to payments under this Agreement and any Notes, provided that
in determining the reasonableness of a request under this clause (iii)
such Lender shall be entitled to consider the cost (to the extent
unreimbursed by the Borrower) which would be imposed on such Lender of
complying with such request;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Each Person that shall become a Lender or
a Participant pursuant to subsection 11.6 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms, certifications and
statements required pursuant to this subsection, provided that in the case of a
Participant the obligations of such Participant pursuant to this paragraph (b)
shall be determined as if such
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43
Participant were a Lender except that such Participant shall furnish all such
required forms, certifications and statements to the Lender from which the
related participation shall have been purchased.
4.12 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment of Eurodollar
Loans after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a prepayment of Eurodollar
Loans on a day which is prior to the last day of an Interest Period with respect
thereto. Such indemnification may include an amount equal to the excess, if any,
of (i) the amount of interest which would have accrued on the amount so prepaid,
or not so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. This covenant shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
4.13 Change of Lending Office. Each Lender agrees that if it makes any
demand for payment under subsection 4.10 or 4.11(a), or if any adoption or
change of the type described in subsection 4.9 shall occur with respect to it,
it shall use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under subsection 4.10 or
4.11(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 4.9.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Managing Agents and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to the Managing Agents and
each Lender that:
5.1 Financial Condition. (a) The audited consolidated balance sheet of
the Borrower and its consolidated Subsidiaries as at December 31, 1996 and the
related consolidated statements of income and of cash flows for the period from
inception of the applicable entity to and including December 31 1996, reported
on by Arthur Andersen & Co., copies of which have heretofore been furnished to
each Lender, are complete and correct and present fairly in all material
respects the consolidated financial condition of the Borrower and
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44
its consolidated Subsidiaries as of such date, and the consolidated results of
their operations and their consolidated cash flows for the period from the
inception of the applicable entity to and including December 31, 1996. The
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries at March 31, 1997 and the related unaudited consolidated statements
of income and of cash flows for the three-month period ended on such date,
certified by a Responsible Officer, copies of which have heretofore been
furnished to each Lender, present fairly in all material respects the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the three-month period then ended (subject
to normal year-end audit adjustments). All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved by
such accountants or Responsible Officer, as the case may be, and as disclosed
therein). Except as set forth on Schedule 5.1(a), neither the Borrower nor any
of its consolidated Subsidiaries had, at the date of the most recent balance
sheet referred to above, any material Guarantee Obligation, contingent liability
or liability for taxes, or any long-term lease or other material agreement or
unusual forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements. Except as set forth on Schedule 5.1(a),
during the period from January 1, 1997 to and including the Closing Date there
has been no sale, transfer or other disposition by the Borrower or any of its
consolidated Subsidiaries of any material part of its business or property and,
no purchase or other acquisition of any business or material part thereof
(including any capital stock of any other Person).
(b) The pro forma balance sheet of the Borrower and its consolidated
Subsidiaries (the "Pro Forma Balance Sheet"), as set forth in the Information
Memorandum is the balance sheet of the Borrower and its consolidated
Subsidiaries as of March 31, 1997 (the "Pro Forma Date"), adjusted to give
effect (as if such events had occurred on the dates set forth therein) to (i)
the making of the Loans and other extension of credit hereunder to be made on
the Closing Date and the application of the proceeds thereof as contemplated
hereby, (ii) the issuance of the Subordinated Notes and (iii) the payment of
fees and expenses paid in connection with the consummation of the transactions
contemplated by the Loan Documents.
5.2 No Change; Solvency. (a) Since December 31, 1996, there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect, and (b) during the period from the inception of the
applicable entity to and including the date hereof no dividends or other
distributions have been declared, paid or made upon the Capital Stock of the
Borrower nor has any of the Capital Stock of the Borrower been redeemed,
retired, purchased or otherwise acquired for value by the Borrower or any of its
Subsidiaries. As of the Closing Date, after giving effect to the transactions
contemplated by the Loan Documents, the Borrower and its Subsidiaries are
solvent, on a consolidated basis and on an individual basis.
5.3 Corporate Existence; Compliance with Law. Each of the Borrower and
the other Loan Parties (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
power and authority, and the legal right, to
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45
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified as
a foreign corporation, limited liability company or limited partnership (as
applicable) and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except for jurisdictions in which the failure to so
qualify, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect, and (d) is in compliance with all Requirements of Law except to
the extent that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
5.4 Corporate Power; Authorization; Enforceable Obligations. Each of
the Borrower and the other Loan Parties has the power and authority, and the
legal right, to execute, deliver and perform the Loan Documents to which it is a
party and, in the case of the Borrower, to borrow hereunder and each of the
Borrower and the other Loan Parties has taken all necessary action to authorize
the borrowings on the terms and conditions of this Agreement and any Notes and
to authorize the execution, delivery and performance of the Loan Documents to
which it is a party. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other Person is
required to be received, made, given or completed by any of the Loan Parties in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan Documents to which the
Borrower or any of the other Loan Parties is a party other than filings and
recordings to perfect the first priority security interest of the Lenders
created by the Security Documents and other than those set forth on Schedule 5.4
(which consents, authorizations, filings, notices and other acts have been
heretofore received, made, given or completed). This Agreement has been duly
executed and delivered by the Borrower, and each of the other Loan Documents to
which the Borrower or any of the other Loan Parties is a party will be duly
executed and delivered by the Borrower or such other Loan Party. This Agreement
constitutes a legal, valid and binding obligation of the Borrower, and each
other Loan Document to which the Borrower or any of the other Loan Parties is a
party when executed and delivered by the Borrower or such other Loan Party will
constitute a legal, valid and binding obligation of the Borrower or such other
Loan Party, enforceable against the Borrower or such other Loan Party in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
5.5 No Legal Bar. The execution, delivery and performance of the Loan
Documents to which the Borrower or any of the other Loan Parties is a party, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or Contractual Obligation of the Borrower or of any of the
other Loan Parties and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation (other than
the Loan Documents).
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5.6 No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of the
other Loan Parties or against any of its or their respective properties or
revenues which could reasonably be expected to have a Material Adverse Effect.
5.7 No Default. Neither the Borrower nor any of the other Loan Parties
is in default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
5.8 Ownership of Property; Liens. Each of the Borrower and the other
Loan Parties has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its material real property, and good title to, or a
valid leasehold interest in, all its other material property, and none of such
property is subject to any Lien except as permitted by subsection 8.4.
5.9 Intellectual Property. The Borrower and each of the other Loan
Parties owns, or is licensed to use, all trademarks, tradenames, copyrights,
technology, know-how and processes necessary for the conduct of its business as
currently conducted except for those the failure to own or license which could
not reasonably be expected to have a Material Adverse Effect (the "Intellectual
Property"). No claim has been asserted and is pending by any Person challenging
or questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, except for such claims which,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect, nor does the Borrower know of any valid basis for any such claim. The
use of such Intellectual Property by the Borrower and the other Loan Parties
does not infringe on the rights of any Person, except for such infringements
that, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
5.10 No Burdensome Restrictions. No Requirement of Law or Contractual
Obligation of the Borrower or any of the other Loan Parties could reasonably be
expected to have a Material Adverse Effect.
5.11 Taxes. Each of the Borrower and the other Loan Parties has filed
or caused to be filed all United States federal income tax returns and all other
material tax returns which, to the knowledge of the Borrower, are required to be
filed and has paid all taxes shown to be due and payable on said returns or on
any assessments made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than any taxes, fees or other charges (i) with respect to which
the failure to pay, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect or (ii) the amount or validity of which are currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been provided on the books of the
Borrower or any of the other Loan Parties, as the case may be); no tax Lien has
been filed, and, to the knowledge of the Borrower, no claim is being asserted,
with respect to any such tax, fee or other charge.
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5.12 Federal Regulations. No part of the proceeds of any Loans or other
extensions of credit hereunder have been or will be used for "purchasing" or
"carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation G or Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time in effect. If requested by
any Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-1 or FR Form U-1 referred to in
said Regulation G or Regulation U, as the case may be.
5.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five year period. The
present value of all accrued benefits under all Single Employer Plans taken as a
whole (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which the representation is made
or deemed made, exceed the value of the assets of such Single Employer Plans
allocable to such accrued benefits by more than $100,000. Neither the Borrower
nor any Commonly Controlled Entity has had a complete or partial withdrawal from
any Multiemployer Plan, and neither the Borrower nor any Commonly Controlled
Entity would become subject to any material liability under ERISA if the
Borrower or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made. As of the Closing Date, and
to the knowledge of the Borrower on any Borrowing Date thereafter, no such
Multiemployer Plan is in Reorganization or Insolvent.
5.14 Collateral. The provisions of each of the Security Documents, when
executed and delivered, will constitute in favor of the Administrative Agent for
the ratable benefit of the Lenders, a legal, valid and enforceable security
interest in all right, title, and interest of the Borrower or any of the other
Loan Parties which is a party to such Security Document, as the case may be, in
the Collateral described in such Security Document, excluding the Interest
Escrow Agreement, the Subordinated Notes Escrow Account and any proceeds
thereof. As of the Closing Date, all Equipment and Inventory (as each of such
terms is defined in the Guarantee and Collateral Agreement) of Management, the
Borrower and each of its Subsidiaries will be kept at, or will be in transit to,
the locations listed on Schedule 5.14, and each of the Security Documents
constitutes a perfected security interest in all right, title and interest of
the Borrower or such other Loan Parties, as the case may be, in the Collateral
described therein, and except for Liens existing on the Closing Date which are
permitted by subsection 8.4 and the priority of which cannot be superseded by
the provisions hereof or of any Security Document and the filings hereunder or
thereunder, a perfected first lien on, and security interest in, all right,
title and interest of the Borrower or such other Loan Parties, as the case may
be, in the Collateral described in each Security Document. Notwithstanding
anything contained herein or in the Security Documents to the contrary, the
Administrative Agent hereby releases its security interest in (i) the Interest
Escrow
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Agreement, (ii) any funds held in the Subordinated Notes Escrow Account and
(iii) any proceeds thereof and acknowledges and agrees that The Bank of New
York, as collateral agent, has been granted a security interest therein pursuant
to the Escrow Security Agreement.
5.15 Investment Company Act; Other Regulations. The Borrower is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
5.16 Subsidiaries. Schedule 5.16 hereto sets forth all of the
Subsidiaries of the Borrower, and all of the joint ventures in which the
Borrower or any of its Subsidiaries has an interest, at the Closing Date, the
jurisdiction of their incorporation or formation and the direct or indirect
ownership interest of the Borrower therein.
5.17 Purpose of Loans. The proceeds of the Loans shall be used by the
Borrower (i) to repay all of its outstanding Indebtedness under the Existing
Credit Agreement, (ii) to finance Permitted Business Acquisitions and related
expenses, (iii) to provide for up to $50,000,000 in Letters of Credit, (iv) to
finance capital expenditures of the Borrower and its Subsidiaries and for the
general corporate purposes and working capital needs of the Borrower and its
Subsidiaries and (v) to pay fees and expenses related to the preparation,
negotiation, execution and delivery of this Agreement and the other Loan
Documents and the transactions contemplated hereby.
5.18 Environmental Matters. Other than exceptions to any of the
following that would not, individually or in the aggregate, reasonably be
expected to give rise to a Material Adverse Effect:
(i) The Borrower and the other Loan Parties: (A) are, and
within the period of all applicable statutes of limitation have been,
in compliance with all applicable Environmental Laws; (B) hold all
Environmental Permits (each of which is in full force and effect)
required for any of their current operations or for any property owned,
leased, or otherwise operated by any of them and have no reason to
believe that they will not be able to timely obtain without material
expense all such Environmental Permits required for planned operations;
(C) are, and within the period of all applicable statutes of limitation
have been, in compliance with all of their Environmental Permits; and
(D) have no reason to believe that: any of their Environmental Permits
will not be, or will entail material expense to be, timely renewed or
complied with; any additional Environmental Permits that may be
required of any of them will not be, or will entail material expense to
be, timely granted or complied with; or that compliance with any
Environmental Law that is applicable to any of them will not be, or
will entail material expense to be, timely attained and maintained.
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(ii) To the best knowledge of the Borrower, Materials of
Environmental Concern have not been generated, transported, disposed
of, emitted, discharged, or otherwise released or threatened to be
released, to or at any real property presently or formerly owned,
leased or operated by the Borrower or any of the other Loan Parties or
at any other location, which could reasonably be expected to (A) give
rise to liability of the Borrower or any of the other Loan Parties
under any applicable Environmental Law, or (B) interfere with the
Borrower's or any other Loan Party's planned or continued operations,
or (C) impair the fair saleable value of any real property owned or
leased by the Borrower or any other Loan Parties.
(iii) There is no judicial, administrative, or arbitral
proceeding (including any notice of violation or alleged violation)
under any Environmental Law to which the Borrower or any of the other
Loan Parties is named as a party that is pending or, to the knowledge
of the Borrower, threatened.
(iv) Neither the Borrower nor any of the other Loan Parties
has received any written request for information, or been notified that
it is a potentially responsible party, under the federal Comprehensive
Environmental Response, Compensation, and Liability Act or any similar
Environmental Law, or received any other written request for
information with respect to any Materials of Environmental Concern.
(v) Neither the Borrower nor any of the other Loan Parties has
entered into or agreed to any consent decree, order, or settlement or
other agreement, nor is subject to any judgment, decree, or order or
other agreement, in any judicial, administrative, arbitral, or other
forum, relating to compliance with or liability under any Environmental
Law, as to which any obligation has not been fully and finally
resolved.
(vi) Neither the Borrower nor any of its Subsidiaries has
assumed or retained, by contract or, to the best knowledge of the
Borrower, by operation of law, any liabilities of any kind, fixed or
contingent, known or unknown, under any Environmental Law or with
respect to any Material of Environmental Concern.
5.19 No Material Misstatements. The written information, reports,
financial statements, exhibits and schedules furnished by or on behalf of the
Borrower and each other Loan Party to the Administrative Agent, the
Documentation Agent and the Lenders in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto (including,
without limitation, the Information Memorandum), taken as a whole (in each case
after giving effect to revisions and updates furnished by or on behalf of a Loan
Party to the Administrative Agent in accordance with the terms of the Loan
Documents), does not contain, and will not contain as of the Closing Date, any
material misstatement of fact and does not, taken as a whole, omit, and will
not, taken as a whole, omit as of the Closing Date, to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not materially misleading. It is understood that no
representation or warranty is made concerning the forecasts, estimates, pro
forma information, projections and statements as to anticipated future
performance or conditions, and the assumptions on which they were based,
contained in any
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50
such information, reports, financial statements, exhibits or schedules, except
that as of the date such forecasts, estimates, pro forma information,
projections and statements were generated, (a) such forecasts, estimates, pro
forma information, projections and statements were based on the good faith
assumptions of the management of the Borrower or Management, as the case may be,
and (b) such assumptions were believed by such management to be reasonable at
the time made, it being understood that such forecasts, estimates, pro forma
information and statements, and the assumptions on which they were based, may or
may not prove to be correct.
5.20 Certain Agreements. The Borrower has delivered to each Lender
complete and correct copies of the Contracts listed on Schedule 5.20 including
all schedules, exhibits and amendments thereto (except as otherwise noted in
Schedule 5.20).
5.21 NRTC, DirecTv Matters. The Borrower and each of its Subsidiaries
meet the NRTC's requirements for affiliation or membership currently in effect.
Schedule 5.20 lists all of the Contracts granted or assigned, or to be granted
or assigned, to the Loan Parties in connection with the provision of DirecTv
owned or, upon consummation of any Permitted Business Acquisition, to be owned
by, the Loan Parties, and the rights and authorizations of the Loan Parties
under the Contracts are the only material authorizations and rights necessary
for the provision of DirecTv by the applicable Loan Parties as of the date
hereof or as of the consummation of Permitted Business Acquisitions. All of the
Contracts have been (or will be on or as of the date of the Permitted Business
Acquisitions to which they relate) validly entered into by or assigned to such
Loan Parties and in full force and effect, and the Loan Parties have fulfilled
and performed (or will on or as of the date of such fulfillment or performance
is then required) all of their obligations with respect thereto. All applicable
Assignments and Consents have been duly executed and are enforceable (or will be
executed and enforceable as of the date of any Permitted Business Acquisitions
to which they relate) against the NRTC and DirecTv, Inc.
SECTION 6. CONDITIONS PRECEDENT
6.1 Conditions to Effectiveness of Agreement. This Agreement shall
become effective as of the date first written above upon satisfaction of the
following conditions:
(a) Loan Documents. The Administrative Agent shall have
received (i) this Agreement, executed and delivered by a duly
authorized officer of the Borrower, with a counterpart for each Lender
and (ii) a Revolving Credit Note or a Term Note, as the case may be,
for the account of each of the Lenders which has requested a Note
pursuant to subsection 2.2 or 2.7, each conforming to the requirements
hereof and executed and delivered by a duly authorized officer of the
Borrower and (iii) the Guarantee and Collateral Agreement, executed and
delivered by a duly authorized officer of each party thereto, with a
counterpart or a conformed copy for each Lender.
(b) Existing Indebtedness. The Borrower and its Subsidiaries
shall have no Indebtedness or preferred stock outstanding on the
Closing Date except for (i) the
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Loans to be made on the Closing Date, (ii) the Seller Notes and (iii)
any other Indebtedness permitted by subsection 8.3.
(c) Financial Information. The Lenders shall have received
copies of and shall be reasonably satisfied, in form and substance,
with the financial statements referred to in subsection 5.1, including,
without limitation, the Pro Forma Balance Sheet. The Pro Forma Balance
Sheet shall not be materially inconsistent with the forecasts
previously provided to the Lenders.
(d) Borrowing Certificate; Other Certificates. The
Administrative Agent shall have received, with a counterpart for each
Lender, a Borrowing Certificate, dated the Closing Date, substantially
in the form of Exhibit E, with appropriate insertions and attachments
executed by a Responsible Officer of the Borrower. The Administrative
Agent shall have received, with a counterpart for each Lender, each
other certificate of the Borrower required to be delivered under
subsection 7.2 of this Agreement, including a Borrowing Base
Certificate.
(e) Authorization Proceedings of the Loan Parties. The
Administrative Agent shall have received, with a counterpart for each
Lender, a copy of the limited liability company agreement charter and
by-laws or limited partnership agreement, as applicable, for each Loan
Party and of the resolutions, in form and substance satisfactory to the
Administrative Agent, of the Board of Directors of each Loan Party
authorizing (i) the execution, delivery and performance of this
Agreement and the other Loan Documents to which each Loan Party is a
party, (ii) in the case of the Borrower, the borrowings contemplated
hereunder and (iii) the granting by the Borrower and each other Loan
Party of the Liens created pursuant to the Security Documents,
certified by a Responsible Officer of such Loan Party, as of the
Closing Date, which certificate shall be in form and substance
satisfactory to the Administrative Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked
or rescinded.
(f) Incumbency Certificate of the Loan Parties. The
Administrative Agent shall have received, with a counterpart for each
Lender, a certificate of each of the Loan Parties, dated the Closing
Date, as to the incumbency and signature of the Responsible Officers of
each such Loan Party executing any Loan Document satisfactory in form
and substance to the Administrative Agent, executed by a Responsible
Officer of such Loan Party or its general partner or Manager, as
applicable.
(g) Charter Documents. The Administrative Agent shall have
received, with a counterpart for each Lender, true and complete copies
of, as appropriate the (x) certificate of incorporation and by-laws,
(y) certificate of formation and operating agreement, or (z)
certificate of limited partnership and limited partnership agreement of
each respective Loan Party, certified, as of the Closing Date as
complete and correct copies thereof by the Secretary or an Assistant
Secretary of such Loan Party or by a Responsible Officer of such Loan
Party serving in a similar capacity.
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(h) Consents, Licenses and Approvals. The Administrative Agent
shall have received, with a counterpart for each Lender, a certificate
of a Responsible Officer of the Borrower stating that all consents,
licenses and filings referred to in subsections 5.4 and 5.21 are in
full force and effect, and each such consent, authorization and filing
shall be in form and substance satisfactory to the Administrative
Agent.
(i) Adverse Change, etc. From December 31, 1996 to the Closing
Date, nothing shall have occurred (and neither the Lenders nor the
Administrative Agent shall have become aware of any facts or conditions
not previously known) which the Administrative Agent or the Required
Lenders shall determine has, or is reasonably likely to have, a
Material Adverse Effect.
(j) Litigation. On the Closing Date, there shall be no
actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against any Loan Party (a) with respect to this
Agreement or any other Loan Document or the transactions contemplated
hereby or thereby (including the Permitted Business Acquisitions) which
could be reasonably expected to have a material adverse effect on the
rights or remedies of the Lenders under the Loan Documents or (b) which
the Administrative Agent or the Required Lenders shall determine could
reasonably be expected to have a Material Adverse Effect.
(k) Legal Opinions. The Administrative Agent shall have
received, with a counterpart for each Lender, the executed legal
opinion of Nelson Mullins Riley & Scarborough, L.L.P., counsel to the
Borrower and the other Loan Parties, substantially in the form of
Exhibit E, with such changes thereto as may be approved by the
Administrative Agent. Such legal opinion shall cover such other matters
incident to the transactions contemplated by this Agreement as the
Administrative Agent may reasonably require.
(l) Actions to Perfect Liens. The Administrative Agent shall
have received evidence in form and substance satisfactory to it that
(i) all filings, recordings, registrations and other actions,
including, without limitation, the filing of duly executed financing
statements on Form UCC-1 necessary or, in the opinion of the
Administrative Agent, desirable to perfect the Liens created by the
Security Documents shall have been completed or (ii) all such financing
statements and other documents with respect to such filings,
recordings, registrations and other actions shall have been delivered
to the Administrative Agent. To the extent the Pledged Stock (as
defined in the Guarantee and Collateral Agreement) consists of
uncertificated limited liability company membership interests the
Issuer (as defined in the Guarantee and Collateral Agreement) of such
Pledged Stock shall have delivered to the Administrative Agent a
transaction statement or other documentary evidence satisfactory to the
Administrative Agent confirming that such Issuer has registered on its
books the pledge effected by the Guarantee and Collateral Agreement.
(m) Financial Forecast. Each Lender shall have received a copy
of the projections by the Borrower of the operating budget and cash
flow budget of the
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53
Borrower and its Subsidiaries for each of the next succeeding six
fiscal years, such projections to be accompanied by a certificate of a
Responsible Officer to the effect that such projections have been
prepared on the basis of sound financial practices and that such
Officer has no reason to believe they are incorrect or misleading in
any material respect.
(n) Subordinated Debt. The Administrative Agent shall have
received evidence, in form and substance satisfactory to it, that the
Borrower shall have received gross proceeds from the issuance of the
Subordinated Notes of not less than $147,000,000 (of which an amount
sufficient to pay at least (but not more than) the first four interest
payments due thereon shall have been deposited in the Subordinated
Notes Escrow Account).
6.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any Loan or any other extension of credit requested to be made by
it on any date (including, without limitation, its initial extension of credit),
and of the Issuing Lender to issue any Letter of Credit requested to be issued
by it on any date, is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Borrower and any other Loan
Party in or pursuant to the Loan Documents shall be true and correct in
all material respects on and as of such date as if made on and as of
such date, except for representations and warranties stated to relate
to a specific earlier date, in which case such representations and
warranties shall be true and correct in all material respects on and as
of such earlier date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
(c) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received
such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it
shall reasonably request.
(d) Leverage Ratios. Upon giving effect to such extension of
credit, neither the Total Leverage Ratio , the Senior Leverage Ratio
nor the Adjusted Leverage Ratio, as the case may be, for the then most
recently ended calendar quarter for which the Borrower shall have
delivered financial statements pursuant to subsection 7.1(a) or (b)
shall be greater than the ratio set forth opposite the Test Period
listed in subsection 8.1(a) or subsection 8.1(b), as the case may be,
which includes the date of such extension of credit.
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54
(e) Subordinated Notes Indenture. No Default or Event of
Default (as defined in the Subordinated Notes Indenture) shall have
occurred after giving effect to the extensions of credit requested to
be made on such date.
(f) Borrowing Base. After giving effect to such extensions of
credit the Total Outstandings will not exceed the Borrowing Base.
Each borrowing by and Letter of Credit issued on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date thereof that the conditions contained in this subsection have been
satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, on and after the Closing Date and so
long as the Commitments remain in effect or any Letter of Credit remains
outstanding and unpaid or any amount is owing to any Lender or the
Administrative Agent hereunder or under any other Loan Document, the Borrower
shall and (except in the case of delivery of financial information, reports and
notices) shall cause each of its Subsidiaries to:
7.1 Financial Statements. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the
audited consolidated balance sheets of the Borrower and its
consolidated Subsidiaries as at the end of such year and the related
consolidated statements of income and consolidated statements of
retained earnings and of cash flows for such year, setting forth (i) in
the case of such consolidated balance sheets, in comparative form the
figures as of the end of the previous fiscal year, to the extent
available, and (ii) in the case of such consolidated statements of
income and of cash flows, in comparative form the figures for the
previous fiscal year, to the extent available, reported on, in the case
of such consolidated financial statements, without a "going concern" or
like qualification or exception, or qualification arising out of the
scope of the audit, by Arthur Andersen & Co. or other independent
certified public accountants of nationally recognized standing;
(b) as soon as available, but in any event within 45 days
after the end of each of the first three quarterly periods of each
fiscal year of the Borrower, the unaudited consolidated balance sheets
of the Borrower and its consolidated Subsidiaries as at the end of such
quarter and the related unaudited consolidated statements of income and
of cash flows of the Borrower and its consolidated Subsidiaries for
such quarter and the portion of the fiscal year through the end of such
quarter, setting forth (i) in the case of such consolidated balance
sheets, in comparative form the budgeted figures as at the end of such
quarter and the figures as at the end of the corresponding quarter of
the previous fiscal year and (ii) in the case of such consolidated
statements of income and of cash flows, in comparative form the
budgeted figures for such quarter and the figures for the corresponding
quarter of the previous fiscal year,
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55
certified by a Responsible Officer as presenting fairly in all material
respects the consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at such date, and the consolidated results
of their operations and their consolidated cash flows for the quarter
then ended (subject to normal year-end audit adjustments);
(c) as soon as available, but in any event not later than 45
days after the end of such month, in form and substance reasonably
satisfactory to the Administrative Agent, (i) summaries of revenues,
expenses and EBITDA on a consolidated basis and Subscriber activity
reports for the Borrower and its consolidated Subsidiaries for such
month and the portion of the fiscal year through the end of such month,
certified by a Responsible Officer as presenting fairly, in all
material respects, such consolidated revenues, expenses and EBITDA and
Subscriber activity; and
(d) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the
audited consolidated balance sheets of the Borrower and its
consolidated Subsidiaries as of the end of such year and the related
audited consolidated statements of income and consolidated statements
of retained earnings and of cash flows of the Borrower and its
consolidated Subsidiaries for such year furnished to each Lender under
subsection 7.1(a), in a comparative form prepared by a Responsible
Officer to show (i) in the case of such consolidated balance sheets,
the budgeted figures as of the end of such year and the figures as of
the end of the previous fiscal year and (ii) in the case of such
consolidated statements of income and of cash flows, the budgeted
figures for such year and the figures for the previous fiscal year;
all such financial statements shall be prepared in reasonable detail and shall
present fairly, in all material respects, in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or Responsible Officer, as the case may
be, and disclosed therein), as applicable, the financial condition of the
Borrower and its Subsidiaries as at such date, and the results of their
operations and their cash flows for the period then ended.
7.2 Certificates; Other Information. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in connection with their audit nothing has come to their
attention to cause them to believe that the Borrower or any of its
Subsidiaries failed to comply with the covenants contained in Section
8; provided, however, that such accountants may state that such audit
shall not have been directed primarily toward obtaining knowledge of
such noncompliance, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a
Responsible Officer ("Compliance Certificate") stating that, to the
best of such Officer's knowledge, during such period
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(i) no Subsidiary has been formed or acquired (or, if any such
Subsidiary has been formed or acquired, the Borrower has complied with
the requirements of subsection 7.10 with respect thereto), (ii) neither
the Borrower nor any of its Subsidiaries has changed its name, its
principal place of business, its chief executive office or the location
of any material item of tangible Collateral without complying with the
requirements of this Agreement and the Security Documents with respect
thereto, (iii) the Borrower has observed or performed all of its
covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Loan Documents to be
observed, performed or satisfied by it, and (iv) the Borrower has set
forth in reasonable detail any and all calculations necessary to show
compliance with subsection 2.1(a) and all of the financial condition
covenants set forth in subsections 8.1 and 8.9, including, without
limitation, calculations and reconciliations, if any, necessary to show
compliance with such financial condition covenants on the basis of
generally accepted accounting principles in the United States of
America consistent with those utilized in preparing the audited
financial statements referred to in subsection 5.1, and that such
Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate;
(c) not later than 45 days after the end of each fiscal year
of the Borrower, a copy of the projections by the Borrower of the
balance sheet, statement of income and statement of cash flows on a
consolidated basis of the Borrower and its Subsidiaries for the next
succeeding fiscal year, such projections to be accompanied by a
certificate of a Responsible Officer to the effect that such
projections have been prepared on the basis of sound financial planning
practice and that such Officer has no reason to believe they are
incorrect or misleading in any material respect;
(d) not later than 45 days after the consummation of a
Permitted Business Acquisition which, after giving effect thereto,
results in an increase in Recently Acquired Households by more than the
lesser of (x) 25% of the number of households within the Borrower's
Service Areas on the date which is one year prior to the date of
consummation of such Permitted Business Acquisition (such number to be
certified by a Responsible Officer), and (y) 250,000, (i) a copy of the
projections by the Borrower of the balance sheet, statement of income
and statement of cash flows on a consolidated basis of the Borrower and
its Subsidiaries for each of the next succeeding five fiscal years, and
(ii) a statement in reasonable detail of the assumptions used in
preparing such projections accompanied by a certificate of a
Responsible Officer to the effect that such Officer has no reason to
believe that such projections are incorrect or misleading in any
material respect;
(e) (A) Promptly and in any event no later than the Closing
Date, (B) not later than 15 days after the end of each month,
commencing July 1997 (each such last day being called a "Determination
Date"), and (C) on the date which is 10 Business Days prior to the
consummation of a Permitted Business Acquisition to be financed (to the
extent permitted under this Agreement) by the Facility (such date, the
"Permitted Business Acquisition Determination Date"), a borrowing base
certificate substantially in the form of Exhibit F hereto (a "Borrowing
Base Certificate") and applicable
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supporting documentation, setting forth, as of a recent date
satisfactory to Administrative Agent, such Determination Date or such
Permitted Business Acquisition Determination Date (or as of such other
date provided in the definition of "Borrowing Base"), the Borrowing
Base;
(f) promptly, such additional financial and other information
as any Lender may from time to time reasonably request; and
(g) promptly upon receipt or delivery thereof, duplicates or
copies of all notices of default or termination received or delivered
by the Borrower or any of its Subsidiaries from or to any Person under
or pursuant to any Contract.
7.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, including, without limitation, taxes, except
where (a) the amount or validity thereof is currently being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Borrower or its
Subsidiaries, as the case may be, or (b) the failure to so pay, discharge or
otherwise satisfy such obligations could not, in the aggregate, be reasonably be
expected to have a Material Adverse Effect.
7.4 Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to subsection 8.5; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, be reasonably expected to have a Material Adverse Effect.
7.5 Maintenance of Property; Insurance. Keep all property necessary in
its business in good working order and condition, ordinary wear and tear
excepted, except where the failure to do so would not be reasonably likely to
have a Material Adverse Effect; maintain with financially sound and reputable
insurance companies insurance on all the Collateral in accordance with the
requirements of Section 5.3 of the Guarantee and Collateral Agreement and on all
its other property in at least such amounts (including as to amounts of
deductibles) and against at least such risks (but including in any event
commercial general liability, product liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to each Lender, upon written request,
full information as to the insurance carried.
7.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and upon reasonable notice and as often as may reasonably be desired and to
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discuss the business, operations, properties and financial and other condition
of the Borrower and its Subsidiaries with officers and employees of the Borrower
and its Subsidiaries and with its independent certified public accountants
(provided that any officers or employees of the Borrower shall be permitted to
be present at any such discussions between representatives of any Lender and the
Borrower's independent certified public accountants).
7.7 Notices. Promptly give notice to the Administrative Agent and each
Lender after any Responsible Officer obtains knowledge of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries, including,
without limitation, under the Seller Notes or (ii) litigation,
investigation or proceeding which may exist at any time between the
Borrower or any of its Subsidiaries and any Governmental Authority,
which in either case, if not cured or if adversely determined, as the
case may be, could reasonably be expected to have a Material Adverse
Effect;
(c) any litigation or proceeding affecting the Borrower or any
of its Subsidiaries (i) in which the amount involved is $1,000,000 or
more and not covered by insurance or (ii) in which injunctive or
similar relief is sought which could reasonably be expected to have a
Material Adverse Effect;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan, the creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of,
any Multiemployer Plan or (ii) the institution of proceedings or the
taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of,
any Plan;
(e) any material adverse change in the business, operations,
property or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole; and
(f) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, (i) any release or
discharge by the Borrower or any of its Subsidiaries of any Materials
of Environmental Concern required to be reported under applicable
Environmental Laws to any Governmental Authority, unless the Borrower
reasonably determines that the total Environmental Costs arising out of
such release or discharge are unlikely to exceed $500,000 or to have a
Material Adverse Effect; (ii) any condition, circumstance, occurrence
or event not previously disclosed in writing to the Administrative
Agent that could result in liability under applicable Environmental
Laws unless the Borrower reasonably determines that the total
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Environmental Costs arising out of such condition, circumstance,
occurrence or event are unlikely to exceed $500,000 or to have a
Material Adverse Effect, or could result in the imposition of any Lien
or other restriction on the title, ownership or transferability of any
facilities and properties owned, leased or operated by the Borrower or
any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect; and (iii) any proposed action to be taken by
the Borrower or any of its Subsidiaries that would reasonably be
expected to subject the Borrower or any of its Subsidiaries to any
material additional or different requirements or liabilities under
Environmental Laws, unless the Borrower determines that the total
Environmental Costs arising out of such proposed action are unlikely to
exceed $500,000 or to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
7.8 Environmental Laws. (a) (i) Comply substantially with, and
undertake all reasonable efforts to ensure substantial compliance by all
tenants, subtenants, and contractors with, all applicable Environmental Laws;
(ii) obtain, comply substantially with and maintain any and all Environmental
Permits necessary for its operations as conducted and as planned; and (iii)
undertake all reasonable efforts to ensure that all tenants, subtenants, and
contractors obtain, comply substantially with and maintain any and all
Environmental Permits necessary for their operations as conducted and as
planned, with respect to any property leased or subleased from, or operated by
the Borrower or its Subsidiaries. For purposes of this subsection 7.8(a), the
Borrower and its Subsidiaries shall be deemed to comply substantially, or to
undertake reasonable efforts to ensure substantial compliance, with an
Environmental Law or an Environmental Permit, provided that, upon learning of
any actual or suspected noncompliance, the Borrower and any such affected
Subsidiary shall promptly undertake all reasonable efforts, if any, to achieve
compliance, and provided, further that notwithstanding the foregoing, any such
noncompliance which would reasonably be expected to have a Material Adverse
Effect shall constitute a default under this subsection 7.8(a).
(b) Promptly comply with all orders and directives of all Governmental
Authorities regarding Environmental Laws, other than any such order or directive
as to which an appeal or other appropriate contest is or has been timely and
properly taken, is being diligently pursued in good faith, and the pendency of
which would not reasonably be expected to have a Material Adverse Effect.
7.9 Further Assurances. Upon the request of the Administrative Agent,
promptly perform or cause to be performed any and all acts and execute or cause
to be executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other Requirement of Law which are necessary or
advisable to maintain in favor of the Administrative Agent, for the benefit of
the Lenders, Liens on the Collateral that are duly perfected in accordance with
all applicable Requirements of Law.
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7.10 Additional Collateral. (a) With respect to any assets (or any
interest therein) acquired after the Closing Date by the Borrower or any of its
Subsidiaries that are intended to be subject to the Lien created by any of the
Security Documents but which are not so subject (including, without limitation,
any assets described in paragraph (b) or (c) of this subsection and any assets
(including any Contracts or any rights to or under any Contracts) required to be
so subjected pursuant to subsection 8.6(a) or 8.6(b)), promptly (and in any
event within 30 days after the acquisition thereof): (i) execute and deliver to
the Administrative Agent such amendments to the relevant Security Documents or
such other documents as the Administrative Agent shall deem necessary or
advisable to grant to the Administrative Agent, for the benefit of the Lenders,
a Lien on such assets (or such interest therein), (ii) take all actions
necessary or advisable to cause such Lien to be duly perfected in accordance
with all applicable Requirements of Law, including, without limitation, the
filing of financing statements in such jurisdictions as may be requested by the
Administrative Agent, (iii) if reasonably requested by the Administrative Agent,
deliver to the Administrative Agent legal opinions relating to the matters
described in clauses (i) and (ii) immediately preceding, which opinions shall be
in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent and (iv) if any such assets are rights to any Contracts
obtain and deliver to the Administrative Agent an Assignment and Consent
executed by DirecTv, Inc. and the NRTC.
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a Subsidiary, promptly upon the request of the Administrative Agent: (i)
execute and deliver to the Administrative Agent, for the benefit of the Lenders,
a new pledge agreement or such amendments to the Guarantee and Collateral
Agreement as the Administrative Agent shall deem necessary or advisable to grant
to the Administrative Agent, for the benefit of the Lenders, a Lien on the
Capital Stock of such Subsidiary which is owned by the Borrower or any of its
Subsidiaries, (ii) deliver to the Administrative Agent any certificates
representing such Capital Stock, together with undated stock powers executed and
delivered in blank by a duly authorized officer of the Borrower or such
Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a
party to the Guarantee and Collateral Agreement and, if applicable, an
Assignment and Consent, in each case pursuant to an annex to the Guarantee and
Collateral Agreement or otherwise pursuant to documentation which is in form and
substance satisfactory to the Administrative Agent, and (B) to take all actions
necessary or advisable to cause the Lien created by the Guarantee and Collateral
Agreement and, if applicable, an Assignment and Consent, to be duly perfected in
accordance with all applicable Requirements of Law, including, without
limitation, the filing of financing statements in such jurisdictions as may be
requested by the Administrative Agent, (iv) if reasonably requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (i), (ii) and (iii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent and (iv) obtain and deliver
to the Administrative Agent an Assignment and Consent executed by DirecTv, Inc.
and the NRTC, if applicable.
7.11 Interest Rate Protection. (a) No later than 180 days following the
Closing Date, enter into Interest Rate Protection Agreements which (when taken
together with any other outstanding fixed rate Indebtedness) shall provide
interest rate protection in respect
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of at least 50% of all Funded Indebtedness of the Borrower and its Subsidiaries
as at the dates of such Interest Rate Protection Agreements, which shall be in
form and substance reasonably satisfactory to the Administrative Agent and for a
term of at least two years.
(b) For each calendar quarter ending (i) after the date on which the
Borrower shall have entered into Interest Rate Protection Agreements pursuant to
subsection 7.11(a) and (ii) on or before the date which is the second
anniversary of the Closing Date, enter into Interest Rate Protection Agreements
not later than 90 days following the end of such quarter which (when taken
together with any other outstanding fixed rate Indebtedness) shall provide
interest rate protection in respect of at least the amount by which 50% of all
Funded Indebtedness at the end of such quarter exceeds the amount of all Funded
Indebtedness covered by Interest Rate Protection Agreements, which shall be in
form and substance reasonably satisfactory to the Administrative Agent and for a
term of at least two years.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that on and after the Closing Date and, so
long as the Commitments remain in effect or any Letter of Credit remains
outstanding and unpaid or any amount is owing to any Lender or the
Administrative Agent hereunder or under any other Loan Document, the Borrower
shall not, and (except with respect to subsection 8.1) shall not permit any of
its Subsidiaries to, directly or indirectly:
8.1 Financial Condition Covenants.
(a) Leverage Ratios. (i) Permit the Total Leverage Ratio on
the last day of any calendar quarter ending during any Test Period set
forth below to be greater than the ratio set forth opposite such Test
Period below:
Test Period Ratio
----------- -----
12/31/99 - 6/29/00 10.00 to 1.00
6/30/00 - 12/30/00 8.75 to 1.00
12/31/00 - 6/29/01 7.50 to 1.00
6/30/01 - 12/30/01 6.25 to 1.00
12/31/01 and thereafter 5.00 to 1.00
(ii) Permit the Adjusted Leverage Ratio on the last day of any
calendar quarter ending during any Test Period set forth below to be
greater than the ratio set forth opposite such Test Period below:
Test Period Ratio
----------- -----
12/31/98 - 6/29/99 9.00 to 1.00
6/30/99 - 12/30/99 7.50 to 1.00
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12/31/99 - 6/29/00 6.50 to 1.00
6/30/00 - 12/30/00 5.75 to 1.00
(iii) Permit at any time the Senior Leverage Ratio on the last
day of any calendar quarter ending during any Test Period set forth
below to be greater than the ratio set forth opposite such Test Period
below:
Test Period Ratio
----------- -----
12/31/99 - 6/29/00 4.50 to 1.00
6/30/00 - 12/30/00 3.75 to 1.00
Thereafter 3.00 to 1.00
(b) Interest Coverage Ratios. (i) Permit the Adjusted Interest
Coverage Ratio as of the end of any calendar quarter of the Borrower
ending during the period from and including March 31, 1998 to and
including December 30, 1999 to be less than 1.00 to 1.00
(ii) Permit the Interest Coverage Ratio as of the end of any
calendar quarter of the Borrower ending during any period set forth
below (each such period, a "Test Period") to be less than the ratio set
forth opposite such Test Period below:
Test Period Interest Coverage Ratio
----------- -----------------------
12/31/99 - 12/30/01 1.25 to 1.00
12/31/01 and thereafter 1.50 to 1.00
(c) General and Administrative Expense. Permit General and
Administrative Expenses of the Borrower and its consolidated
Subsidiaries for the 12-month period ending on the last day of any
calendar quarter included in any period set forth below (each such
period, a "Test Period") as a percentage of the total consolidated
revenues of the Borrower and such consolidated Subsidiaries for such
period to be more than the percentage set forth opposite such Test
Period below:
General and Administrative
Test Period Expense Percentage
----------- --------------------------
12/31/97 - 12/30/98 20.00%
12/31/98 - 12/30/99 16.50%
12/31/99 - 12/30/00 14.50%
12/31/00 and thereafter 13.50%
(d) Minimum Annualized Contribution per Paying Subscriber.
Permit Annualized Contribution for any calendar quarter ending during
any period set forth below (each such period, a "Test Period") divided
by the average number of Paying
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Subscribers for such quarter to be less than the amount set forth
opposite such Test Period below:
Test Period Annualized Contribution
----------- -----------------------
12/31/96-12/30/97 $150
12/31/97-12/30/98 $170
12/31/98-12/30/99 $190
12/31/99-12/30/00 $200
12/31/00-12/30/01 $210
12/31/01-12/30/02 $215
12/31/02 and thereafter $220
8.2 Minimum Penetration. Permit the number of Paying Subscribers as a
percentage of total Households in the Borrower's Service Areas as of the end of
any calendar quarter ending during any period (each such period, a "Test
Period") set forth below (the "Minimum Penetration Percentage") to be less than
the percentage set forth opposite such Test Period below:
Minimum Penetration
Test Period Percentage
----------- -------------------
3/31/97-12/30/97 5.00%
12/31/97-12/30/98 6.50%
12/31/98-12/30/99 8.00%
12/31/99-12/30/00 9.50%
12/31/00 and thereafter 11.00%
For purposes of calculating the Minimum Penetration Percentages at any
time, the number of Paying Subscribers and total Households in any Service Area
acquired (i) subsequent to the Closing Date and (ii) within the nine-month
period immediately preceding the date for which such calculation is made may be
excluded at the Borrower's option.
8.3 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement and any
Notes;
(b) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;
(c) Indebtedness of the Borrower and its Subsidiaries under
Interest Rate Protection Agreements contemplated by subsection 7.11;
(d) Indebtedness outstanding on the Closing Date and listed on
Schedule 8.3(d) and any refinancings, refundings, renewals or
extensions thereof; provided that the
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64
amount of such Indebtedness is not increased at the time of such
refinancing, refunding, renewal or extension;
(e) Indebtedness of a Person which becomes a Subsidiary after
the Closing Date; provided that (i) such Indebtedness existed at the
time such Person became a Subsidiary and was not created in
anticipation thereof and (ii) immediately after giving effect to the
acquisition of such Person by the Borrower no Default or Event of
Default shall have occurred and be continuing, and any refinancings,
refundings, renewals or extensions thereof; provided that the amount of
such Indebtedness is not increased at the time of such refinancing,
refunding, renewal or extension; and provided, further, that the
aggregate principal amount of Indebtedness described in this paragraph
shall in no event exceed $1,500,000 at any one time outstanding;
(f) Indebtedness under Seller Notes which are secured by
Letters of Credit;
(g) other Indebtedness of the Borrower and any of its
Subsidiaries in an aggregate principal amount at any time outstanding
not in excess of $1,500,000;
(h) the Subordinated Notes (provided that the interest rate
payable thereon does not exceed 13.5% per annum); and
(i) Permitted Junior Debt.
8.4 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes, assessments and governmental charges and
Liens not yet due or which are being contested in good faith by
appropriate proceedings; provided that adequate reserves with respect
thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) Liens imposed by law, such as carrier's, warehousemen's,
mechanic's, landlord's, materialmen's, repairmen's or other like Liens,
arising in the ordinary course of business which are not overdue for a
period of more than 60 days or which are being contested in good faith
by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(d) Liens on deposits to secure the performance of bids,
tenders, trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business;
<PAGE> 66
65
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or such Subsidiary conducted at the property subject thereto;
(f) Liens on the property or assets of a Person which becomes
a Subsidiary after the Closing Date securing Indebtedness permitted by
subsection 8.3(e); provided that (i) such Liens existed at the time
such Person became a Subsidiary and were not created in anticipation
thereof, (ii) any such Lien is not spread to cover any property or
assets of such Person after the time such corporation becomes a
Subsidiary, and (iii) the amount of Indebtedness secured thereby is not
increased;
(g) Liens created pursuant to the Security Documents;
(h) Liens in existence on the Closing Date and listed on
Schedule 8.4(h), securing Indebtedness permitted by subsection 8.3(d);
provided that no such Lien is spread to cover any additional property
after the Closing Date and that the amount of Indebtedness secured
thereby is not increased;
(i) leases and subleases of real property owned or leased by
the Borrower or any of its Subsidiaries not interfering with the
ordinary conduct of the business of the Borrower and its Subsidiaries;
(j) renewals, extensions and replacements of the Liens
permitted under clauses (f) and (h) above; provided that no such Lien
shall as a result thereof cover any additional assets and the principal
amount of Indebtedness secured thereby is not increased;
(k) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security;
(l) (i) purchase money Liens upon or Liens in any property
acquired or held by the Borrower or any of its Subsidiaries, incurred
within 90 days of the date on which such property is acquired, to
secure the purchase price of such property or to secure Indebtedness
(including interest, fees, reimbursement and indemnification amounts,
and all other accruals and obligations accruing on or after the time at
which the principal amount of such Indebtedness is incurred) incurred
in accordance with subsection 8.3(g) solely for the purpose of
financing the acquisition, construction or improvement of the property
subject to such Liens, (ii) Liens existing on any such property at the
time of acquisition, and extensions, renewals, refinancings or
replacements of any of the foregoing for the same or a lesser principal
amount (including Liens securing Indebtedness permitted under
subsection 8.3(e)) and (iii) any interest or title of a lessor in the
property subject to any Financing Lease;
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66
(m) Liens on inventory acquired in the ordinary course of
business under conditional sale, title retention, consignment or
similar arrangements entered into by the Borrower or any of its
Subsidiaries to secure payment for the purchase price thereof;
(n) rights of the NRTC to set off amounts owing by it under
the Contracts against amounts owing to it thereunder;
(o) any Lien that may exist on assets of Digital Television
Services of Georgia, LLC, a Georgia limited liability company and a
wholly owned Subsidiary of Management, as set forth on Schedule 8.4(o);
and
(p) the Lien on the funds held in the Subordinated Notes
Escrow Account as described in subsection 6.1(p), on any obligations in
which such cash may be invested from time to time and on the earnings
therefrom, any proceeds thereof and the Interest Escrow Agreement.
8.5 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the Closing Date and
listed on Schedule 8.5(a), and any refinancing, refundings, renewals or
extensions thereof provided that the amount of such Guarantee
Obligation shall not be increased at the time of such refinancing,
refunding, extension or renewal;
(b) guarantees made in the ordinary course of its business by
the Borrower or any of its Subsidiaries of obligations of any of the
Borrower's Subsidiaries, which obligations are otherwise permitted
under this Agreement;
(c) the Guarantee and Collateral Agreement and any of the
other Guarantees;
(d) Guarantee Obligations of certain Subsidiaries of the
Borrower set forth in the Seller Notes which are subordinated as
provided therein;
(e) Guarantee Obligations of a Person which becomes a
Subsidiary after the Closing Date; provided that (i) such Guarantee
Obligations existed at the time such Person became a Subsidiary and
were not created in anticipation thereof and (ii) immediately after
giving effect to the acquisition of such Person by the Borrower no
Default or Event of Default shall have occurred and be continuing, and
any refinancings, refundings, renewals or extensions thereof; provided
that the amount of such Guarantee Obligations is not increased at the
time of such refinancing, refunding, renewal or extension; and
(f) Guarantee Obligations of the Subsidiaries of the Borrower
that are in existence on the date of issuance of the Subordinated Notes
guaranteeing the obligations of the Borrower and Capital in respect to
the Subordinated Notes on the
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67
terms and conditions described in the Information Memorandum and the
Subordinated Notes Indenture.
8.6 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or with or into any
one or more Wholly Owned Subsidiaries of the Borrower (provided that
the Wholly Owned Subsidiary or Subsidiaries shall be the continuing or
surviving corporation or other organization) provided, in either case,
that the continuing or surviving corporation or other organization must
assume the Contracts to which the merged or consolidated Person is a
party or otherwise is entitled to the benefits thereof and meet the
NRTC's requirements for affiliation or membership in effect at the time
of such assignment and assumption and receives the prior written
consent of the NRTC and DirecTv, Inc. in accordance with the provisions
of the Contracts;
(b) any Wholly Owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any other Wholly Owned
Subsidiary of the Borrower provided that if such assignee assumes any
Contracts, it must meet the NRTC's requirements for affiliation or
membership in effect at the time of such assignment and assumption and
receives the prior written consent of the NRTC and DirecTv, Inc. in
accordance with the provisions of the Contracts;
(c) mergers and consolidations in connection with Permitted
Business Acquisitions permitted under subsection 8.10(e), subject to
compliance with subsection 7.10; and
(d) sales and other dispositions of assets permitted by
subsection 8.7(b).
8.7 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer
or otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares
of such Subsidiary's Capital Stock to any Person other than the Borrower or any
Wholly Owned Subsidiary, except:
(a) the sale or other disposition of any property or assets in
the ordinary course of business;
(b) the sale or other disposition of any assets (other than
any rights to provide DirecTv) at fair market value, provided that the
Net Cash Proceeds of all sales of
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68
assets permitted by this clause (b) in excess of $1,500,000 are applied
to make mandatory prepayments and permanent reductions of the Revolving
Credit Commitments pursuant to subsection 4.3(a), except that any such
Net Cash Proceeds of sales or other dispositions of assets permitted by
this clause (b) in excess of $1,500,000 which are used by the Borrower
and its Subsidiaries to acquire fixed or capital assets within 180 days
of receipt thereof shall not be required to be applied to make
mandatory prepayments and permanent reductions of the Revolving Credit
Commitments pursuant to subsection 4.3(a);
(c) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof;
(d) as permitted by subsection 8.6(b); and
(e) sales, leases, conveyances, transfers or other
dispositions to the Borrower or to any Subsidiary of the Borrower or to
any Person if after giving effect to such sale, lease, conveyance,
transfer or other disposition such other Person becomes a Subsidiary,
subject to compliance with subsection 7.10 and, to the extent
applicable, subsection 8.10.
8.8 Limitation on Dividends. Declare or pay any dividend on, or make
any payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of, any shares of any class of Capital Stock of the Borrower or any warrants or
options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary, except (i) for dividends, payments or distributions solely in
Capital Stock of the Borrower, (ii) to the members of the Borrower in amounts
equal to a reasonable estimate of the actual Federal, state and local income tax
obligations of the members of the Borrower with respect to their distributive
share of such Person's items of income and gain in excess of prior allocations
of items of loss and deduction, assuming that all such members are subject to
income taxation at the highest combined effective marginal Federal, state and
local income tax rates applicable to any single member or group or members
holding more than 5% of Capital Stock of the Borrower, which amount may be
distributed annually in advance in four (4) installments to enable such members
to make estimated income tax payments, provided that taxable income exceeds
cumulative tax losses subsequent to November 27, 1996 and (iii) so long as on
the date thereof or after giving effect thereto no Default or Event of Default
shall have occurred or is continuing, to purchase, redeem or acquire shares of
such Capital Stock, held by any employee or former employee of Management, the
Borrower or any Subsidiary of the Borrower or any of their respective heirs or
administrators or executors of their respective estates, or by any Person
substantially all of the beneficial ownership of which is held by members of
such employee's or former employee's family, in each case in connection with
such employee's or former employee's termination of employment with Management,
the Borrower or such Subsidiary, provided that the aggregate payments made
pursuant to this clause (iii) shall not exceed $1,000,000.
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69
8.9 Limitation on Capital Expenditures. Make any expenditure in respect
of the purchase or other acquisition of fixed or capital assets (other than
Permitted Business Acquisitions or Investments contemplated under subsection
8.10(g) (a "Capital Expenditure") except for Capital Expenditures in the
ordinary course of business not exceeding, in the aggregate for the Borrower and
its Subsidiaries during any of the calendar years or periods set forth below,
the amount set forth opposite such calendar year or period set forth below:
Calendar Year/ Period Amount
--------------------- ------
1997 $ 2,000,000
1998 $ 2,000,000
1999 $ 2,000,000
2000 $ 2,000,000
2001 $ 2,000,000;
provided that up to $250,000 of any Capital Expenditures permitted to be made
during any such period and not made during such period may be carried over and
expended during the next succeeding test period (it being understood and agreed
that any Capital Expenditures made during such next succeeding period shall
count, first, against the amount permitted to be made during such next
succeeding period as set forth in the table above and, second, against any
amounts carried over to such next succeeding period).
8.10 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment, in cash or by transfer of assets
or property, in, any Person (each, an "Investment"), except:
(a) extensions of trade credit in the ordinary course of
business;
(b) Investments in Cash Equivalents;
(c) loans and advances to employees of Management, the
Borrower or Subsidiaries of the Borrower in the ordinary course of
business in an aggregate amount for the Borrower and its Subsidiaries
not to exceed $500,000 at any one time outstanding;
(d) Investments by the Borrower in its Subsidiaries and
Investments by Subsidiaries of the Borrower in the Borrower and in
other Subsidiaries of the Borrower;
(e) Permitted Business Acquisitions by the Borrower or any of
its Subsidiaries provided that (i) if any Permitted Business
Acquisition occurs in respect of a Person, (x) such Person becomes a
Subsidiary of the Borrower, subject to compliance with subsection 7.10,
or (y) such Person is merged or consolidated with or into, or transfers
or conveys substantially all of its assets to, or is liquidated into,
the Borrower or any
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of its Subsidiaries, subject to compliance with subsection 7.10; and
(ii) no Default or Event of Default shall have occurred and be
continuing on the date of any such Permitted Business Acquisitions or
would result therefrom;
(f) Investments in the nature of promissory notes, other
securities or other property received in connection with the bankruptcy
or reorganization of Persons having obligations in favor of the
Borrower or its Subsidiaries, in settlement of such obligations;
provided that such promissory notes, other securities or other property
held by the Borrower or any Subsidiary are pledged to the
Administrative Agent for the benefit of the Lenders pursuant to the
Security Documents;
(g) Investments paid for solely in Capital Stock of the
Borrower;
(h) loans or advances by the Borrower or any Subsidiary in the
ordinary course of business consistent with prudent business practice
to dealers or distributors in an aggregate amount not to exceed
$500,000 at any time outstanding; and
(i) Investments by the Borrower or any Subsidiary in any
Person engaged in the same businesses as the businesses in which the
Borrower and its Subsidiaries are engaged on the Closing Date or which
are directly related thereto provided that (i) the Borrower or such
Subsidiary holds a minority interest in such Person, (ii) the Borrower
or such Subsidiary directs or causes the direction of the management
and policies of such Person, whether by contract or otherwise, and
(iii) such Investments by the Borrower and its Subsidiaries do not
exceed $2.5 million in the aggregate at any time outstanding.
8.11 Limitation on Amendment and Termination of Contracts. Amend,
modify, change or terminate or consent or agree to any amendment, modification,
change or termination of any Contract that would violate the terms of the
Assignment and Consent related thereto.
8.12 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement and (b) upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) any transaction between the Borrower and any Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries;
(ii) any payments described in subsection 8.8 and not
prohibited by subsection 8.8; and
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(iii) so long as no Default or Event of Default shall have
occurred or be continuing on the date thereof or after giving effect
thereto, any payments of fees and expenses pursuant to or in respect of
management services performed by Columbia Capital Corporation not to
exceed $500,000 annually in the aggregate.
8.13 Limitation on Changes in Fiscal Year. Permit the fiscal year of
the Borrower to end on a day other than December 31.
8.14 Limitation on Lines of Business. Enter into any business, either
directly or through any Subsidiary, except for those businesses in which the
Borrower and its Subsidiaries are engaged on the Closing Date or which are
directly related thereto.
8.15 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Borrower or such Subsidiary.
8.16 Borrower Activities. Engage in any business or activity other than
the owning of Capital Stock of Management and Capital and any actions reasonably
incidental thereto.
8.17 Prepayments and Amendments of Subordinated Debt. (a) Optionally
prepay, retire, redeem, purchase, defease or exchange any Subordinated Note,
Subordinated Debt or Permitted Junior Debt or pay any interest on Permitted
Junior Debt in cash, (b) amend, supplement or otherwise modify any documentation
governing any Permitted Junior Debt (other than amendments thereto which reduce
the interest rate or extend the maturity thereof) or (c) amend, supplement or
otherwise modify the Subordinated Notes Indenture, the Interest Escrow Agreement
or the Escrow Security Agreement in any manner which is adverse to the Lenders.
8.18 Designation of "Designated Senior Indebtedness". The Borrower will
not, without the prior written consent of the Required Lenders, designate any
Indebtedness as "Designated Senior Indebtedness" within the meaning of such term
as used in the Subordinated Notes Indenture.
8.19 Limitation on Cash Interest Payments. Make any cash interest
payment on the Subordinated Notes from any source other than funds on deposit in
the Subordinated Notes Escrow Account unless and until all amounts originally
deposited therein and any earnings thereon shall have been utilized to make the
first four semiannual interest payments on the Subordinated Notes and no amounts
shall be remaining on deposit in such account.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
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(a) The Borrower shall fail to pay any principal of any Loan
or any Reimbursement Obligation when due in accordance with the terms
thereof or hereof; or the Borrower shall fail to pay any interest on
any Loan, or any other amount payable hereunder, within five days after
any such interest or other amount becomes due in accordance with the
terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the
Borrower or any other Loan Party herein or in any other Loan Document
or which is contained in any certificate furnished by it at any time
under or in connection with this Agreement or any such other Loan
Document shall prove to have been incorrect in any material respect on
or as of the date made or deemed made; or
(c) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in subsection
7.8(a), subsection 7.11 or Section 8; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section 9), and such default shall
continue unremedied for a period of 30 days after a Responsible Officer
of the Borrower or such Loan Party has knowledge of such default or
after notice from the Administrative Agent or any Lender; or
(e) The Borrower or any other Loan Party shall (i) default in
any payment of principal of or interest on any Indebtedness (other than
the Loans and the Reimbursement Obligations) in excess of $1,000,000 or
in the payment of any Guarantee Obligation in excess of $1,000,000,
beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness or Guarantee Obligation was
created; or (ii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity
or such Guarantee Obligation to become payable; or
(f) (i) The Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its assets, or the
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Borrower or any of its Subsidiaries shall make a general assignment for
the benefit of its creditors; or (ii) there shall be commenced against
the Borrower or any of its Subsidiaries any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in
the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a
period of 60 days; or (iii) there shall be commenced against the
Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (iv) the Borrower or
any of its Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower
or any of its Subsidiaries shall generally not, or shall be unable to,
or a Responsible Officer of such Person shall admit in writing its
inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of the Borrower or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Borrower or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required
Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through
(vi) above, such event or condition, together with all other such
events or conditions, if any, could reasonably be expected to have a
Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance) of $1,000,000 or
more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the
entry thereof; or
(i) Except as, and to the extent, permitted by this Agreement,
(i) any of the Security Documents or any of the other Loan Documents
shall cease, for any reason, to be in full force and effect, or the
Borrower or any other Loan Party which is a party to any of the
Security Documents or any of the other Loan Documents shall so assert
in writing or (ii) the Lien created by any of the Security Documents
shall cease to be enforceable and of the same effect and priority
purported to be created thereby; or
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(j) The occurrence of any Change of Control; or
(k) Any Guarantee shall cease, for any reason, to be in full
force and effect or any Guarantor shall so assert in writing; or
(l) The Subordinated Notes for any reason shall not be or
shall cease to be subordinated as provided in the Subordinated Notes
Indenture to the obligations of the Borrower under this Agreement and
the other Loan Documents;
(m) The Permitted Junior Debt, if any, for any reason, shall
not be or shall cease to be validly subordinated, as provided therein,
to the obligations of the Borrower under this Agreement, any Notes and
the other Loan Documents;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to the
Borrower, automatically the Commitments shall immediately terminate and
automatically the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement (including, without limitation, all amounts
of L/C Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement (including, without limitation, all amounts
of L/C Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) and
the Notes to be due and payable forthwith, whereupon the same shall immediately
become due and payable.
With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrower shall at such time deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of the
Issuing Lender and the L/C Participants, a security interest in such cash
collateral to secure all obligations of the Borrower under this Agreement and
the other Loan Documents. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrower hereunder and under the Notes. Within a
reasonable period after all such Letters of Credit shall have expired or been
fully drawn upon, all Reimbursement Obligations shall have been satisfied and
all other obligations of the Borrower hereunder and under the Notes shall have
been paid in full, the
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balance, if any, in such cash collateral account shall be returned to the
Borrower. The Borrower shall execute and deliver to the Administrative Agent,
for the account of the Issuing Lender and the L/C Participants, such further
documents and instruments as the Administrative Agent may request to evidence
the creation and perfection of the within security interest in such cash
collateral account.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 10. THE MANAGING AGENTS
10.1 Appointment. Each Lender hereby irrevocably designates and
appoints CIBC as the Administrative Agent of such Lender under this Agreement
and the other Loan Documents, MGT as Syndication Agent under this Agreement and
the other Loan Documents and Fleet as Documentation Agent under this Agreement
and the other Loan Documents, and each such Lender irrevocably authorizes CIBC
as the Administrative Agent, MGT as the Syndication Agent and Fleet as the
Documentation Agent, in such capacities, to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent, the Syndication Agent and the Documentation Agent by the
terms of this Agreement and the other Loan Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, none of the Administrative Agent, the
Syndication Agent and the Documentation Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against either the
Administrative Agent or the Syndication Agent or the Documentation Agent.
10.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions. Neither the Administrative Agent, the
Syndication Agent, the Documentation Agent nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Loan Document (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any officer thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Administrative Agent, the Syndication Agent or the Documentation Agent
under or in connection with, this
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76
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. Neither the Administrative Agent, the Syndication Agent nor the
Documentation Agent shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Borrower.
10.4 Reliance by Administrative Agent, Syndication Agent and
Documentation Agent. Each of the Administrative Agent, the Syndication Agent and
the Documentation Agent shall be entitled to rely, and shall be fully protected
in relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, telecopy, telex or teletype message, statement, order or
other document or conversation reasonably believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including, without limitation,
counsel to the Borrower), independent accountants and other experts selected by
it. The Administrative Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Administrative
Agent. The Administrative Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement and the other Loan Documents in accordance with a request
of the Required Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Loans.
10.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof, reasonably promptly thereof to the Documentation Agent and
to the Lenders. The Administrative Agent shall take such action reasonably
promptly with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
10.6 Non-Reliance on Administrative Agent, Syndication Agent,
Documentation Agent and Other Lenders. Each Lender expressly acknowledges that
neither the Administrative Agent, the Syndication Agent, the Documentation Agent
nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties to it
and that no act by the Administrative Agent or the
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77
Syndication Agent or the Documentation Agent hereinafter taken, including any
review of the affairs of the Borrower or any other Loan Party, shall be deemed
to constitute any representation or warranty by the Administrative Agent or the
Syndication Agent or the Documentation Agent to any Lender. Each Lender
represents to the Administrative Agent, the Syndication Agent and the
Documentation Agent that it has, independently and without reliance upon the
Administrative Agent or the Syndication Agent or the Documentation Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or the Syndication Agent or the
Documentation Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower or any of the
other Loan Parties and the other Loan Parties. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent, the Syndication Agent
and the Documentation Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrower or any of the other Loan Parties which may come
into the possession of the Administrative Agent, the Syndication Agent or the
Documentation Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
10.7 Indemnification. The Lenders agree to indemnify each of the
Administrative Agent, the Syndication Agent and the Documentation Agent in their
respective capacities as such (to the extent not reimbursed by the Borrower or
any of the other Loan Parties and without limiting the obligation of the
Borrower or any of the other Loan Parties to do so), ratably according to their
respective Commitment Percentages in effect on the date on which indemnification
is sought, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without limitation, at
any time following the payment of the Loans) be imposed on, incurred by or
asserted against the Administrative Agent, the Syndication Agent or the
Documentation Agent in any way relating to or arising out of, the Commitments,
this Agreement, any of the other Loan Documents or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Administrative Agent, the
Syndication Agent or the Documentation Agent under or in connection with any of
the foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's, the Syndication Agent's or the Documentation Agent's
gross negligence or willful misconduct, as the case may be. The agreements in
this subsection shall survive the payment of the Loans and all other amounts
payable hereunder.
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10.8 Administrative Agent, Syndication Agent and Documentation Agent in
Their Individual Capacities. The Administrative Agent, the Syndication Agent,
the Documentation Agent and their respective Affiliates may make loans to,
accept deposits from and generally engage in any kind of business with the
Borrower as if the Administrative Agent, the Syndication Agent and the
Documentation Agent were not the Administrative Agent, the Syndication Agent or
the Documentation Agent, as the case may be, hereunder and under the other Loan
Documents. With respect to the Loans made by it and with respect to any Letter
of Credit issued or participated in by it, each of the Administrative Agent, the
Syndication Agent and the Documentation Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not the Administrative Agent, the
Syndication Agent or the Documentation Agent, as the case may be, and the terms
"Lender" and "Lenders" shall include each of the Administrative Agent and the
Documentation Agent in its individual capacity.
10.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 15 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent (provided
that it shall have been approved by the Borrower), shall succeed to the rights,
powers and duties of the Administrative Agent hereunder. Effective upon such
appointment and approval, the term "Administrative Agent" shall mean such
successor agent, such former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Loans. After any retiring Administrative
Agent's resignation as Administrative Agent, the provisions of this Section 10
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was an Administrative Agent under this Agreement and the other Loan
Documents.
10.10 Issuing Lender. The provisions of this Section 10 shall apply to
the Issuing Lender in its capacity as such to the same extent that such
provisions apply to the Administrative Agent.
10.11 Releases of Guarantees and Collateral. In connection with the
sale or other disposition of all of the Capital Stock of any Guarantor or the
sale or other disposition of Collateral (as defined in each of the Security
Documents) permitted under subsection 8.7, the Administrative Agent shall, and
is hereby authorized by the Lenders to, promptly, upon the request of the
Borrower and at the sole expense of the Borrower, take all actions reasonably
necessary to release such Guarantor from its guarantee contained in the
Guarantee and Collateral Agreement or its Guarantee or to release the Collateral
subject to such sale or other disposition, as the case may be, and shall take
any other actions reasonably requested by the Borrower to effect the
transactions permitted under subsection 8.7.
SECTION 11. MISCELLANEOUS
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11.1 Amendments and Waivers. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the Borrower
and the other Loan Parties written amendments, supplements or modifications
hereto and to the other Loan Documents for the purpose of amending,
supplementing or modifying any provisions of this Agreement or the other Loan
Documents or changing in any manner the rights of the Lenders or of the Borrower
hereunder or thereunder or (b) waive, on such terms and conditions as the
Required Lenders or the Administrative Agent, as the case may be, may specify in
such instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall:
(i) reduce the amount or extend the scheduled date of maturity
of any Loan or any installment thereof or any Reimbursement Obligation
or the scheduled date of any reduction in the Revolving Credit
Commitments as set forth in subsection 2.5 or reduce the stated rate of
any interest or fee payable hereunder or extend the scheduled date of
any payment thereof or increase the amount or extend the expiration
date of any Lender's Commitments, in each case without the consent of
each Lender affected thereby; or
(ii) amend, modify or waive any provision of this subsection
11.1 or reduce the percentage specified in the definition of Required
Lenders, or consent to the assignment or transfer by the Borrower of
any of its rights and obligations under this Agreement and the other
Loan Documents or release any guarantee obligation contained in the
Guarantee and Collateral Document or any of the other Guarantees or
release all or a substantial part of the Collateral (other than in
connection with any release permitted by subsection 10.11), in each
case without the written consent of all the Lenders; or
(iii) amend, modify or waive any provision of Section 10
without the written consent of the then Administrative Agent; or
(iv) amend, modify or waive any provision of this Agreement
regarding the allocation of prepayment amounts among the Term Loans or
the application of such prepayment amounts to the respective
installments of principal under the respective Term Loans without the
written consent of the Term Loan Lenders the Term Loan Commitment
Percentages of which aggregate more than 66 2/3%; or
(v) subject to clause (i) of this subsection 11.1(a) as it
relates to reducing the amount or extending the scheduled date of
maturity of any Loan or any installment thereof, amend, modify or waive
any provision of subsection 2.6 or subsection 2.7 without the written
consent of Term Loan Lenders the Term Loan Commitment Percentages of
which aggregate more than 66 2/3%; or
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(vi) amend, modify or waive any provision of subsection 2.1,
2.2, 2.3 or 2.5 or, subject to paragraph (i) of this subsection 11.1(a)
as it relates to reducing the amount or extending the scheduled date of
maturity of any Reimbursement Obligation, Section 3 without the written
consent of the Revolving Credit Lenders the Revolving Credit Commitment
Percentages of which aggregate more than 66 2/3%; or
(vii) amend, modify or waive the provisions of any Letter of
Credit or any L/C Obligation without the written consent of the Issuing
Lender; or
(viii) amend, modify or waive any provision of any Security
Document that provides for the ratable sharing by the Lenders under
such Security Document of the proceeds of any realization on the
Collateral to provide for a non-ratable sharing thereof, without the
consent of (x) Revolving Credit Lenders the Revolving Credit Commitment
Percentages of which aggregate more than 66 2/3% and (y) Term Loan
Lenders the Term Loan Commitment Percentages of which aggregate more
than 66 2/3%.
Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the
Borrower, the Lenders, the Managing Agents, the Issuing Lender and all future
holders of the Loans. In the case of any waiver, the Borrower, the Lenders, the
Managing Agents and the Issuing Lender shall be restored to their former
positions and rights hereunder and under the other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; no such waiver shall extend to any subsequent or other Default or
Event of Default or impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand or
by overnight courier, when delivered, (b) in the case of delivery by mail, three
days after being deposited in the mails, postage prepaid, or (c) in the case of
delivery by facsimile transmission, when sent and receipt has been confirmed,
addressed as follows in the case of the Borrower and each Managing Agent, and as
set forth in Schedule 1 in the case of the other parties hereto, or to such
other address as may be hereafter notified by the respective parties hereto:
The Borrower:
Digital Television Services, LLC
880 Holcomb Bridge Road
Suite C200
Roswell, Georgia 30076
Attention: Mr. Donald A. Doering
Fax: (770) 645-9586
The Administrative Agent:
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Canadian Imperial Bank of Commerce
425 Lexington Avenue
7th Floor
New York, New York 10017
Attention: Ms. Lorain Granberg
Fax: (212) 856-3558
The Syndication Agent:
The Morgan Guaranty Trust Company
60 Wall Street
New York, New York 10004
Attention: Mr. Blake Witherington III
Fax: (212) 648-5348
The Documentation Agent:
Fleet National Bank
One Federal Street
Mail Stop MA/0FD03D
Boston, Massachusetts 02110
Attention: Mr. Stephen Healey
Fax: (617) 346-4345
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.3, 2.5, 2.8, 3.2, 4.2, 4.4 or 4.8 shall
not be effective until received.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
11.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents (or in any amendment,
modification or supplement hereto or thereto) and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the making of the Loans
hereunder.
11.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Managing Agents and the Arranger for all their respective
reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the
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other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby (including the syndication of the Commitments
(including the reasonable expenses of the Administrative Agent's due diligence
investigation)), including, without limitation, the reasonable fees and
disbursements of counsel to the Managing Agents and the Arranger, (b) to pay or
reimburse each Lender and the Managing Agents and the Arranger for all their
respective costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, including, without limitation, the fees and
disbursements of counsel (including the allocated fees and expenses of in-house
counsel) to the respective Lenders, the Managing Agents and the Arranger, (c) to
pay, indemnify, and hold each Lender and the Managing Agents and the Arranger
harmless from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the other
Loan Documents and any such other documents, and (d) to pay, indemnify, and hold
each Lender and the Managing Agents and the Arranger and their respective
directors, trustees, officers, employees and agents harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents or the use or
proposed use of the proceeds of the Loans in connection with the transactions
contemplated hereby and thereby and any such other documents regardless of
whether the Managing Agents, the Arranger or any Lender is a party to the
litigation or other proceeding giving rise thereto and regardless of whether any
such litigation or other proceeding is brought by the Borrower or any other
Person, including, without limitation, any of the foregoing relating to the
violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the Borrower, any of its Subsidiaries or any of
the facilities and properties owed, leased or operated by the Borrower or any of
its Subsidiaries (all the foregoing in this clause (d), collectively, the
"indemnified liabilities"), provided that the Borrower shall have no obligation
hereunder to the Managing Agents, the Arranger or any Lender or any other Person
with respect to indemnified liabilities arising from the gross negligence or
willful misconduct of the party seeking indemnification. The agreements in this
subsection shall survive repayment of the Loans and all other amounts payable
hereunder.
11.6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Administrative Agent, the Syndication Agent, the Documentation
Agent and their respective successors and assigns, except that the Borrower may
not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its business or
investment activities and in accordance with applicable law, at any time sell to
one or more banks or other entities ("Participants") participating interests in
any Loan owing to such Lender, any
<PAGE> 84
83
Commitment of such Lender or any other interest of such Lender hereunder and
under the other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Loan for all purposes under this Agreement
and the other Loan Documents, and the Borrower and the Administrative Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Loan
Documents. No Lender shall be entitled to create in favor of any Participant, in
the participation agreement pursuant to which such Participant's participating
interest shall be created or otherwise, any right to vote on, consent to or
approve any matter relating to this Agreement or any other Loan Document except
for those matters specified in clauses (i) and (ii) of the proviso to subsection
11.1. The Borrower agrees that if amounts outstanding under this Agreement are
due or unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall, to the
maximum extent permitted by applicable law, be deemed to have the right of
setoff in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement, provided that, in
purchasing such participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as provided in subsection
11.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that
each Participant shall be entitled to the benefits of subsections 4.10, 4.11 and
4.12 with respect to its participation in the Commitments and the Loans
outstanding from time to time as if it was a Lender; provided that, in the case
of subsection 4.11, such Participant shall have complied with the requirements
of said subsection and provided, further that no Participant shall be entitled
to receive any greater amount pursuant to any such subsection than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such Participant
had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its business or
investment activities and in accordance with applicable law, at any time and
from time to time assign to any Lender or any branch or affiliate thereof or,
with the consent of the Borrower and the Administrative Agent (which in each
case shall not be unreasonably withheld or delayed), to an additional bank or
financial institution (an "Assignee") all or any part of its rights and
obligations under this Agreement and the other Loan Documents pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit G, executed by
such Assignee and such assigning Lender (and, in the case of an Assignee that is
not then a Lender or a branch or an affiliate thereof, by the Borrower and the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register, provided that, in the case of any such
assignment to an additional bank or financial institution, if such assignment is
of less than all of the rights and obligations of the assigning Lender, the sum
of the aggregate principal amount of the Loans, the aggregate amount of the L/C
Obligations and the aggregate amount of the Available Revolving Credit
Commitment being assigned shall not be less than $10,000,000 (or such lesser
amount as may be agreed to by the Borrower and the Administrative Agent). Upon
such execution, delivery, acceptance and recording, from and
<PAGE> 85
84
after the effective date determined pursuant to such Assignment and Acceptance,
(x) the Assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein, and (y) the assigning Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto but shall nonetheless continue to be entitled
to the benefits of subsections 4.10, 4.11, 4.12 and 11.5). Notwithstanding any
provision of this paragraph (c) and paragraph (e) of this subsection, the
consent of the Borrower shall not be required, and, unless requested by the
Assignee and/or the assigning Lender, new Notes shall not be required to be
executed and delivered by the Borrower, for any assignment which occurs at any
time when any of the Events of Default described in Section 9(f) shall have
occurred and be continuing.
(d) The Administrative Agent, on behalf of the Borrower, shall maintain
at the address of the Administrative Agent referred to in subsection 11.2 a copy
of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amounts of the Loans owing to, and any Notes
evidencing the Loans owned by, each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Lenders shall treat each Person whose
name is recorded in the Register as the owner of a Loan or other obligation
hereunder as the owner thereof for all purposes of this Agreement and the other
Loan Documents, notwithstanding any notice to the contrary. Any assignment of
any Loan or other obligation hereunder shall be effective only upon appropriate
entries with respect thereto being made in the Register.The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Borrower and the Administrative
Agent) together with payment to the Administrative Agent of a registration and
processing fee of $3,500, the Administrative Agent shall promptly accept such
Assignment and Acceptance and record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower. Such Assignment and Acceptance and the assignment evidenced
thereby shall only be effective upon appropriate entries with respect to the
information contained therein being made in the Register pursuant to subsection
11.6(d).
(f) The Borrower authorizes each Lender to disclose to any Participant
or Assignee (each, a "Transferee") and any prospective Transferee, subject to
such Person agreeing to comply with the provisions of subsection 11.15, any and
all financial and other information in such Lender's possession concerning the
Borrower and its Affiliates which has been delivered to such Lender by or on
behalf of the Borrower pursuant to this Agreement or which has been delivered to
such Lender by or on behalf of the Borrower in connection with
<PAGE> 86
85
such Lender's credit evaluation of the Borrower and its Affiliates prior to
becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
11.7 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of its Loans or the
Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 9(f), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's Loans or
the Reimbursement Obligations owing to it, or interest thereon, such benefitted
Lender shall purchase for cash from the other Lenders a participating interest
(or, at the option of such benefitted Lender, a direct interest) in such portion
of each such other Lender's Loan or the Reimbursement Obligations owing to it,
or shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount remaining unpaid (including, without limitation,
any amount owing to such Lender in respect of an undivided interest purchased by
such Lender in any draft paid by the Issuing Lender under any Letter of Credit
pursuant to subsection 3.4(a)) after it becomes due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any affiliate, branch or agency thereof to or
for the credit or the account of the Borrower. Each Lender agrees promptly to
notify the Borrower and the Administrative Agent after any such set-off and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application.
11.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one
<PAGE> 87
86
and the same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
11.9 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Managing Agents and the Lenders
with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Managing Agents or any Lender
relative to subject matter hereof not expressly set forth or referred to herein
or in the other Loan Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in subsection 11.2 or
at such other address of which the Administrative Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
<PAGE> 88
87
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
11.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or
in connection with this Agreement or any of the other Loan Documents,
and the relationship between Administrative Agent and Lenders, on one
hand, and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
11.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.15 Confidentiality. Each Lender agrees to keep confidential any
written information (a) provided to it by or on behalf of the Borrower or any of
its Subsidiaries pursuant to or in connection with this Agreement or (b)
obtained by such Lender based on a review of the books and records of the
Borrower or any of its Subsidiaries; provided that nothing herein shall prevent
any Lender from disclosing any such information (i) to the Administrative Agent
or any other Lender, (ii) to any Transferee or prospective Transferee which
agrees to comply with the provisions of this subsection, (iii) to its employees,
directors, agents, attorneys, accountants and other professional advisors, (iv)
upon the request or demand of any Governmental Authority having jurisdiction
over such Lender or as shall be required pursuant to any Requirement of Law, (v)
in response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Requirement of Law, (vi) in connection
with any litigation to which such Lender is a party, (vii) which has been
publicly disclosed other than in breach of this Agreement, or (viii) to the
extent reasonably necessary, in connection with the exercise of any remedy
hereunder (provided that upon receipt of such an order, request or demand from
any Person other than a regulatory authority having jurisdiction over such
Lender described in subclause (iv) or (v) of this subsection 11.15, such Lender
shall (x) promptly notify the Borrower thereof and (y) cooperate with the
Borrower in any efforts the Borrower may make to oppose or narrow such request
or to assure confidentiality for all or any portion of any information
delivered).
<PAGE> 89
88
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
DIGITAL TELEVISION SERVICES, LLC
By: DTS Management, LLC,
its Manager
By:/s/ Neil Byrne
-----------------------------
Title: Vice President
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY, as
Administrative Agent and as a Lender
By:/s/ Lorain Granberg
----------------------------
Title: Director, CIBC Wood Gundy
Securities, as Agent for Canadian Imperial
Bank of Commerce
MORGAN GUARANTY TRUST COMPANY,
as Syndication Agent and as a Lender
By:/s/ R. Blake Witherington
----------------------------
Title: Vice President
FLEET NATIONAL BANK, as Documentation
Agent and as a Lender
By:/s/ Stepehn Healy
----------------------------
Title: Senior Vice President
<PAGE> 90
89
BANK OF MONTREAL
By:/s/ W.T. Calder
----------------------------
Title: Director
<PAGE> 91
9O
BANQUE PARIBAS
By:/s/ Nicole Cawley
----------------------------
Title: Vice President
By:/s/ Lynne S. Randall
----------------------------
Title: Vice President
<PAGE> 92
91
BANKBOSTON, N.A.
By:/s/Robert F. Milordi
--------------------------
Title: Managaing Director
<PAGE> 93
Schedule 2
to Credit Agreement
Applicable Margin Calculation
<TABLE>
<CAPTION>
ABR Loans Eurodollar Loans Eurodollar
Applicable ABR Loans Applicable Loans
Margin Applicable Margin Applicable
(Revolving Margin (Revolving Margin
Leverage Ratio Credit Loans) (Term Loans) Credit Loans) (Term Loans)
-------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Greater than or equal to 6.75 to 2.25% 2.50% 3.50% 3.75%
1.00
Less than 6.75 to 1.00 but 2.00% 2.25% 3.25% 3.50%
greater than or equal to 6.25 to
1.00
Less than 6.25 to 1.00 but 1.50% 1.75% 2.75% 3.00%
greater than or equal to 5.75 to
1.00
Less than 5.75 1.25% 1.50% 2.50% 2.75%
</TABLE>
<PAGE> 1
EXHIBIT 10.2
CONFORMED COPY
================================================================================
SECOND AMENDED AND RESTATED GUARANTEE
AND COLLATERAL AGREEMENT
made by
DIGITAL TELEVISION SERVICES, LLC,
as a Grantor
DTS MANAGEMENT, LLC
and
certain Subsidiaries of Digital Television Services, LLC,
as Guarantors and Grantors,
in favor of
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent
Dated as of July 30, 1997
================================================================================
<PAGE> 2
GUARANTEE AND COLLATERAL AGREEMENT
SECOND AMENDED AND RESTATED GUARANTEE AND
COLLATERAL AGREEMENT, dated as of July 30, 1997, made by each of the signatories
hereto (together with any other entity that may become a party hereto as
provided herein, the "Grantors"), in favor of CANADIAN IMPERIAL BANK OF
COMMERCE, as Administrative Agent (in such capacity, the "Administrative Agent")
for the banks and other financial institutions (the "Lenders") from time to time
parties to the Second Amended and Restated Credit Agreement, dated as of the
date hereof (as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement"), among DIGITAL TELEVISION SERVICES, LLC, a Delaware
limited liability company, formerly known as Columbia DBS Holdings, LLC (the
"Borrower"), the Lenders, CIBC WOOD GUNDY SECURITIES CORP. ("CIBCWG"), as
arranger (the "Arranger"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MGT"), a
New York banking corporation, as syndication agent (in such capacity, the
"Syndication Agent"), FLEET NATIONAL BANK ("Fleet"), as documentation agent (in
such capacity, the "Documentation Agent"), and the Administrative Agent.
W I T N E S S E T H:
WHEREAS, each Grantor and the Administrative Agent are parties
to the Amended and Restated Guarantee and Collateral Agreement dated as of May
9, 1997, as amended and as in effect immediately prior to the effectiveness of
this Agreement (the "Existing Guarantee and Collateral Agreement");
WHEREAS, each Grantor and the Administrative Agent wish to
amend and restate the Existing Guarantee and Collateral Agreement pursuant to
this Agreement in accordance with the terms and subject to the conditions set
forth herein;
WHEREAS, each Grantor and the Administrative Agent have
elected to amend and restate the Existing Guarantee and Collateral Agreement
pursuant to this Agreement rather than amend the Existing Guarantee and
Collateral Agreement or enter into a new security agreement for their
convenience and intend that all indebtedness, obligations and liens created
under (i) the Guarantee and Collateral Agreement dated as of November 27, 1996
(the "Original Guarantee and Collateral Agreement") and (ii) the Existing
Guarantee and Collateral Agreement be continued hereunder and remain in full
force and effect and not be discharged, paid, satisfied or cancelled except as
otherwise provided herein;
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of
Persons that includes each Guarantor;
<PAGE> 3
2
WHEREAS, the proceeds of the extensions of credit will be used
in part to enable the Borrower to make valuable transfers to one or more of the
Guarantors in connection with the operation of their respective businesses;
WHEREAS, the Borrower and the Guarantors are engaged in
related businesses and each such Grantor will derive substantial direct and
indirect benefit from the making of the extensions of credit under the Credit
Agreement; and
WHEREAS, it is a condition precedent to the effectiveness of
the Credit Agreement and to the obligation of the Lenders to make their
respective extensions of credit to the Borrower thereunder that the Grantors
shall have executed and delivered this Agreement to the Administrative Agent for
the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, each Grantor hereby agrees with the Administrative Agent,
for the ratable benefit of the Lenders, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement, and the following terms which are defined in the
Uniform Commercial Code in effect in the State of New York on the date hereof
are used herein as so defined: Accounts, Chattel Paper, Documents, Equipment,
Farm Products, Instruments and Inventory.
(b) The following terms shall have the following meanings:
"Agreement": this Second Amended and Restated Guarantee and
Collateral Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations
and all other obligations and liabilities of the Borrower (including,
without limitation, interest accruing at the then applicable rate
provided in the Credit Agreement after the maturity of the Loans and
Reimbursement Obligations and interest accruing at the then applicable
rate provided in the Credit Agreement after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) to
the Administrative Agent or any Lender (or, in the case of any Interest
Rate Protection Agreement referred to below, any Affiliate of any
Lender), whether direct or indirect, absolute or contingent, due or to
become due, or now
<PAGE> 4
3
existing or hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreement, this Agreement, the other Loan
Documents, any Letter of Credit, any Interest Rate Protection Agreement
entered into by the Borrower with any Lender (or any Affiliate of any
Lender) or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest,
Reimbursement Obligations, fees, indemnities or costs or expenses
required to be paid by the Borrower under the Loan Documents or
otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required
to be paid by the Borrower pursuant to the terms of any of the
foregoing agreements).
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral": as defined in Section 3.
"Collateral Account": any collateral account established by
the Administrative Agent as provided in Section 6.1 or 6.4.
"Contracts": the contracts and agreements listed in Schedule
7, as the same may be amended, supplemented or otherwise modified from
time to time, including, without limitation, (i) all rights of any
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of any Grantor to damages arising
thereunder and (iii) all rights of any Grantor to perform and to
exercise all remedies thereunder; provided that to the extent the
assignment of any such Contracts is provided for under the Assignment
and Consent, the Assignment and Consent will govern the terms and
conditions of such assignment.
"Copyright Licenses": any written agreement naming any Person
as licensor or licensee (including, without limitation, those listed in
Schedule 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.
"Copyrights": (i) all copyrights, whether published or
unpublished (including, without limitation, those listed in Schedule
6), all registration and recordings thereof, and all applications in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, and
(ii) all renewals thereof.
"General Intangibles": all "general intangibles" as such term
is defined in Section 9-106 of the Uniform Commercial Code in effect in
the State of New York on the date hereof and, in any event, shall
include, without limitation, with respect to any Person, all contracts,
agreements, instruments and indentures in any form, and thereof, to
which such Person is a party or under which such Person has any right,
title or
<PAGE> 5
4
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of
such Grantor to receive moneys due and to become due to it thereunder
or in connection therewith, (ii) all rights of such Grantor to damages
arising thereunder and (iii) all rights of such Grantor to perform and
to exercise all remedies thereunder, in each case to the extent the
grant by such Grantor of a security interest pursuant to this Agreement
in its right, title and interest in such contract, agreement,
instrument or indenture is not prohibited by such contract, agreement,
instrument or indenture without the consent of any other party thereto,
would not give any other party to such contract, agreement, instrument
or indenture the right to terminate its obligations thereunder, or is
permitted with consent if all necessary consents to such grant of a
security interest have been obtained from the other parties thereto (it
being understood that the foregoing shall not be deemed to obligate
such Grantor to obtain such consents); provided, that the foregoing
limitation shall not affect, limit, restrict or impair the grant by
such Grantor of a security interest pursuant to this Agreement in any
Receivable or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture.
"Grantor": as defined in the preamble.
"Guarantor Obligations": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or
in connection with this Agreement or any other Loan Document to which
such Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders
that are required to be paid by such Guarantor pursuant to the terms of
this Agreement or any other Loan Document).
"Guarantors": the collective reference to each Grantor other
than the Borrower.
"Intellectual Property": the collective reference to the
Copyrights, the Copyright Licenses, the Patents, the Patent Licenses,
the Trademarks and the Trademark Licenses, in each case to the extent
the grant by any Person of a security interest pursuant to this
Agreement in its right, title and interest in such Intellectual
Property is not prohibited by any contract or agreement to which such
Person is a party without the consent of any other party thereto, would
not give any other party to such contract or agreement the right to
terminate its obligations thereunder, or is permitted with consent if
all necessary consents to such grant of a security interest have been
obtained from the other parties to such contract or agreement.
"Intercompany Note": any promissory note evidencing loans made
by any Grantor to the Borrower or any of its Subsidiaries.
<PAGE> 6
5
"Issuers": the collective reference to the Persons identified
on Schedule 2 as the issuers of the Pledged Securities.
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to any Person of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any of the foregoing referred to in Schedule 6.
"Patents": (i) all letters patent of the United States or any
other country, all reissues and extensions thereof and all goodwill
associated therewith, including, without limitation, any of the
foregoing referred to in Schedule 6, and (ii) all applications for
letters patent of the United States or any other country and all
divisions, continuations and continuations-in-part thereof, including,
without limitation, any of the foregoing referred to in Schedule 6.
"Pledged Notes": all promissory notes listed on Schedule 2,
all Intercompany Notes at any time issued to any Pledgor and all other
promissory notes issued to or held by any Grantor (other than
promissory notes issued in connection with extensions of trade credit
by any such Grantor in the ordinary course of business).
"Pledged Securities": the collective reference to the Pledged
Notes and the Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on
Schedule 2, together with any other shares, certificates, options or
rights of any nature whatsoever in respect of the Capital Stock of any
Issuer that may be issued or granted to, or held by, any Grantor while
this Agreement is in effect.
"Pledgor": any Grantor that assigns and transfers to the
Administrative Agent, for the ratable benefit of the Lenders, Pledged
Securities and, to the extent provided herein, all Proceeds thereof
under Section 3 of this Agreement.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New
York on the date hereof and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Securities,
collections thereon or distributions or payments with respect thereto.
"Receivable": any right to payment for goods sold or leased or
for services rendered, whether or not such right is evidenced by an
Instrument or Chattel Paper and
<PAGE> 7
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whether or not it has been earned by performance (including, without
limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
"Trademark License": any agreement, whether written or oral,
providing for the grant by or to any Person of any right to use any
Trademark, including, without limitation, any of the foregoing referred
to in Schedule 6.
"Trademarks": (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and all goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
of the foregoing referred to in Schedule 6, and (ii) all renewals
thereof.
1.2 Other Definitional Provisions. (a) The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section and Schedule references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(c) Where terms relating to the Collateral or any part thereof
are used in relation to a particular Grantor, such terms shall refer only to
such Grantor's Collateral or the relevant part thereof and not to the Collateral
of any other Grantor.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Lenders and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor
<PAGE> 8
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under applicable federal and state laws relating to the insolvency of debtors
(after giving effect to the right of contribution established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at
any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section 2
or affecting the rights and remedies of the Administrative Agent or any Lender
hereunder.
(d) The guarantee contained in this Section 2 shall remain in
full force and effect until all the Borrower Obligations and the obligations of
each Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full, no Letter of Credit shall be outstanding and the
Commitments shall have been terminated, notwithstanding that from time to time
during the term of the Credit Agreement the Borrower may be free from any
Borrower Obligations.
(e) No payment made by the Borrower, any of the Guarantors, or
any other Person or received or collected by the Administrative Agent or any
Lender from the Borrower, any of the Guarantors, or any other Person by virtue
of any action or proceeding or any set-off or appropriation or application at
any time or from time to time in reduction of or in payment of the Borrower
Obligations shall be deemed to modify, reduce, release or otherwise affect the
liability of any Guarantor hereunder which shall, notwithstanding any such
payment (other than any payment made by such Guarantor in respect of the
Borrower Obligations or any payment received or collected from such Guarantor in
respect of the Borrower Obligations), remain liable for the Borrower Obligations
up to the maximum liability of such Guarantor hereunder until the Borrower
Obligations are paid in full, no Letter of Credit shall be outstanding and the
Commitments are terminated.
2.2 Right of Contribution. Each Guarantor hereby agrees that
to the extent that a Guarantor shall have paid more than its proportionate share
of any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has
not paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 2.3. The
provisions of this Section 2.2 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent and the Lenders, and
each Guarantor shall remain liable to the Administrative Agent and the Lenders
for the full amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor
<PAGE> 9
8
in respect of payments made by such Guarantor hereunder, until all amounts owing
to the Administrative Agent and the Lenders by the Borrower on account of the
Borrower Obligations are paid in full, no Letter of Credit shall be outstanding
and the Commitments are terminated. If any amount shall be paid to any Guarantor
on account of such subrogation rights at any time when all of the Borrower
Obligations shall not have been paid in full, such amount shall be held by such
Guarantor in trust for the Administrative Agent and the Lenders, segregated from
other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Administrative Agent in the exact form received
by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent,
if required), to be applied against the Borrower Obligations, whether matured or
unmatured, in such order as the Administrative Agent may determine.
2.4 Amendments, etc. with respect to the Borrower Obligations.
To the fullest extent permitted by law, each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Borrower Obligations made by the Administrative Agent
or any Lender may be rescinded by the Administrative Agent or such Lender and
any of the Borrower Obligations continued, and the Borrower Obligations, or the
liability of any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and the Credit Agreement and the other Loan Documents and
any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Administrative Agent (or the Required Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any Lender for the
payment of the Borrower Obligations may be sold, exchanged, waived, surrendered
or released. Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Borrower Obligations or for the guarantee contained in this
Section 2 or any property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Borrower Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon the guarantee contained in this Section
2 or acceptance of the guarantee contained in this Section 2; the Borrower
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon the guarantee contained in this Section 2; and all dealings between the
Borrower and any of the Guarantors, on the one hand, and the Administrative
Agent and the Lenders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon the guarantee
contained in this Section 2. To the fullest extent permitted by law, each
Guarantor waives diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon the Borrower or any of the Guarantors with
respect to the Borrower
<PAGE> 10
9
Obligations. Each Guarantor understands and agrees that, to the fullest extent
permitted by law, the guarantee contained in this Section 2 shall be construed
as a continuing, absolute and unconditional guarantee of payment without regard
to (a) the validity or enforceability of the Credit Agreement or any other Loan
Document, any of the Borrower Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Lender, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower against the Administrative Agent or any Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Borrower
or such Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrower for the Borrower Obligations in
bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on or otherwise pursue such rights and remedies as it may
have against the Borrower, any other Guarantor or any other Person or against
any collateral security or guarantee for the Borrower Obligations or any right
of offset with respect thereto, and any failure by the Administrative Agent or
any Lender to make any such demand, to pursue such other rights or remedies or
to collect any payments from the Borrower, any other Guarantor or any other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower, any other
Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Administrative Agent or
any Lender against any Guarantor. For the purposes hereof "demand" shall include
the commencement and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent
or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars (except as otherwise provided in Section 2.3 or 6.4) the
office of the Administrative Agent located at 425 Lexington Avenue, New York,
New York 10017.
<PAGE> 11
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SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the
Administrative Agent, and hereby grants to the Administrative Agent, for the
ratable benefit of the Lenders, a security interest in, all of the following
property now owned or at any time hereafter acquired by such Grantor or in which
such Grantor now has or at any time in the future may acquire any right, title
or interest (collectively, the "Collateral"), as collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of such Grantor's Obligations:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Pledged Stock;
(k) all Pledged Notes;
(l) all books and records pertaining to the Collateral; and
(m) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security
and guarantees given by any Person with respect to any of the
foregoing;
provided, however, that "Collateral" shall not include any right, title
or interest that any Grantor now has or in the future may acquire in
(i) the Interest Escrow Agreement dated as of July ___, 1997 among the
Borrower and Capital, as the issuers, and The Bank of New York, as
trustee and escrow agent (the "Interest Escrow Agreement"), (ii) any
funds held in the escrow account established pursuant to the Interest
Escrow Agreement and (iii) any proceeds thereof.
<PAGE> 12
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF GRANTORS
To induce the Administrative Agent and the Lenders to enter
into the Credit Agreement and to induce the Lenders to make their respective
extensions of credit to the Borrower thereunder, each Grantor hereby represents
and warrants to the Administrative Agent and each Lender that:
4.1 Representations in Credit Agreement. In the case of each
Guarantor, the representations and warranties set forth in Section 5 of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Administrative Agent and each Lender
shall be entitled to rely on each of them as if they were fully set forth
herein, provided that each reference in each such representation and warranty to
the Borrower's knowledge shall, for the purposes of this Section 4.1(a), be
deemed to be a reference to such Guarantor's knowledge.
4.2 Title; No Other Liens. Except for the security interest
granted to the Administrative Agent for the ratable benefit of the Lenders
pursuant to this Agreement and the other Liens permitted to exist on the
Collateral by the Credit Agreement and except as set forth on Schedule 4.2, such
Grantor owns each item of the Collateral which is owned by such Grantor free and
clear of any and all Liens or claims of others. No financing statement or other
public notice with respect to all or any part of such Grantor's rights in the
Collateral is on file or of record in any public office, except such as have
been filed in favor of the Administrative Agent, for the ratable benefit of the
Lenders, pursuant to this Agreement or as are not prohibited by the Credit
Agreement.
4.3 Perfected First Priority Liens. The security interests
granted pursuant to this Agreement (a) constitute or upon completion of the
filings and other actions specified on Schedule 3 (which, in the case of all
filings and other documents referred to on said Schedule, have been delivered to
the Administrative Agent in completed and duly executed form) will constitute
valid perfected security interests in all of the Collateral in favor of the
Administrative Agent, for the ratable benefit of the Lenders, as collateral
security for such Grantor's Obligations, enforceable in accordance with the
terms hereof against all creditors of such Grantor and any Persons purporting to
purchase any Collateral from such Grantor and (b) are prior to all other Liens
on the Collateral in existence on the date hereof except for (i) unrecorded
Liens permitted by the Credit Agreement which have priority over the Liens on
the Collateral by operation of law and (ii) Liens described on Schedule 9.
4.4 Chief Executive Office. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business, as applicable, are specified on Schedule 4.
<PAGE> 13
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4.5 Inventory and Equipment. On the date hereof, the Inventory
and the Equipment are kept at the locations within the filing jurisdictions
listed on Schedule 5 except that no more than 5% of the aggregate fair market
value of the Inventory may be in transit to or between such jurisdictions.
4.6 Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
4.7 Pledged Securities. (a) The shares (including membership
interests in any limited liability company if so pledged) of Pledged Stock
pledged by such Grantor hereunder constitute all the issued and outstanding
shares of all classes (including membership interests in any limited liability
company if so pledged) of the Capital Stock of each Issuer owned by such
Grantor.
(b) All the shares (including membership interests in any
limited liability company if so pledged) of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(c) Each of the Pledged Notes issued by any Issuer constitutes
the legal, valid and binding obligation of the obligor with respect thereto,
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and
has good and marketable title to, the Pledged Securities pledged by it
hereunder, free of any and all Liens or options in favor of, or claims of, any
other Person, except the security interest created by this Agreement.
(e) Each of the Borrower and Management represent and warrant
that each share of Pledged Stock issued by it has been duly and validly issued
and is fully paid and nonassessable.
4.8 Receivables. No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument which has not been
delivered to the Administrative Agent.
4.9 Contracts. (a) No consent of any party to any Contract is
required, or purports to be required, in connection with the execution, delivery
and performance of this Agreement other than the NRTC and Directv, which
respective consents have been duly obtained, are in full force and effect and do
not subject the scope of any such Contract to any material adverse limitation,
either specific or general in nature.
<PAGE> 14
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(b) Each Contract is in full force and effect and constitutes
a valid and legally enforceable obligation of the parties thereto, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act
by or in respect of any Governmental Authority is required in connection with
the execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or general
in nature.
(d) Neither such Grantor nor (to the best of such Grantor's
knowledge) any of the other parties to the Contracts is in default in the
performance or observance of any of the material terms thereof.
(e) The right, title and interest of such Grantor in, to and
under the Contracts are not subject to any defenses, offsets, counterclaims or
claims.
(f) Such Grantor has delivered to the Administrative Agent a
complete and correct copy of each Contract, including all amendments,
supplements and other modifications thereto.
(g) No amount payable to such Grantor under or in connection
with any Contract is evidenced by any Instrument or Chattel Paper which has not
been delivered to the Administrative Agent.
(h) None of the parties to any Contract is a Governmental
Authority.
4.10 Intellectual Property. (a) Schedule 6 lists all
Intellectual Property owned by such Grantor in its own name on the date hereof.
(b) To the best of such Grantor's knowledge, each Copyright,
Patent and Trademark listed on Schedule 6 is on the date hereof valid,
subsisting, unexpired, enforceable and has not been abandoned.
(c) Except as set forth in Schedule 6, none of the Copyrights,
Patents or Trademarks listed on Schedule 6 is on the date hereof the subject of
any licensing or franchise agreement.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of any
Copyright, Patent or
<PAGE> 15
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Trademark listed on Schedule 6 in any respect that could reasonably be expected
to have a Material Adverse Effect.
(e) No action or proceeding is pending on the date hereof (i)
seeking to limit, cancel or question the validity of any Copyright, Patent or
Trademark listed on Schedule 6, or (ii) which, if adversely determined, would
have a material adverse effect on the value of any such Patent or Trademark.
SECTION 5. COVENANTS OF GRANTORS
Each Grantor covenants and agrees with the Administrative
Agent and the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated:
5.1 Covenants in Credit Agreement. In the case of each
Guarantor, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case may
be, so that no Default or Event of Default is caused by the failure to take such
action or to refrain from taking such action by such Guarantor.
5.2 Delivery of Instruments. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
Instrument, such Instrument shall be immediately delivered to the Administrative
Agent, duly indorsed in a manner satisfactory to the Administrative Agent, to be
held as Collateral pursuant to this Agreement.
5.3 Maintenance of Insurance. (a) Such Grantor will maintain,
with financially sound and reputable companies, insurance policies (i) insuring
the Inventory and Equipment against loss by fire, explosion, theft and such
other casualties at levels which are prudent in light of the business undertaken
by such Grantor and which are reasonably satisfactory to the Administrative
Agent and (ii) insuring such Grantor, the Administrative Agent and the Lenders
against liability for personal injury and property damage relating to such
Inventory and Equipment, such policies to be in such form and amounts and having
such coverage as may be reasonably satisfactory to the Administrative Agent and
the Lenders.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as insured party or
loss payee, (iii) if reasonably requested by the Administrative Agent, include a
breach of warranty clause and (iv) be reasonably satisfactory in all other
respects to the Administrative Agent.
<PAGE> 16
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(c) The Borrower shall deliver to the Administrative Agent and
the Lenders a report of a reputable insurance broker with respect to such
insurance during the month of November in each calendar year and such
supplemental reports with respect thereto as the Administrative Agent may from
time to time reasonably request.
5.4 Intentionally Omitted.
5.5 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement as a perfected security interest having at least the priority
described in Section 4.3 and shall defend such security interest against the
claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent and
the Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such Grantor,
such Grantor will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code (or other similar laws) in effect in any
jurisdiction with respect to the security interests created hereby.
5.6 Changes in Locations, Name, etc. Such Grantor will not,
except upon 15 days' prior written notice to the Administrative Agent and
delivery to the Administrative Agent of (a) all additional executed financing
statements and other documents reasonably requested by the Administrative Agent
to maintain the validity, perfection and priority of the security interests
provided for herein and (b) if applicable, a written supplement to Schedule 5
showing any additional location at which Inventory or Equipment shall be kept:
(i) except as permitted under Section 4.5, permit any of the
Inventory or Equipment to be kept at a location in a filing
jurisdiction other than those listed on Schedule 5;
(ii) change the location of its chief executive office or sole
place of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Administrative
Agent in connection with this Agreement would become misleading.
<PAGE> 17
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5.7 Notices. Such Grantor will advise the Administrative Agent
and the Lenders promptly, in reasonable detail, after learning of the existence
of:
(a) any Lien (other than security interests created hereby or
Liens permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and
(b) of the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate value
of the Collateral or on the security interests created hereby.
5.8 Pledged Securities. (a) If such Grantor shall become
entitled to receive or shall receive any stock certificate or any certificate
evidencing beneficial interests or membership interests in limited liability
companies, as applicable (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization) (the "Additional Interests"), option or
rights in respect of the Capital Stock of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Administrative Agent and the Lenders, hold the same in
trust for the Administrative Agent and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with (i) an undated stock or
other appropriate power covering such certificate duly executed in blank by such
Grantor and with, if the Administrative Agent so requests, signature guaranteed,
to be held by the Administrative Agent, subject to the terms hereof, as
additional collateral security for the Obligations and (ii) if requested by the
Administrative Agent to perfect the security interests of the Administrative
Agent in the Additional Interests in accordance with any requirements of
applicable law, executed financing statements on form UCC-1, to be filed in the
appropriate jurisdictions. Any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any Issuer shall be paid over
to the Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
made on or in respect of the Pledged Securities or any property shall be
distributed upon or with respect to the Pledged Securities pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Securities shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in
trust for the Lenders, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
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(b) Except to the extent permitted under the Credit Agreement,
without the prior written consent of the Administrative Agent, such Grantor will
not (i) vote to enable, or take any other action to permit, any Issuer to issue
any stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or exchange for
any stock or other equity securities of any nature of any Issuer, (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Pledged Securities or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Credit Agreement), (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person with
respect to, any of the Pledged Securities or Proceeds thereof, or any interest
therein, except for the security interests created by this Agreement, (iv) enter
into any agreement or undertaking restricting the right or ability of such
Grantor or the Administrative Agent to sell, assign or transfer any of the
Pledged Securities or Proceeds thereof or (v) consent to, vote in favor of or
otherwise permit any amendment to any limited liability company agreement the
membership interest of such Grantor under which constitutes Pledged Stock
hereunder, except amendments which individually or in the aggregate are not
materially adverse to the interests of the Lenders and/or the Administrative
Agent.
(c) In the case of each Grantor which is an Issuer, such
Issuer agrees that (i) it will be bound by the terms of this Agreement relating
to the Pledged Securities issued by it and will comply with such terms insofar
as such terms are applicable to it, (ii) it will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in Section
5.8(a) with respect to the Pledged Securities issued by it and (iii) the terms
of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to
all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with
respect to the Pledged Securities issued by it.
5.9 Receivables. (a) Other than in the ordinary course of
business consistent with its past practice, such Grantor will not (i) grant any
extension of the time of payment of any Receivable, (ii) compromise or settle
any Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it that questions
or calls into doubt the validity or enforceability of more than 5% of the
aggregate amount of the then outstanding Receivables.
5.10 Contracts. (a) Such Grantor will perform and comply in
all material respects with all its obligations under the Contracts.
(b) Such Grantor will not amend, modify, terminate or waive
any provision of any Contract in any manner which could reasonably be expected
to materially adversely affect the value of such Contract as Collateral.
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(c) Such Grantor will exercise promptly and diligently each
and every material right which it may have under each Contract (other than any
right of termination).
(d) Such Grantor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it relating in any
way to any Contract that questions the validity or enforceability of such
Contract.
5.11 Intellectual Property. (a) Such Grantor will not do any
act, or omit to do any act, whereby any material Patent belonging to such
Grantor may become abandoned or dedicated.
(b) Whenever such Grantor, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, such Grantor shall report such filing to the
Administrative Agent and the Lenders within five Business Days after the last
day of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, such Grantor shall execute and deliver any and all
agreements, instruments, documents, and papers as the Administrative Agent may
request to evidence the Administrative Agent's and the Lenders' security
interest in any Copyright, Patent or Trademark and the goodwill and general
intangibles of such Grantor relating thereto or represented thereby.
(c) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain each registration of the material
Patents and Trademarks owned by it, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of incontestability.
(d) In the event that any material Patent or Trademark owned
by a Grantor is infringed, misappropriated or diluted by a third party, such
Grantor shall (i) take such actions as such Grantor shall reasonably deem
appropriate under the circumstances to protect such Patent or Trademark and (ii)
if such Patent or Trademark is of material economic value, promptly notify the
Administrative Agent and the Lenders after it learns thereof.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Receivables. (a) The
Administrative Agent shall have the right, after the occurrence and during the
continuance of an Event of Default, to make test verifications of the
Receivables in any manner and through any medium that it reasonably considers
advisable, and each Grantor which has granted a security interest in such
Receivables shall furnish all such assistance and information as the
Administrative Agent may require in connection with such test verifications. At
any time and from time to time, after
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the occurrence and during the continuance of an Event of Default, upon the
Administrative Agent's request and at the expense of the relevant Grantor, such
Grantor shall cause independent public accountants or others satisfactory to the
Administrative Agent to furnish to the Administrative Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Receivables.
(b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor's Receivables, subject to the Administrative Agent's
direction and control, and the Administrative Agent may curtail or terminate
said authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any
event, within two Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Administrative Agent if required,
in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders only as provided in Section , and (ii) until so turned
over, shall be held by such Grantor in trust for the Administrative Agent and
the Lenders, segregated from other funds of such Grantor. Each such deposit of
Proceeds of Receivables shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
(c) At the Administrative Agent's request, after the
occurrence and during the continuance of an Event of Default, each Grantor which
has granted a security interest in such Receivables shall deliver to the
Administrative Agent all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original orders, invoices and shipping
receipts.
6.2 Communications with Obligors; Grantors Remain Liable. (a)
The Administrative Agent in its own name or in the name of others may at any
time after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables and parties to the Contracts to
verify with them to the Administrative Agent's satisfaction the existence,
amount and terms of any Receivables or Contracts.
(b) Upon the request of the Administrative Agent at any time
after the occurrence and during the continuance of an Event of Default, each
Grantor which owns Receivables a security interest in which is granted hereunder
shall notify obligors on the Receivables and parties to the applicable Contracts
that the Receivables and the Contracts have been assigned to the Administrative
Agent for the ratable benefit of the Lenders and that payments in respect
thereof shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of its respective Receivables and
Contracts and limited liability company agreements to which it is a party to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any
<PAGE> 21
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agreement giving rise thereto. Neither the Administrative Agent nor any Lender
shall have any obligation or liability under any Receivable (or any agreement
giving rise thereto), Contract, Account, General Intangible or limited liability
company agreement to which it is a party, by reason of or arising out of this
Agreement or the receipt by the Administrative Agent or any Lender of any
payment relating thereto, nor shall the Administrative Agent or any Lender be
obligated in any manner to perform any of the obligations of any Grantor under
or pursuant to any Receivable (or any agreement giving rise thereto), Contract,
Account, General Intangible or limited liability company agreement to which it
is a party, to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have
occurred and be continuing and the Administrative Agent shall have given notice
to the relevant Grantor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted
to receive and retain all dividends paid in respect of its Pledged Stock and all
payments made in respect of its Pledged Notes and to collect all Accounts
arising out of any limited liability company agreement to which it is a party in
respect of the membership interest pledged hereby in such limited liability
company, in each case to the extent, and only to the extent, permitted in the
Credit Agreement, including, without limitation, the distributions provided
under subsection 8.8 of the Credit Agreement, and to exercise all voting,
membership or corporate rights with respect to the Pledged Securities; provided,
however, that no vote shall be cast or corporate or other right exercised or
other action taken which would impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the Credit
Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise such rights
to the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments, amounts collected by such
Grantors arising out of their membership interests in any limited liability
company or other Proceeds paid in respect of the Pledged Securities and make
application thereof to the Obligations in such order as the Administrative Agent
may determine, and (ii) any or all of the Pledged Securities shall be registered
in the name of the Administrative Agent or its nominee, and the Administrative
Agent or its nominee may thereafter during the continuance of such Event of
Default exercise (x) all voting, corporate and other rights pertaining to such
Pledged Securities at any meeting of shareholders or members of the relevant
Issuer or Issuers or otherwise and (y) any and all rights of conversion,
exchange, subscription and any other rights, privileges or options pertaining to
such Pledged Securities as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any and all of the
Pledged Securities upon the merger, consolidation, reorganization,
recapitalization or other fundamental change
<PAGE> 22
21
in the corporate or membership structure of any Issuer, or upon the exercise by
any Grantor or the Administrative Agent of any right, privilege or option
pertaining to such Pledged Securities, and in connection therewith, the right to
deposit and deliver any and all of the Pledged Securities with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.
(c) Each Grantor hereby authorizes and instructs each Issuer
of any Pledged Securities pledged by such Grantor hereunder to (i) comply with
any instruction received by it from the Administrative Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments (including, but not
limited to, amounts collected by such Grantor arising out of its membership
interests in any limited liability company) with respect to the Pledged
Securities directly to the Administrative Agent.
(d) Notwithstanding any of the foregoing, Grantors shall be
permitted to receive and retain any dividends or other distributions provided
for under subsection 8.8 of the Credit Agreement so long as such dividends or
other distributions were permitted under the Credit Agreement at the time made.
6.4 Proceeds to be Turned Over to Administrative Agent. In
addition to the rights of the Administrative Agent and the Lenders specified in
Section 6.1 with respect to payments of Receivables, if an Event of Default
shall occur and be continuing, if directed to do so by the Administrative Agent,
any Proceeds received by any Grantor (subject to Section 6.3(d)) consisting of
cash, checks and other instruments (including, but not limited to, the payment
of monies due under any limited liability company agreement or any Account,
Instrument or General Intangible arising thereunder or out of such Grantor's
limited liability company membership interest pledged hereunder) shall be held
by such Grantor in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Administrative Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Administrative
Agent, if required). All Proceeds received by the Administrative Agent hereunder
shall be held by the Administrative Agent in a Collateral Account maintained
under its sole dominion and control. All Proceeds held by the Administrative
Agent in a Collateral Account (or by such Grantor in trust for the
Administrative Agent and the Lenders) shall immediately be applied to the
payment of the Obligations.
6.5 Application of Proceeds. If an Event of Default shall have
occurred and be continuing, the Administrative Agent shall apply the Proceeds
held in any Collateral Account to the payment of the Obligations in such order
as the Administrative Agent may
<PAGE> 23
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elect, and any part of such funds which the Administrative Agent elects not so
to apply and deems not required as collateral security for the Reimbursement
Obligations shall be paid over from time to time by the Administrative Agent to
the Borrower or to whomsoever may be lawfully entitled to receive the same. Any
balance of such Proceeds remaining after the Obligations shall have been paid in
full, no Letters of Credit shall be outstanding and the Commitments shall have
terminated shall be paid over to the Borrower or to whomsoever may be lawfully
entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall
occur and be continuing, the Administrative Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code or any other applicable law. Without limiting the generality of the
foregoing, the Administrative Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived to the extent permitted by law), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Administrative Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in any Grantor, which right or equity is
hereby waived or released. Each Grantor further agrees, at the Administrative
Agent's request, to assemble its Collateral and make it available to the
Administrative Agent at places which the Administrative Agent shall reasonably
select, whether at such Grantor's premises or elsewhere. The Administrative
Agent shall apply the net proceeds of any action taken by it pursuant to this
Section 6.6, after deducting all reasonable costs and expenses of every kind
incurred in connection therewith or incidental to the care or safekeeping of any
of the Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder to the extent payable under this
Agreement or the other Loan Documents, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Administrative Agent may elect, and only after
such application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to any Grantor. To the extent permitted by applicable law, each Grantor
waives all claims, damages and demands it may acquire against the Administrative
Agent or any Lender arising out of the exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such
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notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition.
6.7 Registration Rights. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 6.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the relevant
Grantor will use its best efforts to cause the Issuer thereof to (i) execute and
deliver, and cause the directors and officers of such Issuer to execute and
deliver, all such instruments and documents, and do or cause to be done all such
other acts as may be, in the opinion of the Administrative Agent, necessary or
advisable to register the Pledged Stock, or that portion thereof to be sold,
under the provisions of the Securities Act, (ii) use its best efforts to cause
the registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
use its best efforts to cause such Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of the Securities
Act.
(b) Each Grantor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that the fact that a sale of Pledged
Stock is by private sale shall not result in such sale's being deemed to have
been made in a commercially reasonable manner. The Administrative Agent shall be
under no obligation to delay a sale of any of the Pledged Stock for the period
of time necessary to permit the Issuer thereof to register such securities for
public sale under the Securities Act, or under applicable state securities laws,
even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no
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adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 6.7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred or is
continuing under the Credit Agreement.
6.8 Waiver; Deficiency. Each Guarantor shall remain liable for
any deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay its Obligations and the fees and
disbursements of any attorneys employed by the Administrative Agent or any
Lender to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact,
etc. (a) Each Grantor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Administrative Agent the power and
right, on behalf of such Grantor, without notice to or assent by such Grantor,
to do any or all of the following with respect to such Grantor's Collateral:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Receivable or Contract or with respect to any other Collateral and
file any claim or take any other action or proceeding in any court of
law or equity or otherwise deemed appropriate by the Administrative
Agent for the purpose of collecting any and all such moneys due under
any Receivable or Contract or with respect to any other Collateral
whenever payable;
(ii) in the case of any Copyright, Patent or Trademark owned
by such Grantor and/or Trademark License, execute and deliver any and
all agreements, instruments, documents and papers as the Administrative
Agent may request to evidence the Administrative Agent's and the
Lenders' security interest in such Copyright, Patent or Trademark
and/or Trademark License and the goodwill and general intangibles of
such Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of
the premiums therefor and the costs thereof;
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(iv) execute, in connection with any sale provided for in
Section 6.6 or 6.7, any indorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral;
(v) at its option by written notice to the applicable Grantor
and NRTC, succeed to such Grantor's rights and obligations under the
Contracts to which such Grantor is a party, provided that the
Administrative Agent meets the NRTC's requirements for affiliation or
membership which are in effect at the time of such notice and the
Administrative Agent receives the prior written consent of NRTC and
Directv in accordance with the provisions of the Contracts to which
such Grantor is a party; and
(vi) (1) direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become
due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (2) ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising
out of any Collateral; (3) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (4) commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of any
Collateral; (5) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral; (6) settle, compromise or
adjust any such suit, action or proceeding and, in connection
therewith, to give such discharges or releases as the Administrative
Agent may deem appropriate; (7) assign any Copyright, Patent or
Trademark and/or Trademark License (along with the goodwill of the
business to which any such Copyright, Patent or Trademark and/or
Trademark License pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Administrative
Agent shall in its sole discretion determine; and (8) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Administrative Agent were the absolute owner thereof for all purposes,
and do, at the Administrative Agent's option and such Grantor's
expense, at any time, or from time to time, all acts and things which
the Administrative Agent deems necessary to protect, preserve or
realize upon the Collateral and the Administrative Agent's and the
Lenders' security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary
notwithstanding, the Administrative Agent agrees that it will not exercise any
rights under the power of attorney provided for in this Section 7.1(a) unless an
Event of Default shall have occurred and be continuing.
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(b) If any Grantor fails to perform or comply with any of its
agreements contained herein or under any applicable Contract, the Administrative
Agent, at its option, but without any obligation so to do, may perform or
comply, or otherwise cause performance or compliance, with such agreement or
Contract.
(c) The expenses of the Administrative Agent incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable on past due ABR Loans under the Credit Agreement,
from the date of payment by the Administrative Agent to the date reimbursed by
the relevant Grantor, shall be payable by such Grantor to the Administrative
Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done in accordance herewith. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar property for its own account. Neither the Administrative Agent, any
Lender nor any of their respective officers, directors, employees or agents
shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative Agent
and the Lenders hereunder are solely to protect the Administrative Agent's and
the Lenders' interests in the Collateral and shall not impose any duty upon the
Administrative Agent or any Lender to exercise any such powers. The
Administrative Agent and the Lenders shall be accountable only for amounts that
they actually receive as a result of the exercise of such powers, and neither
they nor any of their officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section
9-402 of the Code and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.
<PAGE> 28
27
7.4 Authority of Administrative Agent. Each Grantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Grantors, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by each affected Grantor and the Administrative
Agent, provided that any provision of this Agreement imposing obligations on any
Grantor may be waived by the Administrative Agent in a written instrument
executed by the Administrative Agent.
8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 11.2 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Person at its notice address set forth on Schedule 1.
8.3 No Waiver by Course of Conduct; Cumulative Remedies.
Neither the Administrative Agent nor any Lender shall by any act (except by a
written instrument pursuant to Section 8.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default. No failure to exercise, nor any
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, power or privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor
agrees to pay or reimburse each Lender and the Administrative Agent for all its
reasonable out-of-pocket costs and expenses incurred in collecting against such
Guarantor under the guarantee contained in Section 2 or otherwise enforcing or
preserving any rights under this Agreement
<PAGE> 29
28
and the other Loan Documents to which such Guarantor is a party, including,
without limitation, the fees and disbursements of counsel to the Administrative
Agent.
(b) Each Guarantor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
(c) Each Guarantor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement (collectively, the "indemnified liabilities") to the extent the
Borrower would be required to do so pursuant to subsection 11.5 of the Credit
Agreement.
(d) The agreements in this Section 8.4 shall survive repayment
of the Obligations and all other amounts payable under the Credit Agreement and
the other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of each Grantor and shall inure to the benefit
of the Administrative Agent and the Lenders and their successors and assigns;
provided that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
8.6 Set-Off. Each Guarantor hereby irrevocably authorizes the
Administrative Agent and each Lender at any time and from time to time, without
notice to such Guarantor, any other Guarantor or the Borrower, any such notice
being expressly waived by each Guarantor and by the Borrower, to set-off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the
Administrative Agent or such Lender to or for the credit or the account of such
Guarantor, or any part thereof in such amounts as the Administrative Agent or
such Lender may elect, against and on account of the obligations and liabilities
of such Guarantor to the Administrative Agent or such Lender hereunder and
claims of every nature and description of the Administrative Agent or such
Lender against such Guarantor, in any currency, whether arising hereunder, under
the Credit Agreement, any other Loan Document or otherwise, as the
Administrative Agent or such Lender may elect, whether or not the Administrative
Agent or any Lender has made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured. The
Administrative Agent and each Lender shall notify such Guarantor promptly of any
such set-off and the application made by the Administrative Agent or such Lender
of the proceeds thereof, provided that the failure to give
<PAGE> 30
29
such notice shall not affect the validity of such set-off and application. The
rights of the Administrative Agent and each Lender under this Section 8.6 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Administrative Agent or such Lender may have.
8.7 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
8.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
8.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Grantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
<PAGE> 31
30
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address referred to in Section 8.2 or
at such other address of which the Administrative Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents
to which it is a party;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between the Grantors, on the one hand, and the
Administrative Agent and Lenders, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Grantors and the
Lenders.
8.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
8.15 Additional Grantors. (a) Each Subsidiary of the Borrower
that is required to become a party to this Agreement pursuant to subsection 7.10
of the Credit Agreement shall become a Grantor for all purposes of this
Agreement upon execution and delivery by such Subsidiary of an Assumption
Agreement in the form of Annex 1 hereto.
(b) To the extent the Pledged Stock of or issued by any
Subsidiary of the Borrower that becomes a Grantor under subsection 8.15(a)
consists of uncertificated limited liability company membership interests such
Grantor or such other Grantor, as the case may be, which owns such Pledged Stock
shall send to the applicable Issuer of such membership interests written
instructions satisfactory to the Administrative Agent and shall cause such
<PAGE> 32
31
Issuer to deliver to the Administrative Agent a transaction statement or other
documentary evidence satisfactory to the Administrative Agent confirming that
such Issuer has registered on its books the pledge effected by this Agreement.
8.16 Releases. (a) At such time as the Loans, the
Reimbursement Obligations and the other Obligations shall have been paid in
full, the Commitments have been terminated and no Letters of Credit shall be
outstanding, the Collateral shall be released from the Liens created hereby, and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, including, without limitation, a repurchase or redemption of employee
equity interests provided for under subsection 8.8 of the Credit Agreement, then
the Administrative Agent, at the request and sole expense of such Grantor, shall
execute and deliver to such Grantor all releases or other documents reasonably
necessary or desirable for the release of the Liens created hereby on such
Collateral. At the request and sole expense of the Borrower, a Guarantor shall
be released from its obligations hereunder in the event that all the Capital
Stock of such Guarantor shall be sold, transferred or otherwise disposed of in a
transaction permitted by the Credit Agreement; provided that the Borrower shall
have delivered to the Administrative Agent, at least ten Business Days prior to
the date of the proposed release, a written request for release identifying the
relevant Guarantor and the terms of the sale or other disposition in reasonable
detail, including the price thereof and any expenses in connection therewith,
together with a certification by the Borrower stating that such transaction is
in compliance with the Credit Agreement and the other Loan Documents.
<PAGE> 33
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
DIGITAL TELEVISION SERVICES, LLC
By: DTS MANAGEMENT, LLC,
its Manager
By: Neil Byrne
--------------------------
Title: Vice President
DIGITAL TELEVISION SERVICES OF
COLORADO, LLC
By: DTS MANAGEMENT, LLC,
its Member
By: Neil Byrne
--------------------------
Title: Vice President
DIGITAL TELEVISION SERVICES OF
NEW MEXICO, LLC
By: DTS MANAGEMENT, LLC,
its Member
By: Neil Byrne
--------------------------
Title: Vice President
<PAGE> 34
DIGITAL TELEVISION SERVICES OF
NEW YORK I, LLC
By: DTS MANAGEMENT, LLC,
its Member
By: Neil Byrne
--------------------------
Title: Vice President
DIGITAL TELEVISION SERVICES OF
SOUTH CAROLINA I, LLC
By: DTS MANAGEMENT, LLC,
its Member
By: Neil Byrne
--------------------------
Title: Vice President
DIGITAL TELEVISION SERVICES OF
KENTUCKY, LLC
By: DTS MANAGEMENT, LLC,
its Member
By: Neil Byrne
--------------------------
Title: Vice President
DIGITAL TELEVISION SERVICES OF
CALIFORNIA, LLC
By: DTS MANAGEMENT, LLC,
its Member
By: Neil Byrne
--------------------------
Title: Vice President
<PAGE> 35
DIGITAL TELEVISION SERVICES OF
KANSAS, LLC
By: DTS MANAGEMENT, LLC,
its Member
By: Neil Byrne
--------------------------
Title: Vice President
DIGITAL TELEVISION SERVICES OF
VERMONT, LLC
By: DTS MANAGEMENT, LLC,
its Member
By: Neil Byrne
--------------------------
Title: Vice President
DIGITAL TELEVISION SERVICES OF
GEORGIA, LLC
By: DTS MANAGEMENT, LLC,
its Member
By: Neil Byrne
--------------------------
Title: Vice President
<PAGE> 36
DTS MANAGEMENT, LLC
By: Neil Byrne
--------------------------
Title: Vice President
SPACENET, INC.
By: Neil Byrne
--------------------------
Title: Secretary
DTS CAPITAL, INC.
By: Neil Byrne
--------------------------
Title: Vice President
Accepted and Agreed to:
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY, as Administrative Agent
By: Lorain Granberg
---------------------------------
Title: Director, CIBC Wood Gundy
Securities, as Agent for Canadian
Imperial Bank of Commerce
<PAGE> 37
ACKNOWLEDGEMENT AND CONSENT*
The undersigned hereby acknowledges receipt of a copy of the Second
Amended and Restated Guarantee and Collateral Agreement dated as of July 30,
1997 (the "Agreement"), made by the Grantors parties thereto for the benefit of
Canadian Imperial Bank of Commerce, as Administrative Agent. The undersigned
agrees for the benefit of the Administrative Agent and the Lenders as follows:
9. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the undersigned.
10. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) of
the Agreement.
11. The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply
to it, mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 6.3(a) or 6.7 of the Agreement.
[NAME OF ISSUER]
By
----------------------------------
Title
-------------------------------
Address for Notices:
------------------------------------
------------------------------------
Fax:
--------------------------------
- --------
* This consent is necessary only with respect to any Issuer which is
not also a Grantor.
<PAGE> 38
Annex 1 to
Guarantee and Collateral Agreement
ASSUMPTION AGREEMENT, dated as of ________________, _____,
made by ______________________________, a ______________ corporation (the
"Additional Grantor"), in favor of CANADIAN IMPERIAL BANK OF COMMERCE, as
administrative agent (in such capacity, the "Administrative Agent") for the
banks and other financial institutions (the "Lenders") parties to the Credit
Agreement referred to below. All capitalized terms not defined herein shall have
the meaning ascribed to them in such Credit Agreement.
W I T N E S S E T H :
WHEREAS, Digital Television Services, LLC (the "Borrower"),
the Lenders and the Administrative Agent have entered into a Second Amended and
Restated Credit Agreement, dated as of July 30, 1997 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrower
and certain of its Affiliates (other than the Additional Grantor) have entered
into the Second Amended and Restated Guarantee and Collateral Agreement, dated
as of July 30, 1997 (as amended, supplemented or otherwise modified from time to
time, the "Guarantee and Collateral Agreement") in favor of the Administrative
Agent for the benefit of the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor
to become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and
deliver this Assumption Agreement in order to become a party to the Guarantee
and Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and
delivering this Assumption Agreement, the Additional Grantor, as provided in
Section 8.15 of the Guarantee and Collateral Agreement, hereby becomes a party
to the Guarantee and Collateral Agreement as a Grantor thereunder with the same
force and effect as if originally named therein as a Grantor and, without
limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Grantor thereunder. The information set forth
in Annex 1-A
<PAGE> 39
2
hereto is hereby added to the information set forth in Schedules ___________(1)
to the Guarantee and Collateral Agreement. The Additional Grantor hereby
represents and warrants that each of the representations and warranties
contained in Section 4 of the Guarantee and Collateral Agreement is true and
correct on and as the date hereof (after giving effect to this Assumption
Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
--------------------------------
Name:
Title:
- --------
(1) Refer to each Schedule which needs to be supplemented.
<PAGE> 1
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this AGREEMENT") is made and entered
into this 30th day of January, 1996, by and between DBS HOLDINGS, L.P., a
Delaware limited partnership ("BUYER") and Edward BOTEFUHR and Janet Blakeley
Botefuhr ("SELLER").
RECITALS
A. Seller owns all of the issued and outstanding shares (the "SHARES")
of Spacenet, Inc., a New Mexico corporation (the "COMPANY").
B. The Company operates an exclusive distributorship of the National
Rural Telecommunications Cooperative's DBS Services and of Hughes Communications
Galaxy, Inc.'s DirecTv service in Los Alamos and Colfax Counties, New Mexico
(the "BUSINESS").
C. Seller desires to sell, and Buyer desires to purchase for the price
and on the terms hereinafter set forth, the Shares.
AGREEMENTS
NOW, THEREFORE, in order to implement said sale and purchase, and in
consideration of the mutual agreements set forth herein, the parties agree as
follows:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. As used herein, the following terms shall have the
following meanings:
Accounts Receivable shall have the meaning set forth in Section 3.7(e)
of this Agreement.
Acquisition Documents shall mean this Agreement, the Pledge Agreement,
the Security Agreement and any and all other agreements, documents, certificates
or instruments executed pursuant to or in connection with this Agreement or the
transactions contemplated hereby.
Affiliate, when used with reference to a specified Person, shall mean
any Person that is a spouse, parent, grandparent, lineal descendant, sibling or
other relative of such Person or any Person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the specified Person.
Business shall have the meaning ascribed to it in Recital B.
Business Day shall mean any day except a Saturday, Sunday or other day
on which commercial banks are required or authorized to close in New York.
<PAGE> 2
Cable Programming shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
Closing and Closing Date shall have the meanings set forth in Section
2.5 of this Agreement.
Commercial Establishment shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
Committed Member Residence shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
Current Assets shall mean the current assets of the Company, as shown
on the Closing Date Balance Sheet.
Current Liabilities shall mean the current liabilities of the Company,
as shown on the Closing Date Balance Sheet.
Customer shall mean any user of the DBS Services or other services
distributed by Seller (including a Subscriber).
DBS Services shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
DirecTv means DirecTv, Inc., a California corporation.
DirecTv Agreement shall mean any and all agreements between Seller and
DirecTv relating to Seller's application or authorization to act as a dealer of
DirecTv programming packages, together with any amendments thereto.
Escrow Agent shall mean the escrow agent pursuant to the Escrow
Agreement.
Escrow Agreement shall mean an escrow agreement substantially in the
form of Exhibit A.
HGC DirecTv shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
Hughes shall mean Hughes Communications Galaxy, Inc.
Indebtedness shall mean any indebtedness of the Company, as shown on
the Closing Date Balance Sheet.
Independent Accountant shall mean a "Big 6 " Accounting Firm (or other
firm mutually acceptable to Buyer and Seller) which accounting firm shall not
have provided any services to
<PAGE> 3
Buyer, Seller or any of their Affiliates for the prior five (5) years.
Licenses shall mean all governmental or private licenses, permits,'
authorizations and rights, including the NRTC/Member Agreement and the DirecTv
Agreement, all rights in pending applications, and all additions thereto,
including renewals and modifications and applications therefor, with respect to
the Business, all of which Licenses are described in Schedule 3.10 of this
Agreement.
Lien shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
Non-Select Services shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
NRTC shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
NRTC/Member Agreement shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services by and between the Company and NRTC,
together with all amendments and exhibits thereto and any and another agreements
by and between the Company and NRTC.
Other Contracts shall mean all equient leases, real estate leases and
other contracts and agreements described in Schedule 3.19 to this Agreement
other than the NRTC/Member Agreement and the DirecTv Agreement, together with
any additional contracts entered into by the Company between the date hereof and
the Closing Date in accordance with this Agreement.
Person shall mean an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or agency or instrumentality thereof.
Pledge Agreement shall mean that certain Stock Pledge Agreement
substantially in the form attached hereto as Exhibit B, the execution and
delivery of which is a condition to Closing.
Programming shall mean Cable Programming and HCG DirecTv.
Security Agreement means that certain Security Agreement substantially
in the form
<PAGE> 4
attached hereto as Exhibit C, the execution and delivery of which is a condition
to Closing.
Subscriber as of any date shall mean a Customer who, at a minimum, is
subscribing to a package of basic services and: (1) on the last date of the
calendar month prior to such date, whose account is not more than sixty (60)
days past due from the date payment is due; (2) who is not an employee or agent
of the service provider or charged a fee that is nominal (e.g., demonstration
unit) or substantially below the service provider's published rates; and (3) who
has not given notice of intent to discontinue service.
1.2 Other & Definitional Provisions. For purposes of this Agreement and
the other Acquisition Documents, the following additional rules of construction
shall apply:
(a) wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter;
(b) the term "including" shall not be limiting or exclusive, unless
specifically indicated to the contrary; and
(c) all references to "sections" or "subsections" in an Acquisition
Document shall be to sections or subsections of such Acquisition Document,
unless otherwise specifically provided.
SECTION 2. PURCHASE AND SALE OF SHARES.
2.1 Sale Of Shares.
Subject to the provisions of this Agreement, Seller agrees to sell, and
Buyer agrees to purchase, at Closing, the Shares.
2.2 Purchase Price.
The purchase price for the Shares (the "PURCHASE PRICE") shall be
$100,000 (the "CLOSING PAYMENT"), payable at Closing, plus certain additional
payments of interest and principal (the "Note Payments") to made in accordance
with the terms of a secured promissory note of the Company in the principal
amount of $412,000 substantially in the form attached hereto as Exhibit D (the
46 Note"), payable as follows:
(i) the Closing Payment will be paid by Buyer to Seller at
Closing by wire transfer of immediately available funds to an account
designated in writing by Seller at least three Business Days prior to
the Closing Date; and
(ii) the Note Payments will be evidenced by, and paid to
Seller in accordance with the terms of the Note, which shall be issued
by the Company to
<PAGE> 5
Seller at Closing.
2.3 Consideration Adjustments. (a) The Closing Payment shall be reduced
by the parties' good faith estimate of the amount by which Current Liabilities
exceed Current Assets, or increased by the amount that Accounts Receivable
exceed Current Liabilities, and reduced by the parties' good faith estimate of
amount of any Indebtedness (excluding Indebtedness of the Company to Columbia
Capital Corporation in the principal amount of $7,500) (the "Closing
Adjustment"). Buyer shall cause the Indebtedness of the Company to Los Alamos
National Bank to be paid in full at Closing.
(b) Promptly after the Closing, Seller shall prepare a balance sheet of
the Company as of the Closing Date, which balance sheet will be prepared on a
basis consistent with the Latest Balance Sheet and will present fairly the
financial position of Seller as of the Closing Date. Such balance sheet is
hereinafter called the "Closing Date Balance Sheet." No later than 30 days after
the Closing, Seller shall deliver to Buyer a copy of the Closing Date Balance
Sheet together with its determination of the Closing Adjustment pursuant to the
Closing Date Balance Sheet. The Closing Date Balance Sheet and the determination
of the Closing Adjustment shall be subject to review by Buyer and its auditors
on behalf of Buyer at Buyer's expense. Such review by Buyer shall be completed
within fifteen (15) business days after delivery of the Closing Date Balance
Sheet to Buyer. In the event of any disagreement between Seller and Buyer
regarding the amount of the Closing Adjustment which has not been resolved
within sixty (60) days after the Closing Date, unless said date shall have been
extended by mutual agreement of the parties, the dispute shall be referred to an
Independent Accountant, whose determination shall be made within thirty (30)
days of such referral, and shall be final and binding upon the parties. The fees
and expenses of said Independent Accountant shall be borne by Seller and the
Buyer equally. The determination of the Closing Adjustment pursuant to this
Section 2.3(b) shall be referred to as the "Final Closing Adjustment".
(c) If the Final Closing Adjustment is greater than the Closing
Adjustment agreed to pursuant to Section 2.3(a), then the Seller shall pay the
difference to Buyer in cash, within thirty (30) days after delivery to it of the
Closing Date Balance Sheet. If the Final Closing Adjustment is less than the
Closing Adjustment agreed to pursuant to Section 2.3(a), then Buyer shall pay
the difference to Seller within thirty (30) days after the delivery of the
Closing Date Balance Sheet; provided, however, in either case that if the Buyer
shall disagree with the Closing Date Balance Sheet, the payment shall be made
within thirty (30) days of the final determination of such disagreement.
(d) If, following any final payment of a consideration adjustment
pursuant to this Section 2.3, an error (in billing or reporting by NRTC or
otherwise) is thereafter discovered which would have affected such final
payment, the parties shall agree in good faith on the amount of such adjustment,
and the next payment made pursuant to the Note shall be increased or decreased
accordingly.
<PAGE> 6
2.4 Time and Place of Closing; Termination of Agreement. The closing of
the purchase and sale provided for in this Agreement (herein called the
"Closing") shall be held at the office of the Buyer at 10:00 A.M. (the "CLOSING
DATE") (i) on the last calendar day of the month in which all of the conditions
precedent set forth in Section 7 hereof shall have been satisfied or waived,
(ii) at Buyer's election with at least five (5) days prior written notice to
Seller, on the calendar day of such month on which the NRTC's mid-month
statements are created, or (iii) such other place, time or date as the parties
may agree upon in writing. Either party may terminate this Agreement by written
notice to the other party if the Closing has not occurred by April 30, 1996.
2.5 The Closing. At the Closing:
(a) Seller shall deliver to Buyer certificates representing the
Shares, duly endorsed (or accompanied by duly executed stock powers), for
transfer to Buyer;
(b) Seller shall deliver to Buyer all originals or copies, as
provided herein, of Seller's files and records which are relevant to the
Company, such relevance to be determined in Buyer's reasonable discretion, and
Seller shall put Buyer in actual possession of the Company; and
(c) Seller and Buyer shall execute and deliver, each to the other,
the documents required to be executed and delivered by such parties pursuant to
Sections 7.2 and 7.3, respectively.
2.6 Further Assurances. From and after Closing, Buyer and Seller shall
do, execute, acknowledge and deliver or cause to be done, executed, acknowledged
and delivered, all such further acts, deeds, assignments, documents,
instruments, transfers, conveyances, discharges, releases, assurances and
consents as Buyer or Seller may, from time to time, reasonably request to
confirm, perfect and evidence the transfers and transactions contemplated by
this Agreement.
2.7 Escrow. Contemporaneously with the execution of this Agreement,
Buyer has delivered to the Escrow Agent a deposit in the amount of $50,000, to
be held by the Escrow Agent in accordance with the Escrow Agreement. At Closing,
the Escrow Agent shall release all escrowed funds to Seller, and Buyer shall
receive a credit to the Closing Payment in the amount of any sum so released.
Upon the termination of this Agreement (except for any termination by Seller
resulting from a default hereunder by Buyer), all escrowed funds shall be
released to Buyer. Buyer and Seller shall execute and deliver to the Escrow
Agent any and all instructions required to cause the release of escrowed funds
in accordance with this Section 2.7.
2.8 Cablenet Sales Agreement. At Closing, Buyer and Seller shall cause
that certain promissory note issued to the Company pursuant to the Cablenet
Sales Agreement to be assigned to Seller.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER.
<PAGE> 7
In order to induce Buyer to enter into this Agreement, Seller hereby
represents and warrants to Buyer that the following statements are true, correct
and complete. The representations and warranties of Seller set forth in this
Agreement and in any other Acquisition Document are continuing in nature and
Seller shall promptly inform Buyer of any matter which would cause any such
representations or warranties to be untrue, incorrect or incomplete.
3.1 Incorporation; Authorized Shares (a) The Company is a duly
organized and validly existing corporation in good standing under the laws of
the State of New Mexico. The Company has full corporate power and authority to
carry on its business and operations as presently conducted and as planned to be
conducted and is duly qualified to do business in each jurisdiction in which it
is either doing business or in which the failure to qualify would have an
adverse effect on the Company. The Company does not directly or indirectly own
or otherwise control any capital stock of, or have any ownership interest in,
any corporation, partnership or other entity. The current ownership structure
has been approved by all necessary governmental agencies. Attached hereto as
Schedule 3.1(a) is a complete and correct copy of the Articles of Incorporation
and Bylaws (together with all amendments thereto and restatements thereof) of
the Company.
(b) The authorized equity securities of the Company consist of 10,000
shares of common stock, no par value, of which 9,500 shares are issued and
outstanding and constitute the Shares. Seller is the record and beneficial owner
and holder of the Shares, free and clear of all Liens. All of the Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
There are no agreements relating to the issuance, sale, or transfer of any
equity securities or other securities of the Company. The Company does not own
or have any agreement to acquire any equity securities or other securities of
any Person or any direct or indirect ownership interest in any other business.
3.2 Governmental Authorizations.
No consent or authorization of, or filing with, any governmental
authority is required on the part of the Seller or the Company in connection
with the Seller's execution, delivery or performance of this Agreement and the
other Acquisition Documents to which it is a party.
3.3 Binding Effect. This Agreement has been duly and validly executed
and delivered by Seller. This Agreement constitutes, and, on the Closing Date,
the other Acquisition Documents executed and delivered by the Seller will
constitute the legal, valid and binding obligation of Seller enforceable against
Seller in accordance with their respective terms, subject to bankruptcy,
insolvency and similar laws of general application affecting creditors' rights
and remedies.
3.4 No Conflict. Neither the execution and delivery by Seller of this
Agreement or the other Acquisition Documents nor the consummation of the
transactions contemplated by this
<PAGE> 8
Agreement and the other Acquisition Documents (i) violate any applicable law,
regulation, order, judgment, injunction, decree, rule or ruling of any
governmental authority, (ii) violate any provision of the articles of
incorporation or bylaws of the Company, (iii) result in any breach of, or
constitute (with due notice or lapse of time or both) a default under any
agreement, instrument, license or permit to which the Company or Seller is a
party or by which or to which the Company, Seller or any of its or his assets
are subject or bound, (iv) result in the creation or imposition of any lien,
charge or encumbrance on any of the assets of the Company, or (v) require the
consent of any third party, except for consents required pursuant to agreements
set forth on Schedule 3.19, all of which shall have been obtained by Seller or
Buyer prior to Closing.
<PAGE> 9
3.5 Title to Properties; Liens: Condition of Properties.
(a) SCHEDULE 3.5(a) lists all tangible assets of the Company which
consist of all tangible assets used or otherwise necessary to conduct the
Business. The Company has good and valid title to the tangible assets free and
clear of any Lien. All tangible assets material to the operation of the Business
are in good working order and repair and comply in all material respects with
applicable rules, regulations and standards regarding their intended use.
Without limiting the generality of the foregoing, except as indicated in
SCHEDULE 3.5(a), the Company uses no furniture, fixtures or equient which it
does not own. All items of such furniture, fixtures and equient are in good
operating condition, ordinary wear and tear excepted (where appropriate) and
adequate for the present use thereof.
(b) All leases of personal property to which the Company is a
party are valid, binding and enforceable in accordance with their terms, and
neither the Company nor, to Seller's knowledge, any other party thereto is in
default thereunder. The Company is the sole and exclusive owner of all right,
title and interest in and to all assets. Except for the Lien in favor Los
Alamos National Bank, which shall be released at Closing upon payment in full
by Buyer of the Indebtedness of the Company to Los Alamos National Bank, all of
the assets of the Company are free and clear of all security interests,
pledges, liens, conditional sales agreements and encumbrances.
(c) SCHEDULE 3.5(c) contains a description of all of the Company's
interests, including leasehold interests and easements, and rights in and
agreements with respect to real property used or intended for use in connection
with the operations of the Business (the "REAL PROPERTY"). All of the Real
Property is in good condition and repair consistent with its current use and
available for immediate use in connection with the Business. All of the Real
Property owned by the Company and the use thereof complies with all applicable
laws, statutes, ordinances, rules and regulations of federal, state and local
governmental and quasi-governmental authorities, including, without limitation,
those relating to zoning.
(d) The Company has not received any notice of any appropriation,
condemnation or like proceeding, or of any violation of any applicable zoning
law, regulation or other law, order, regulation or requirement relating to or
affecting such Real Property or improvements thereon, or of the need for any
material repair, remedy, construction, alteration or installation with respect
to such Real Property or improvements thereon, or any change in the means or
methods of conducting operations thereon.
(e) The Company has good title to the non-fee estates identified on
SCHEDULE 3.5(c), if any. The contracts with respect to Real Property listed on
SCHEDULE 3.5(c) constitute valid and binding obligations of the Company and of
all other parties thereto, and are in full force and effect as of the date
hereof. The Company is not in default under any of the contracts with respect to
Real Property and, to the best of Seller's knowledge, the other parties to such
contracts are not in default thereunder. The Company has not received or given
written
<PAGE> 10
notice of any default thereunder from or to any of the other parties thereto.
SCHEDULE 3.5(c) lists all third party consents necessary to assign such
contracts.
3.6 [INTENTIONALLY OMITTED.]
3.7 Financial Condition of Seller.
(a) Prior to the execution of this Agreement or prior to Closing,
as specified below, copies of the following financial statements (together with
any financial statements delivered pursuant to Section 5.3(l), the "FINANCIAL
STATEMENTS") have been or shall be delivered to the Buyer:
(i) the balance sheets of the Company as of December 31, 1993,
1994 and 1995, and statements of operations and retained earnings and
cash flows for the fiscal years then ended shall be delivered to Buyer
within fifteen (15) days after the date of this Agreement; and
(ii) the unaudited trial balance sheet of the Company as of
January 23, 1996 has been delivered prior to the execution of this
Agreement and, within fifteen (15) days after the execution of this
Agreement, will be revised to conform to the accounting
representations, warranties and covenants set forth herein (the "Latest
Balance Sheet").
The Financial Statements, together with the notes thereto, (i) are in accordance
with the books and records of the Company, (ii) present fairly and accurately
the financial condition of the Company as of the dates of the balance sheets,
(iii) present fairly and accurately in all material respects the results of
operations of the Company for the periods covered by such statements, and (iv)
have been prepared in accordance with the applicable rules and regulations of
the NRTC and sound accounting principles except as noted therein, and in the
case of the Latest Balance Sheet, subject to normal year-end adjustments. As of
the Closing, the Company shall have no debts, liabilities or obligations of any
nature (whether absolute, accrued or contingent and whether due or to become
due) that are not reflected on the Latest Balance Sheet or that are not
otherwise disclosed on schedules delivered pursuant to this Agreement. The
Financial Statements include appropriate reserves for all taxes and other
liabilities accrued as of the date of such statements but not yet payable.
(b) Except to the extent provided in the Latest Balance Sheet,
there are no material liabilities or obligations of the Company or otherwise
relating to the Business. Since the date of the Latest Balance Sheet, there has
been no material adverse change in the financial condition of the Company or
results of operations of the Business, or either of them, nor has any other
event or condition occurred which may have or has had a material adverse effect
on the Company or the Business.
(c) All federal, state, county and local tax returns, reports and
declarations of
<PAGE> 11
estimated tax or estimated tax deposit forms required to be filed by the Company
have been duly and timely filed. The Company has timely paid all taxes which
have become due pursuant to such returns or pursuant to any assessment received
by it, and has paid in full all installments of estimated taxes due. All taxes,
levies and other assessments which the Company is required by law to withhold or
to collect have been duly withheld and collected, and have been paid over to the
proper governmental authorities or are held by the Company for such payment.
(d) The Company's books and records are complete and accurately and
fairly reflect the transactions and dispositions of the Company's assets.
(e) Within fifteen (15) days after the execution of this Agreement,
Seller shall deliver to Buyer a schedule of the accounts receivable of the
Company relating to the Business (collectively, the "Accounts Receivable").
(f) (1) The accounting data in the Financial Statements has been
derived from NRTC Central Billing System Reports, including but not limited to:
Report 18A (Subscriber Accounts Receivable), Report 19A (Accounts Receivable
Summary), Report 17 (Unearned Revenue Report), and the NRTC Wholesale Invoice.
Any deviation in the Financial Statements in any month from the amounts stated
on these reports will be reconciled and adjusted to the satisfaction of Buyer.
(2) The Financial Statements have been prepared in compliance
with NRTC recommendations as stated in the following documents: NRTC DBS Member
Audit Guide, DBS Participant Accounting Handbook, NRTC DBS Member Standard
Journal Entry Reference Manual. Any deviation in the Financial Statements in
any month from the procedures described in these manuals will be reconciled and
adjusted to the satisfaction of the Buyer.
(3) For the months following the last statement provided,
there have been no material changes in revenues or expenses, except those
normally associated with the addition of new Customer accounts, there have been
no purchases or other additions of new Customer accounts, and there have been
no purchases or other additions to fixed assets by the Company. Listings of
fixed assets, accounts payable, accounts receivable, and inventory provided by
the Seller are true and correct as of the date they were provided to Buyer. Any
material changes in the updated financial statements will be reconciled and
adjusted to the satisfaction of the Buyer.
3.8 Absence of Certain Changes. Since June 30, 1995, or as otherwise
provided, except as expressly disclosed in this Agreement or the -Schedules
thereto, there has not been (a) any pending or threatened union organizational
activity, labor dispute or grievance, strike or work stoppage affecting the
Business; (b) any physical damage,.destruction or loss affecting the Business
where the affected assets have not been restored, repaired or replaced with
assets of similar quality, value and utility; (c) any material contract,
commitment or transaction entered into or consummated respecting the Business;
(d) any sale, assignment, lease or other transfer or disposition of any of the
Company's properties or assets except in the normal course of
<PAGE> 12
business; (e) any increase in compensation payable or to become payable to, or
any bonus paid or agreed to be paid to, any employee or agent of the Business;
or (f) any change in the service area of the Business or any electronic
interference with the Business.
3.9 Compliance with Laws and Other Instruments. The Company is not in
violation or breach of, or in default under, (a) any provision of its or other
organizational documents, (b) any provision of any law or regulation applicable
to it or to which any of its assets are subject, or any other state, federal, or
municipal administrative agency, which violation or breach would have a material
adverse effect on the Seller or the Business (and no notice has been received of
any violation or breach of law or regulation whatsoever), except as may be
listed in the Schedules to this Agreement, (c) any order, judgment or award of
any court, tribunal or state, federal, or municipal administrative or regulatory
authority applicable to it or to which any of its assets are subject, or (d) any
material agreement or instrument to which it is a party or to which any of its
assets is bound, including, without limitation, the NRTC/Member Agreement and
the DirecTv Agreement.
3.10 Intellectual Property. Schedule 3.10 lists all material
copyrights, trademarks, tradenames, service marks, Licenses, patents, permits,
jingles, privileges and other similar intangible property rights and interests
(exclusive of those required to be listed in other Schedules) applied for,
issued to or owned by the Company, or under which the Company is licensed or
franchised, and used or useful in the conduct of the businesses and operations
of the Business, all of which rights and interests are issued to or owned by the
Company, or if licensed or franchised to the Company, are valid and uncontested.
Seller has delivered to Buyer copies of all material documents, if any,
establishing such rights, Licenses or other authority. To Seller's knowledge,
there is no pending or threatened proceeding or litigation affecting or with
respect to the intellectual property. The Company has received no notice and the
Seller has no knowledge of any infringement or unlawful use of such property.
The intellectual property listed in SCHEDULE 3.10 includes all such property
necessary to conduct the Business as now conducted.
3.11 Litigation.
(a) Except as set forth in SCHEDULE 3.11(a) (or as otherwise disclosed
to Buyer), there are no actions, suits, proceedings or investigations (whether
or not purportedly on behalf of Seller) pending or threatened against or
affecting Seller, the Company or the Business at law or IN equity or admiralty,
or before or by any federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, domestic or foreign which could
have a material adverse effect on the Company or the Business, nor has any such
action, suit, proceeding or investigation been pending during the 12-month
period preceding the date of this Agreement.
(b) Except as listed in SCHEDULE 3.11(b), the Company is not operating
under or subject to, or in default with respect to, any order, writ, injunction
or decree of any court or federal, state, municipal or other governmental
department, commission, board, agency or
<PAGE> 13
instrumentality, domestic or foreign.
3.12 Employee Information.
(a) SCHEDULE 3.12(a) contains a true and complete list of all Persons
employed in connection with the Business. Except as set forth on SCHEDULE
3.12(a), there are no employment contracts or other compensation arrangements
respecting any employees of the Company.
(b) The Company is not a party to any collective bargaining agreement
or other contract or commitment to or with any labor union or other employee
representative or group of employees, and no labor organization or any
representative thereof has made any attempt to organize or represent such
employees. There are no unfair labor practice charges, pending grievance
proceedings or adverse decisions of a Trial Examiner of the National Labor
Relations Board against the Company or any agent, representative or employee of
the Company. The Company is not in arrears in the payment or deposit of any
wages or wagerelated governmental taxes or charges. The Company has complied
with all laws relating to the employment of labor, including, without
limitation, the Employee Retirement Income Security Act of 1974, as amended
(ERISA), and those laws relating to safety, health, wages, hours, collective
bargaining, unemployment insurance, workers' compensation, equal employment
opportunity and payment and withholding of taxes.
(c) Except as set forth in SCHEDULE 3.12(c), the Company is not a party
to or bound by any employee benefit plan within the meaning of Section 3(3) of
the Employment Retirement Income Security Act of 1974, as amended (ERISA),
whether or not such plan is otherwise exempt from the provisions of ERISA, and
no employee or spouse of an employee is entitled to any benefits that would be
payable pursuant to any such plan. Except pursuant to a plan or agreement listed
on SCHEDULE 3.12(c), the Company has no fixed or contingent liability or
obligation to any person now or formerly employed at the Business, including,
without limitation, pension or thrift plans, individual or supplemental pension
or accrued compensation arrangements, contributions to hospitalization or other
health or life insurance programs, incentive plans, bonus arrangements and
vacation, sick leave, disability and termination arrangements or policies,
including workers' compensation policies. The Company has administered any plan
on SCHEDULE 3.12(c) in accordance with the provisions of ERISA.
3.13 Finder's Fee. No agent, broker or finder has acted for Seller in
connection with this Agreement, and the transactions contemplated hereby, and
Seller hereby agrees to indemnify and save Buyer harmless from any claims of
Persons claiming by or through Seller for commissions or fees by reason of this
Agreement or the transactions contemplated by this Agreement.
3.14 Safety and Environmental Representation. The Company is in
compliance with all applicable laws and regulations related to the environment,
health and safety, all required governmental permits have been obtained and are
in effect, and no on-site storage, treatment or
<PAGE> 14
disposal of hazardous waste or material has been made (except in compliance with
applicable laws and regulations). There are no pending actions, proceedings, or
notices of potential action against the Company or with respect to the Business,
and Seller has no knowledge of any facts that may lead to actions, proceedings,
or notices of potential action from any governmental agency regarding the
condition of the properties owned or leased by the Company under environmental,
health or safety laws, which would have a material adverse effect on the Company
or the Business. The Company has lawfully disposed of its waste and no pending
or threatened proceedings exist concerning waste disposal by the Company. There
are no underground storage tanks, PCBs, asbestos, radon gas, harmful nuclear
radiation, or hazardous wastes present on the properties leased by or real or
personal property owned by the Company.
3.15 Non-Foreign Status. Seller is not a "non-resident alien", "foreign
corporation", "foreign partnership", "foreign trust" or "foreign estate" within
the meaning of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder and Seller agrees, at the Closing, to deliver to Buyer
any affidavit or certificate required pursuant to the Internal Revenue Code or
any regulations thereunder specifically relating to the matters represented in
this Section.
3.16 Insurance. The assets and employees of the Business are insured
against loss, damage or injury in amounts customary in the industry. SCHEDULE
3.16 lists all insurance policies held by the Company relating to such business,
properties and employees, together with the policy limit, the type of coverage,
the location of the property covered, annual premium, premium payment dates and
expiration date of each of the policies. All such insurance policies are in full
force and effect.
3.17 Insolvency. No insolvency proceedings of any character, including
without limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting Seller, the
Company or any of the assets of the Company, are pending or threatened, and
neither Seller nor the Company has made any assignment for the benefit of
creditors or taken any action in contemplation of or which would constitute the
basis for the institution of such insolvency proceedings.
3.18 Securities Law. The Company is not now and has never been subject
to the reporting requirements of the Securities and Exchange Commission
("SECII).
3.19 Contracts. Except for the contracts, plans, agreements, and leases
listed in SCHEDULE 3.19, true and complete copies of which have been furnished
to Buyer as of the date hereof, Seller is not a party to any (i) contracts for
the future purchase of materials, supplies, equient or services; (ii)
contracts not made in the ordinary and usual course of business; (W) employment
or consulting contracts; (iv) contracts with any labor union or other labor
organization; (v) guarantees or accommodations; (A) leases of personal or real
property; (vii) contracts or agreements with affiliates or shareholders of the
Company, or (viii) contracts continuing for a period of more than six (6) months
from their respective dates. The Company has performed all obligations required
to be performed by it to date (including having paid any
<PAGE> 15
amounts required to have been paid to date under any agreements including, but
not limited to, Programming agreements, all franchise fees, and all payments to
NRTC, Hughes, or DirecTv and has not breached and is not in default under any
agreement listed in SCHEDULE 3.19 or to which it is a party or by which it is
bound, and all of the same are enforceable in accordance with their terms. All
such agreements are in full force and effect and there does not exist any
default or event or condition which, after notice or lapse of time or both,
would constitute a default thereunder by the Company or to the knowledge of
Seller, by any other party thereto.
3.20 NRTC Membership; DBS Distribution Rights.
(a) Attached hereto as SCHEDULE 3.20(a), is a true and complete copy of
the NRTC/Member Agreement together with all exhibits thereto.
(b) Attached hereto as SCHEDULE 3.20(b) is a true and complete copy of
the DirecTv Agreement, with all exhibits thereto.
(c) Pursuant to the NRTC/Member Agreement, the Company has the
exclusive right to market, sell and retain revenue from Programming (except
Non-Select Services) transmitted over the NRTC/Member Agreement directly to
Committed Member Residences in Los Alamos and Colfax Counties under the terms
and conditions set forth in the NRTC/Member Agreement. The Company also has the
right to market, sell and, retain revenue from the distribution of Programming
(except Non-Select Services) directly to Commercial Establishments in Los Alamos
and Colfax Counties under the terms and conditions set forth in the NRTC/Member
Agreement.
(d) Pursuant to the NRTC/Member Agreement, the Company. has (i) the
right to establish the terms and conditions upon which it will market and sell
Programming (except Non-Select Services) to Committed Member Residences or
Commercial Establishments, or both, in Los Alamos and Colfax Counties and is
entitled to all revenues from such marketing and sales to such Committed Member
Residences or Commercial Establishments, or both, in Los Alamos and Colfax
Counties, subject only to those Programming agreements set forth on SCHEDULE
3.20(d) ("MARKETING REVENUES"), and (ii) the Company has paid all sums to NRTC
or Hughes, as appropriate, required under the NRTC/Member Agreement such that
the Company is entitled to the Marketing Revenues. The Company has the right to
receive from NRTC, on a pro rata basis, all other net revenues received by NRTC
from Hughes in connection with the Programming which are directly attributable
to the Committed Member Residences or the Commercial Establishments in Los
Alamos and Colfax Counties.
(e) The Company is in full compliance in all material respects with any
and all membership, affiliation, licensing or other requirements or arrangements
as may have been established by NRTC, Hughes or DirecTv, if any, pursuant to the
NRTC/Member Agreement, the DirecTv Agreement, or otherwise.
(f) The Company is not in breach of the NRTC/Member or the DirecTv
Agreement,
<PAGE> 16
nor has the Company failed to perform any material obligation under the
NRTC/Member Agreement or the DirecTv Agreement. The Company has not received
notice of any such breach or non-performance at any time.
(g) Except as disclosed on SCHEDULE 3.20(g), none of the DBS Services
distributed by the Company has been suspended at any time since inception.
(h) SCHEDULE 3.20(h) (as supplemented by applicable NRTC reports) sets
forth all Customers, identified as Committed Member Residence and Commercial
Establishment, including the number of months such Customer has been a Customer,
whether such Customer's account is past due, and the number of monthly payments
per Customer which have been 30, 60 and 90 days past due. The Company has
maintained full and complete information regarding the location of each
Customer's descrambler.
3.21 True at Closing. The representations, warranties, covenants and
agreements of the Seller set forth in this Section 3, are and will be true both
on the date of this Agreement and on and as of the Closing, except for
representations, warranties, covenants and agreements made as of a specific
date, which will be true as of such specific date. All of the representations
and warranties by Seller shall survive the Closing for a period of eighteen (18)
months, with the exception of the tax representations and warranties, which will
survive for the respective tax statute of limitation periods.
3.22 Disclosure Seller. No representation or warranty made by Seller in
this Agreement and no statement made in any certificate to be delivered at the
Closing, Exhibit or Schedule furnished or to be furnished in connection with the
transactions herein contemplated contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact necessary to
make such representation or warranty or any such statement not misleading to a
prospective purchaser of assets of Seller who is seeking full information with
respect to Seller, the Company and the Business.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
In order to induce Seller to enter into this Agreement, Buyer represents
and warrants to Seller that the following statements are true, correct and
complete. The representations and warranties of Seller set forth in this
Agreement and in any other Acquisition Document are continuing in nature and
Seller shall promptly inform Buyer of any matter which would cause any such
representations or warranties to be untrue, incorrect or incomplete.
4.1 Organization, Ownership, etc. of Buyer. Buyer is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware with full power and authority to carry on its business
and operations as presently conducted and is duly qualified to do business in
each jurisdiction in which it is doing business.
<PAGE> 17
4.2 Authority of Buyer. Buyer has the power to execute, deliver, and
perform this Agreement and the other Acquisition Documents to which it is a
party. Buyer has taken all necessary action to authorize the execution, delivery
and performance of this Agreement and the other Acquisition Documents to which
it is a party, and has full partnership power to perform its obligations
hereunder and thereunder and to consummate the transactions(s) contemplated by
this Agreement.
4.3 Binding Effect. This Agreement constitutes, and the other
Acquisition Documents to which it is a party, on the Closing Date, will
constitute, the legal, valid, and binding obligations of Buyer enforceable
against it in accordance with the respective terms hereof and thereof, subject
to bankruptcy, insolvency, and similar laws of general application affecting
creditors' rights and remedies.
4.4 No Violation. Neither the execution and delivery by Buyer of this
Agreement or any other Acquisition Document nor the consummation of the
transactions contemplated hereby or thereby violate or will violate any
provision of law applicable to, or any provision of the certificate of limited
partnership or agreement of limited partnership of the Buyer or conflict with or
result in any breach of any term, condition or provision of, or constitute (with
due notice or lapse of time or both) a default under, or, except as contemplated
by the Security Agreement, result in the creation or imposition of any lien,
charge or encumbrance upon any of the properties or assets of Buyer pursuant to
the terms of, any mortgage, deed of trust or other agreement or instrument to
which Buyer is a party or by which or to which Buyer or any of its assets are
subject or bound.
4.5 Finder's Fee. No agent, broker or finder has acted for Buyer in
connection with this Agreement, and the transactions contemplated hereby, and
Buyer hereby agrees to indemnify and save Seller harmless from any claims of
Persons claiming by or through Buyer for commissions or fees by reason of this
Agreement or the transactions contemplated by this Agreement.
4.6 Consents.
Except as contemplated in Section 7.1 of this Agreement, no consent or
approval by, or filing with, any governmental authority is required in
connection with the execution or delivery of this Agreement by Buyer or the
performance of its obligations hereunder.
SECTION 5. COVENANTS OF SELLER.
Seller agrees that from the date hereof through and until the Closing
Date (or as otherwise provided in Section 5.5):
5.1 Approvals. It shall diligently prosecute any required applications
to NRTC,
<PAGE> 18
Hughes and DirecTv for all consents, authorizations and approvals necessary for
the sale of the Shares to Buyer, (including, without limitation, attendance by
representatives of Seller at meetings with NRTC, Hughes or DirecTv) and use its
best efforts to obtain such consents and approvals as promptly and expeditiously
as possible.
5.2 Access. Buyer shall have the right, itself or through its
representatives, subject to the conditions and limitations set forth in this
Agreement, to inspect the properties of Seller and to inspect and make abstracts
and reproductions of all books and records of Seller including, without
limitation, applications and reports to and correspondence with NRTC, Hughes and
DirecTv, and Seller shall furnish Buyer with such information respecting the
Assets and the Business as Buyer may, from time to time, reasonably request.
Buyer and Seller agree to use such reasonable discretion so as to preserve the
confidentiality of the transaction.
5.3 Conduct of Business. Unless performance of the following
obligations is waived by Buyer (made in its sole discretion) in advance and in
writing, Seller shall cause the Company to:
(a) not sell or dispose of any of the assets of the Company,
other than in the ordinary course of business, in which case such assets
disposed of shall be replaced by assets of like kind, quality and utility;
(b) not modify, amend, alter or terminate the NRTC/Member.
Agreement, the DirecTv Agreement or any of the Other Contracts, or waive any
default or breach thereunder;
(c) comply in all material respects with the NRTC/Member
Agreement, the DirecTv Agreement and all Other Contracts, use its best efforts
to cure any material default or breach thereunder, and promptly notify Buyer
upon receipt of notice of any default or breach thereunder;
(d) maintain the insurance set forth in Schedule 3.16;
(e) maintain its books and records in accordance with prior
practice, maintain all of its property and assets in their present condition,
ordinary wear and tear excepted, maintain supplies of technical materials,
supplies, inventory and spare parts consistent with past practice, and
otherwise use its best efforts to operate the Business in the ordinary course
in accordance with practices during the twelve (12) months preceding the date
of this Agreement;
(f) not increase the compensation payable or to become payable to,
and not pay or agree to pay any bonus to, any employee or agent of the Company.
<PAGE> 19
(g) not enter into any contract or renewal of any existing
contract for the employment of any employee of the Company;
(h) not, without the prior written consent of Buyer, enter into any
other contract or commitment affecting the Business;
(i) use its best efforts to keep its business organization intact,
make available the services of key employees, and maintain good relationships
with its employees, suppliers, advertisers and other having business relations
with it;
(j) use its best efforts to obtain prior to the Closing Date
consents from all third parties under the Other Contracts listed on SCHEDULE
3.19 hereto;
(k) operate the Business in all material respects in accordance
with the Licenses, comply in all material respects with all laws, rules and
regulations applicable to it, including the regulations and policies of NRTC,
Hughes and DirecTv, and use its best efforts to cure any material violations of
the Licenses;
(l) within ten (10) days after the end of each month (commencing
with the month in which this Agreement is executed) prior to the Closing Date,
furnish to Buyer or unaudited balance sheet and a statements of operations in
respect of the Business for the elapsed portion of the then current fiscal year
of the Company, which financial statements shall be prepared in accordance with
the rules and regulations of the NRTC and sound accounting principles, and
shall fairly present the results of such operations of the Company as of the
dates and for the periods covered thereby (subject to normal year-end
adjustments);
(m) provide to Buyer, concurrently with filing thereof, copies of
all reports to and other filings and correspondence with the NRTC, Hughes and
DirecTv;
(n) not surrender or voluntarily modify any of the Licenses, or,
without the prior agreement of Buyer, take any action which would cause the
institution of proceedings for the suspension, revocation or limitation of
rights under any of the Licenses;
(o) provide to Buyer, promptly upon receipt thereof by the
Company, a copy of (i) any notice of the revocation, suspension, or limitation
of the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under any License, and (ii) copies of all protests,
complaints, challenges or other documents submitted to or filed with the NRTC,
Hughes or DirecTv by third parties concerning the Business and, promptly upon
the filing or making thereof, copies of the Company's responses thereto; and
(p) notify Buyer in writing immediately upon learning of the
institution or threat of any action against Seller or the Company in any court,
or any action against Seller or the Company before any governmental agency, and
notify Buyer in writing promptly upon receipt of any administrative or court
order relating to the Business.
<PAGE> 20
5.4 Lien Searches. As soon as practicable after the date hereof and in
any event not later than ten days prior to the Closing, the Seller shall obtain
and deliver to the Buyer at the Seller's expense Uniform Commercial Code, tax
lien, bankruptcy and judgment lien Searches for the Company. Such searches shall
be conducted under the present name of the Seller and such other names as it has
used during the past five years. All such names are listed in Schedule 5.4
attached hereto.
5.5 Coordination. Prior to Closing, Seller will use its best efforts to
coordinate with Buyer the transfer of systems and management at Closing. Seller
shall be available on a reasonable basis for a period of two (2) weeks after
Closing to facilitate the transition.
SECTION 6. COVENANTS OF BUYER.
Buyer agrees that from the date hereof through and until the Closing
Date:
6.1 Approvals. It shall diligently prosecute any required applications
to NRTC, Hughes and DirecTv for all consents, authorizations and approvals
necessary for the sale of the Shares to Buyer (including, without limitation,
attendance by representatives of Buyer at NRTC, Hughes and DirecTv meetings) and
use its best efforts to obtain such consents and approvals as promptly and
expeditiously as possible.
6.2 Controls of Business. Subject to the provisions of Section 5.3,
Buyer shall not exercise any control over or supervise, directly or indirectly,
the operations or policies of the Business, all of which shall be Seller's sole
right and responsibility.
6.3 Coordination of Consents. Buyer agrees to make reasonable efforts
to respond to reasonable and customary inquiries relating to Buyer made by a
party (other than Seller) from whom, pursuant to Section 7.2(c) hereof, a
consent to the assignment of such Other Contract is a condition precedent to
Buyer's obligation to consummate the transaction contemplated hereby.
SECTION 7. CONDITIONS TO CLOSING.
7.1 Mutual Conditions. The obligations of Buyer and Seller to
consummate the transactions contemplated hereby are subject to satisfaction at
the time of the Closing of, in addition to all other conditions set forth
herein, the condition precedent that NRTC, Hughes and DirecTv shall have issued
all necessary authorizations, consents and approvals in connection with the
transactions contemplated by this Agreement, without conditions which are
materially adverse to Buyer or Seller or which in any material way diminish the
operating rights with respect to the Company or the Business.
7.2 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
(1) receipt by Buyer of the Schedules required to be provided by Seller
hereunder in such form and substance as shall be
<PAGE> 21
satisfactory to Buyer (2) the satisfactory completion, in Buyer's sole
discretion, of Buyer's due. diligence investigation of the Company, and (3) the
fulfillment (or waiver by Buyer), on or prior to the Closing Date, of each of
the following conditions:
(a) The representations and warranties of Seller contained herein
shall have been true and correct when made and shall be repeated and be true
and correct as of the Closing Date;
(b) Seller shall have performed and complied with all agreements,
covenants and conditions contained in this Agreement and the other Acquisition
Documents required to be performed or complied with by it prior to or at the
Closing Date;
(c) All authorizations and approvals of or consents of, or filings
with, any governmental authority or other Person required to be obtained or made
by Seller or the Company in connection with the Closing shall have been obtained
or made and shall be in full force and effect;
(d) Each of the Acquisition Documents to which Seller is a party
shall have been duly executed and delivered by Seller and complete and correct
copies thereof shall have been delivered to Buyer.
(e) At Closing, the Company shall have not less than 350
Subscribers;
(f) Seller shall have executed and delivered to Buyer a
certificate, dated the Closing Date, to the effect that the conditions set
forth in paragraphs (a) through (e) of this Section 7.2 have been fulfilled;
(g) All corporate and other proceedings of the Company in
connection with the transactions contemplated by this Agreement and the other
Acquisition Documents, and all documents and instruments incident to such
corporate proceedings, shall be satisfactory in substance and form to Buyer and
its counsel, and Buyer and its counsel shall have received all such documents
and instruments, or copies thereof, certified if requested, as may be
reasonably requested;
(h) No action or proceeding shall have been instituted or
threatened against Seller or the Company which could have a material adverse
effect on the Seller, the Company or the Business; no action or proceeding
shall have been instituted or threatened against, the Company or any of the
parties to this Agreement or their directors or officers, before any court or
governmental department, agency or commission. to restrain or prohibit, or to
obtain substantial damages in respect of, this Agreement or the consummation of
the transactions contemplated hereby; and neither Seller, the Company nor Buyer
shall have received written notice from any court or governmental department,
agency or commission of its intention to institute any action or proceeding to
restrain or enjoin or continence any investigation (other than a routine letter
of inquiry) into the consummation of this Agreement and the transactions
<PAGE> 22
contemplated hereby or to nullify or render ineffective this Agreement or such
transactions if consummated, which in the opinion of Buyer would make it
inadvisable to consummate such transactions;
(i) Prior to the Closing, there shall not have occurred any
material adverse change in the financial condition, operations, business or
prospects of the Company, including, but not limited to, becoming subject to
any state or federal regulatory proceedings which could culminate in an order
or other action which could cause such a material adverse change;
(j) Prior to the Closing, there shall not have occurred any damage,
destruction or loss to tangible assets of the Company exceeding $1,000 or other
loss that has a material adverse effect on the products, properties, business
operations or prospects of the Company;
(k) Seller shall have obtained and delivered to Buyer consents
from all third parties under the Other Contracts, where such consents are
required in order to transfer and assign such Other Contracts, and neither
Seller nor, to Seller's knowledge, any third party shall be in material breach
or default under the NRTC/Member Agreement, the DirecTv Agreement or any Other
Contract;
(l) None of the Licenses shall have been revoked or suspended, or
modified in any manner which could have a material adverse effect on the
Company, the Business or its operation and no proceeding for such revocation,
suspension, or modification shall be in effect; and
(m) Seller shall have executed and delivered the Security
Agreement and the Pledge Agreement.
7.3 Conditions to Obligations of Seller. Seller's obligation to
consummate the transactions contemplated by this Agreement is subject to
satisfaction at the time of Closing of each of the following conditions
precedent, any of which may be waived by Seller:
(a) Each of the representations and warranties of Buyer contained
in this Agreement shall be true and correct in all material respects on the
Closing Date as though made on and as of the Closing Date; and Buyer shall, on
or before the Closing Date, have performed in all material respects all of its
covenants and obligations hereunder which by the terms hereof are to be
performed on or before the Closing Date;
(b) No action or proceeding shall have been instituted or
threatened against Buyer, the Company or Seller before any court or
governmental agency or commission seeking to restrain or prohibit this
Agreement or consummation of the transactions contemplated hereby;
(c) Buyer shall have delivered to Seller the certificate of Buyer,
dated as of
<PAGE> 23
the Closing Date, certifying as to the matters set forth in the foregoing
clauses (a) and (b) (except that, with regard to clause (b), such certificate
shall not certify as to matters relating to Seller);
(d) All partnership and other proceedings of Buyer in connection
with the transactions contemplated by this Agreement and the other Acquisition
Documents, and all documents and instruments incident to such partnership
proceedings, shall be satisfactory in substance and form to Seller and its
counsel, and Seller and its counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested;
(e) Buyer shall have executed and delivered the Pledge Agreement;
(f) The Company shall have executed and delivered the Security
Agreement, and the Company and the Buyer shall have executed and delivered the
Note;
(g) Seller shall have received confirmation that the Company has
been capitalized by Buyer with at least an additional $100,000 for working
capital and capital expenditures; and
(h) Seller shall have received confirmation in the form of a
balance sheet that Buyer has been capitalized with at least an additional
$100,000 for working capital and capital expenditures.
<PAGE> 24
SECTION 8. INDEMNIFICATION.
8.1 Right to Indemnification.
(a) Seller shall indemnify, reimburse, and hold harmless Buyer from and
against all claims, losses, damages, costs (including, without limitation, court
costs and attorneys' fees), expenses and liabilities suffered, incurred, or
sustained by Buyer on account of (i) any misrepresentation, breach of warranty,
or nonfulfillment of any agreement on the part of Seller under this Agreement or
under any Acquisition Document, (ii) the failure of the Company (prior to
Closing) to pay and perform promptly when due all of its obligations,
liabilities and debts, (iii) the operation of the Business prior to Closing,
(iv) any breach by the Company of the NRTC/Member Agreement, the DirecTv
Agreement or any of the Other contracts prior to Closing, or (v) any other
matter or event respecting the Company and which occurs with respect to the
period prior to the Closing, subject, however, to any contrary agreement by the
parties concerning costs and expenses of litigation arising from or relating to
the parties' efforts to seek approval of the transactions contemplated by this
Agreement.
(b) Buyer shall indemnify, reimburse, and hold harmless Seller from and
against all claims, losses, damages, costs (including, without limitation, court
costs and attorneys' fees), expenses and liabilities suffered, incurred, or
sustained by Seller on account of (i) any misrepresentation, breach of warranty,
or nonfulfillment of any agreement on the part of Buyer under this Agreement or
under any Acquisition Document, or (ii) the failure of Buyer to pay and perform
promptly when due all of its obligations, liabilities, and debts as provided
under this Agreement or any Acquisition Document, subject, however, to any
contrary agreement by the parties concerning costs and expenses of litigation
arising from or relating to the parties' efforts to seek approval of the
transactions contemplated by this Agreement.
8.2 Right to Contest. Before being required to make any payment
pursuant to Section 8.1 hereof, Seller or Buyer, whichever is the indemnifying
party (the "INDEMNIFYING PARTY"), may, at its expense, elect to undertake and
control the defense of, and take all necessary steps properly to contest any,
claim, liability or action in respect thereof involving third parties or to
prosecute such contest or action to conclusion or settlement satisfactory to the
party to be indemnified (the "INDEMNIFIED PARTY"). The Indemnified Party shall
notify the Indemnifying Party of any claims to indemnification involving third
parties it may wish to assert pursuant to Section 8.1 hereof as soon as
reasonably practicable; thereafter, the Indemnified Party shall, at the expense
of the Indemnifying Party, cooperate FULLY with the Indemnifying Party in the
conduct of any such contest or action. If the Indemnifying Party makes the
foregoing election, then the Indemnified Party shall have the right to
participate, at its own expense, in all proceedings. If the Indemnifying Party
does not make such election, it shall be bound by whatever result is obtained by
the Indemnified Party respecting such third party matter.
8.3 Limitation of Claims. Any claim by a party hereunder arising from a
claimed breach by the other party of any representation, warranty or covenant
hereunder (other than tax claims in respect of which there shall be no
limitation period) shall be made in writing and
<PAGE> 25
delivered to such other party no later than eighteen (18) months after the
Closing Date.
SECTION 9. ACCESS.
9.1 Access. Buyer and Seller each acknowledges that, to the best of its
knowledge, it has been afforded such opportunity to obtain information, inspect
and examine the other party, the Company and the Business as it deems necessary
to enter into this Agreement; however, the foregoing acknowledgment of present
belief shall not be deemed to relieve either party under, or impair or otherwise
affect, any representation, warranty or covenant (including Buyer's right to
conduct additional due diligence and to receive completed Schedules to this
Agreement) contained in this Agreement or any of the other Acquisition Documents
or the rights and obligations of either party in respect of a breach thereof.
9.2 Notice of Breach. Buyer and Seller each agrees to give to the other
prompt notice of a breach by such other party of any of its representations,
warranties and covenants of which Buyer or Seller, as the case may be, obtains
actual knowledge prior to the Closing Date. The term "actual knowledge" shall be
deemed to include information which is actually known and in good faith
recognized to be such a breach, it being the intention hereby that a party be
afforded as much opportunity as reasonably possible to cure prior to Closing
breaches which hereafter are found to exist.
SECTION 10. MISCELLANEOUS.
10.1 Fees and Expenses.
Each of the parties shall bear its own expenses in connection with the
negotiation and the consummation of the transactions contemplated by this
Agreement.
10.2 Law Governing. This Agreement and the other Acquisition Documents
shall be construed under and governed by the laws of the state of New Mexico.
10.3 Notice. Any notice or communication given pursuant to this
Agreement by any party to any other party shall be in writing and shall be
sufficiently given if personally delivered, delivered by commercial courier
service (which obtains receipt on delivery) or sent by registered or certified
mail, return receipt requested, postage prepaid to the parties at the following
addresses or to such other address as either party may hereafter designate to
the other by like notice:
If to Buyer:
DBS Holdings, L.P.
201 N. Union, Suite 300
Alexandria, VA 22314
Attn: Harry F. Hopper, HI
<PAGE> 26
With a copy to:
Swidler & Berlin, Chartered
3000 K Street, N.W.
Suite 300
Washington, D.C. 20007
Attn: John J. Klusaritz, Esq.
If to Seller:
Edward and Janet Blakeley Botefuhr
2322 Calle Pava
Santa Fe, NM 87505
With a copy to:
Hickey & Ives, P.A.
300 Pasco de Peralta Suite 101
Santa Fe, NM 87501
Attn: Peter N. Ives, Esq.
Notices shall be deemed given when personally delivered, confirmation
of delivery is received by the sender, or on the date on which notice is
otherwise received. The foregoing provisions shall not, however, prohibit the
giving of actual written notice in any other manner.
10.4 Construction.
(a) The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
(b) Words such as "herein" and "hereof" shall be deemed to refer to
this Agreement as a whole and not to any particular provision of this Agreement.
10.5 Assignment; Binding Effect. This Agreement may not be assigned by
Buyer or Seller prior to the Closing without the prior written consent of the
other party, which shall not be unreasonably withheld. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
successors and permitted assigns.
10.6 Amendment; Waiver. This Agreement may be amended only by a written
instrument signed by Buyer and Seller. No provisions of this Agreement may be
waived except by an instrument in writing signed by the party sought to be
bound. No failure or delay by any party in exercising any right or remedy
hereunder shall operate as a waiver thereof, and a waiver of a particular right
or remedy on one occasion shall not be deemed a waiver of any other right or
remedy or a waiver on any subsequent occasion.
<PAGE> 27
10.7 Entire Agreement. Except as provided in Section 10.9 hereof, this
Agreement and the Acquisition Documents set forth the entire understanding
between the parties relating to the subject matter hereof, any and all prior
correspondence, conversations and memoranda or other writings being merged
herein and replaced. No promises, covenants or representations of any character
or nature other than those expressly stated herein have been made to induce
either party to enter into this Agreement and the Acquisition Documents.
10.8 Initial Notice to Public. Seller and Buyer shall mutually agree in
advance on the manner in which the public is first informed of the execution of
this Agreement.
10.9 Termination of Term Sheet. All provisions of that certain
Acquisition Term Sheet dated November 28, 1995 between Seller and Columbia
Capital Corporation ("COLUMBIA"), an affiliate of Buyer, as amended by that
certain letter dated December 15, 1995, are hereby terminated, other than the
confidentiality and the exclusivity provisions set forth therein. Buyer hereby
assumes and agrees to be bound by the obligations imposed upon Columbia pursuant
to such confidentiality provision.
10.10 Execution in Counterparts. This Agreement may be executed in two
or more counterparts, all of which together shall constitute one and the same
Agreement.
10.11 Facsimile Signatures. Facsimile signatures shall be considered
original signatures for the purpose of execution and enforcement of the rights
delineated in this Agreement.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed by their respective duly authorized general partners as of the date
first above written.
ATTEST/WITNESS: SELLER:
EDWARD BOTEFUHR
JANET BLAKELEY BOTEFUHR
BUYER:
DBS HOLDINGS, L.P.
Columbia DBS, Inc.
General Partner
By:
-----------------------
Name:
-----------------------
Title:
-----------------------
<PAGE> 28
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed by their respective duly authorized general partners as of the date
first above written.
ATTEST/WITNESS: SELLER:
EDWARD BOTEFUHR
- ------------------------ ----------------------------
JANET BLAKELEY BOTEFUHR
- ------------------------ ----------------------------
BUYER:
DBS HOLDINGS, L.P.
By:Columbia DBS, Inc.
Its:General Partner
By: /s/
- ----------------------- ---------------------
Name:
---------------------
Title:
---------------------
<PAGE> 1
EXHIBIT 10.4(a)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into this 19th day of March, 1996, by and between COLUMBIA DBS SAN LUIS OBISPO,
L.P., a Delaware limited partnership ("BUYER") and PACIFIC COAST DBS, a
California corporation ("SELLER").
RECITALS
A. Seller owns and operates an exclusive distributorship of the
National Rural Telecommunications Cooperative's DBS Services and of Hughes
Communications Galaxy, Inc.'s DirecTv service in San Luis Obispo County,
California (the "Business").
B. Seller desires to sell, and Buyer desires to purchase for the price
and on the terms hereinafter set forth, Seller's assets used and useful in the
operation of the business.
AGREEMENTS
NOW, THEREFORE, in order to implement said sale and purchase, and in
consideration of the mutual agreements set forth herein, the parties agree as
follows:
SECTION 1. DEFINITIONS.
1.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
ACCOUNTS RECEIVABLE shall have the meaning set forth in Section 3.7(e)
of this Agreement.
ACQUISITION DOCUMENTS shall mean this Agreement, the Security and
Pledge Agreement, the Security Agreement, Secured Promissory Note, Collateral
Assignment of Marketing and Distribution Agreement and any and all other
instruments of assignment or assumption or other agreements, documents, letters,
certificates or instruments executed pursuant to or in connection with this
Agreement or the transactions contemplated hereby.
AFFILIATE, when used with reference to a specified Person, shall mean
any Person that is a spouse, parent, grandparent, lineal descendant, sibling or
other relative of such Person or any Person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the specified Person.
ASSETS means assets and rights of every kind and nature, real, personal
and mixed, tangible and intangible, other than the Excluded Assets, owned by
Seller or in which
<PAGE> 2
Seller has an interest (as lessee, licensee or otherwise), including all assets
and rights acquired by Seller between the date hereof and the Closing Date, and
which are used or usable in connection with the operation of the Business,
including, without limitation:
(a) All Tangible Assets and, to the extent assignable, all Asset
Warranties;
(b) the NRTC/Member Agreement;
(c) the DirecTv Agreement;
(d) the Other Assumed Contracts;
(e) all files, books and records including, without limitation,
computer programs, tapes and electronic data processing software, accounting
journals and ledgers, copies of NRTC reports and correspondence and other
documents relating to the NRTC/Member Agreement and the DirecTv Agreement and
compliance therewith;
(f) All Customers, and all additional customers obtained between the
date hereof and the Closing Date in accordance with this Agreement;
(g) All goodwill, know-how, slogans, jingles, trademarks, trade names,
service marks, logos, copyrights, customer lists and other intangible assets
used or usable in connection with the Business; and
(h) Accounts Receivable.
ASSET WARRANTIES shall mean all manufacturer's, distributor's or
seller's warranties with respect to the Tangible Assets.
BUSINESS shall have the meaning ascribed to it in Recital A.
BUSINESS DAY shall mean any day except a Saturday, Sunday or other day
on which commercial banks are required or authorized to close in New York.
CABLE PROGRAMMING shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
CLOSING AND CLOSING DATE shall have the meanings set forth in Section
2.5 of this Agreement.
COLLATERAL ASSIGNMENTS shall mean the Collateral Assignment of
Marketing and Distribution Agreement substantially in the form attached hereto
as Exhibit A, the execution and delivery by Seller, Buyer, NRTC and Hughes shall
be a condition to Closing.
2
<PAGE> 3
COMMERCIAL ESTABLISHMENT shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
COMMITTED MEMBER RESIDENCE shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
CURRENT ASSETS shall mean the current assets of Seller, as shown on the
Closing Date Balance Sheet, acquired by Buyer at Closing.
CURRENT LIABILITIES shall mean the current liabilities of Seller, as
shown on the Closing Date Balance Sheet, assumed by Buyer at Closing.
CUSTOMER shall mean any user of the DBS Services or other services
distributed by Seller (including a Subscriber).
DBS SERVICES shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
DIRECTV means DirecTv, Inc., a California corporation.
DIRECTV AGREEMENT shall mean any and all agreements between Seller and
DirecTv relating to Seller's application or authorization to act as a dealer of
DirecTv programming packages, together with any amendments thereto.
ELECTION DATE shall mean either the Early Election Date or the Late
Election Date, as applicable.
EQUIPMENT shall mean office equipment as outlined on Schedule 3.5(a)
(Fixed Assets and Fixed Assets-Physical Listing) and all other tangible personal
property and facilities owned, used or held for use in the Business (other than
Inventory).
EXCLUDED ASSETS shall mean (a) Seller's corporate seal, minute books,
charter documents, corporate stock record books and such other books and records
relating to the organization, existence or capitalization of the Seller; (b) all
contracts of insurance and insurance proceeds relating to events arising prior
to the Closing Date, insurance claims made by Seller relating to property or
equipment repair, replaced or restored by Seller prior to the Closing Date; (c)
all pension, profit sharing or deferred (Section 401(k)) plans and trusts and
any assets thereof and any other employee benefit plan or arrangement and the
assets thereof, if any; (d) all claims in and to refunds for federal, state or
local income or other taxes payable for periods prior to the Closing Date; (e)
all contracts that have terminated or have expired prior to the Closing Date in
the ordinary course of business and as permitted under the terms hereof, and any
contracts which do not constitute the NRTC/Member Agreement, the DirecTv
Agreement or Other Assumed Contracts; (f) cash on hand; and (g) any assets
listed on
3
<PAGE> 4
SCHEDULE 1. 1.
FIXED FINAL PAYMENT shall mean Four Million Dollars ($4,000,000).
GAAP shall mean generally accepted accounting principles, consistently
applied
HGC DIRECTV shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
HUGHES shall mean Hughes Communications Galaxy, Inc.
INDEPENDENT ACCOUNTANT shall mean a "Big 6 " Accounting Firm (or other
FIRM mutually acceptable to Buyer and Seller) which accounting firm shall not
have provided any services to Buyer, Seller or any of their Affiliates for the
prior five (5) years.
INVENTORY shall mean undamaged subscriber units contained in sealed
original cartons and recoverable units on consignment.
LICENSES shall mean all governmental or private licenses, permits,
authorizations and rights, including the NRTC/Member Agreement and the DirecTv
Agreement, all rights in pending applications, and all additions thereto,
including renewals and modifications and applications therefor, with respect to
the Business, all of which Licenses are described in Schedule 3.10 of this
Agreement.
LIEN shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
NON-SELECT SERVICES shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
NOTE shall have the meaning ascribed to such term in Section
2.2(a)(ii).
NRTC shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
NRTC MEMBER AGREEMENT shall mean that certain NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated December 16, 1992, by and
between
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Seller and NRTC, as amended by that certain Amendment to NRTC/Member Agreement
for Marketing and Distribution of Services dated March 22, 1994, and as further
amended from time to time.
OTHER ASSUMED CONTRACTS shall mean all equipment leases, real estate
leases and other contracts and agreements described in SCHEDULE 3.19 to this
Agreement other than the NRTC/Member Agreement and the DirecTv Agreement,
together with any additional contracts entered into by Seller between the date
hereof and the Closing Date in accordance with this Agreement which Buyer
expressly elects to assume.
PERSON shall mean an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or agency or instrumentality thereof.
PROGRAMMING shall mean Cable Programming and HCG DirecTv.
SECURITY AGREEMENT means that certain Security Agreement substantially
in the form attached hereto as EXHIBIT C, the execution and delivery of which is
a condition to Closing.
SECURITY AND PLEDGE AGREEMENT means that certain Security and Pledge
Agreement executed by all of the partners of Buyer substantially in the form
attached hereto as Exhibit D, the execution and delivery of which is a condition
to Closing.
SUBSCRIBER as of any date shall mean a Customer of the Business who, at
a minimum, is an active subscriber subscribing to a package of basic services
and: (1) on the last date of the calendar month prior to such date, whose
account is not more than sixty (60) days past due from the date payment is due
in an amount greater than $ 10; (2) who is not an employee or agent of the
service provider or charged a fee that is nominal (eg., demonstration unit) or
substantially below the service provider's published rates or substantially
below its rates included in any generally available discount package; and (3)
who has not given notice of intent to discontinue service. The Active Subscriber
number shall be derived from the NRTC Ad-Hoc Report - Active Subscriber Listing.
Notwithstanding any other provision of this Agreement, clause (1) of the
preceding definition shall only be applicable to the determination of the number
of Subscribers for which Seller is the service provider and shall not be
applicable to the determination of the number of Subscribers for which Buyer is
the service provider.
SUBSCRIBER SETTLEMENT DATE shall mean the Subscriber Settlement Date
determined in accordance with Section 2.2(a)(iii).
TANGIBLE ASSETS shall mean those certain assets (including Equipment)
identified on Schedule 3.5(a) to this Agreement, together with any additional
such assets
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relating to the Business acquired by the Seller between the date hereof and the
Closing Date.
1.2 OTHER DEFINITIONAL PROVISIONS. For purposes of this Agreement and
the other Acquisition Documents, the following additional rules of construction
shall apply:
(a) wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter;
(b) the term "including" shall not be limiting or exclusive, unless
specifically indicated to the contrary; and
(c) all references to "sections" or "subsections" in an Acquisition
Document shall be to sections or subsections of such Acquisition Document,
unless otherwise specifically provided.
SECTION 2. PURCHASE AND SALE OF ASSETS.
2.1 SALE OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES.
(a) Subject to the provisions of this Agreement, Seller agrees to
sell, and Buyer agrees to purchase, at Closing, Seller's right, title and
interest in and to the Assets.
(b) Upon the sale and purchase of the Assets, Buyer shall assume
Seller's obligations to be performed after 12:01 A.M. on the day following the
Closing Date (but not obligations to have been performed by Seller prior to such
time) under, and as set forth in the NRTC/Member Agreement, the DirecTv
Agreement, and the Other Assumed Contracts, but only to the extent that such
obligations arise out of the operation of the Business by Buyer on or after the
Closing Date (including, without limitation, any obligations of Seller pursuant
to any NRTC Wholesale Invoice); provided, that as to any Other Assumed Contract
which, for the assignment thereof by Seller, requires the consent of a party
thereto other than the Seller and as to which such consent has not been
obtained, Buyer shall assume Seller's obligations to be performed under such
Other Assumed Contract only with respect to the period that Buyer receives the
benefits to which Seller is entitled under such Other Assumed Contract.
(c) Except as expressly set forth in Section 2. 1 (b), above, Buyer
shall not assume or be deemed to have assumed under this Agreement, the
Acquisition Documents or otherwise by reason of the transactions contemplated by
this Agreement or the Acquisition Documents, any liabilities, obligations or
commitments of Seller of any nature whatsoever, absolute or contingent, known or
unknown, and the execution, delivery and performance of this Agreement and the
Acquisition Documents shall not render Buyer liable for any such liability,
obligation, undertaking, expense or agreement. Without limiting the generality
of the
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foregoing, Buyer shall in no event assume or be liable for any liability or
obligation of Seller arising out of any collective bargaining agreement,
insurance, pension, retirement. deferred compensation, incentive bonus or profit
sharing or employee benefit plan or trust, or any litigation, proceeding or
claim by any person or entity relating to the Business or the operations thereof
prior to Closing, whether or not such litigation, proceeding or claim is
pending, threatened or asserted before, on or after the Closing Date.
(d) Buyer shall purchase, at Closing, the Inventory. The purchase price
for the Inventory in sealed original cartons shall be equal to Seller's
wholesale cost of the Inventory. Recoverable Inventory units on consignment
shall be purchased at fifty percent (50%) of Seller's wholesale cost. Buyer and
Seller shall use their best efforts to agree in good faith on an Inventory count
at the Closing. Within thirty (30) days after Closing, Buyer shall conduct a
physical Inventory count, accompanied by Seller's representatives and the
difference between the value of Inventory estimated at Closing and the value of
Inventory determined pursuant to the physical count shall be included as part of
the Final Closing Adjustment pursuant to Section 2.4(b).
2.2 PURCHASE PRICE; DEPOSIT
(a) Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be $1,500,000 (the "Closing Payment"), payable at Closing, plus
twenty-four (24) equal monthly payments of $20,000 (the "Monthly Payments"),
plus a final payment (the "Subscriber Settlement Payment") payable on the date
that is twenty-four (24) months or the date that is thirty (30) months after
Closing, at Seller's election, payable as follows:
(i) the Closing Payment will be paid by Buyer to Seller at
Closing by wire transfer of immediately available funds to an
account designated in writing by Seller at least three
Business Days prior to the Closing Date;
(ii) the Monthly Payments and the Subscriber Settlement
Payment will be evidenced by, and paid to Seller in accordance
with the terms of a secured promissory note of Buyer to be
issued to Seller at Closing in the form attached hereto as
Exhibit B (the "Note"); and
(iii) the Subscriber Settlement Payment will be paid by Buyer
to Seller on the Subscriber Settlement Date in accordance with
the terms of the Note. For purposes of this Section
2.2(a)(iii), the Subscriber Settlement Payment and the
Subscriber Settlement Date shall be determined as follows:
(A) If, within thirty (30) days prior to the date that is
eighteen (18) months from the Closing Date (the
"Early Election Date"), Seller delivers written
notice to Buyer (an "Early Election Notice") that it
so elects, the Subscriber Settlement Date shall be
the date that is twenty-four (24)
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months after the Closing Date, or, if such date is
not a Business Day, the next following Business Day.
(B) If the Seller does not deliver an Early Election
Notice, the Subscriber Settlement Date shall be the
date that is thirty (30) months after the Closing
Date, or if such date is not a Business Day, the next
following Business Day.
(C) On the Subscriber Settlement Date, the Seller shall
receive Four Million Dollars ($4,000,000.00) (the
"Fixed Final Payment") or the Contingent Final
Payment, whichever is greater.
(D) For purposes of this Section 2.2(a)(iii), the
"Contingent Final Payment" shall be equal to the
total of the following amounts per Subscriber as of
the applicable Subscriber Settlement Date:
NUMBER OF AMOUNT PER (EXAMPLE @ 15,000
SUBSCRIBERS SUBSCRIBER SUBSCRIBERS)
----------- ---------- ------------
0 - 1,000 $ 0 $ 0
1,001 - 3,300 $1,500 $ 3,450,000
3,301 - 6,600 $ 750 $ 2,475,000
6,601 - 9,900 $ 600 $ 1,980,000
9,901 - 13,200 $ 550 $ 1,815,000
13,201 or above $ 400 $ 720,000
-----------
$10,440,000
(b) Pro Rations. All expenses and prepayments in connection with the
Assets shall be prorated among Buyer and Seller as of 12:01 A.M. on the day
following the Closing Date, and the net amount thereof shall be paid to Seller
or Buyer, as appropriate. Such prorations shall include, without limitation, all
Customer programming prepayments, rental payments, business and license fees
(but only for Licenses transferred hereunder) and utility expenses. Seller shall
be responsible for all expenses arising out of contracts, agreements and
commitments of the Business (other than the NRTC/Member Agreement, DirecTv
Agreement and the Other Assumed Contracts, performance of which shall be
prorated pursuant to Section 2.1 hereof) for all periods prior to the Closing
Date. Buyer shall in no event be responsible for any amounts associated with the
Excluded Assets. Expenses, costs and liabilities incurred shall be allocated to
the time of occurrence of such programs and announcements without regard to the
date of payment therefor. All prorations shall, to the extent feasible, be
determined and paid on the Closing Date, with a final settlement and payment
thereof to be made as part of the Final Consideration Adjustment pursuant to
Section 2.4. If any dispute arises under this Agreement regarding amounts
determined in accordance
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with this Section, it shall be referred to an Independent Accountant. The
determination made by the Independent Accountant shall be conclusive and binding
on each party and the fees of the Independent Accountant shall be divided
equally between Buyer and Seller.
2.3 ALLOCATION OF PURCHASE PRICE AMONG ASSETS. The Purchase Price shall
be allocated among the Assets by mutual agreement which Buyer and Seller shall,
reasonably and in good faith, determine prior to Closing. Buyer and Seller agree
to be bound by any such agreement to file all returns and reports (tax and
otherwise) on the basis of such allocation.
2.4 CONSIDERATION ADJUSTMENTS. (a) The Closing Payment shall be reduced
by the parties' good faith estimate of the amount by which Current Liabilities
exceed Current Assets, or increased by the amount that Current Assets exceed
Current Liabilities (the "CLOSING ADJUSTMENT").
(b) Promptly after the Closing, Seller shall prepare a balance
sheet of Seller as of the Closing Date. Such balance sheet is hereinafter
called the "CLOSING DATE BALANCE Sheet" and shall be prepared on a basis
consistent with the "Pro Forma Balance Sheet attached hereto as Exhibit 2.4(b).
The Closing Date Balance Sheet shall include all assets and liabilities of
Seller. Buyer shall be permitted to net accounts payable to and accounts
receivable from Coast TV, Inc.
The NRTC accounting data in the Closing Date Balance Sheet shall be
derived from NRTC Central Billing System Reports, including, but not limited to:
Report 18A (Subscriber Accounts Receivable), Report 19A (Accounts Receivable
Summary), Report 17 (Unearned Revenue Report), and the NRTC Wholesale Invoice.
The NRTC accounting data for the Closing Date Balance Sheet shall be prepared in
compliance with NRTC recommendations as stated in the following documents: NRTC
DBS Member Audit Guide, DBS Participant Accounting Handbook, NRTC DBS Member
Standard Journal Entry Reference Manual.
As soon as practicable after the Closing Date, Seller shall also
provide to Buyer A list of Customers including account type in the form of
NRTC's Ad Hoc Report Active Subscribers Listing, dated as of the Closing Date.
Seller shall also provide a list of employees and agent accounts to adjust the
total active subscriber amount.
(c) No later than 30 days after the Closing, or within three days
after receipt of the necessary accounting data, whichever is later, Seller
shall deliver to Buyer a copy of the Closing Date Balance Sheet together with
its determination of the Closing Adjustment pursuant to the Closing Date
Balance Sheet. The Closing Date Balance Sheet and the determination of the
Closing Adjustment shall be subject to review by Buyer and its auditors on
behalf of Buyer at Buyer's expense. Such review by Buyer shall be completed
within fifteen (15) business days after delivery of the Closing Date Balance
Sheet to Buyer. In the event of any disagreement between Seller and Buyer
regarding the amount of the Closing Adjustment which has not been resolved
within sixty (60) days after the Closing
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Date, unless said date shall have been extended by mutual agreement of the
parties, the dispute shall be referred to an Independent Accountant, whose
determination shall be made within thirty (30) days of such referral, and shall
be final and binding upon the parties. The fees and expenses of said Independent
Accountant shall be borne by Seller and the Buyer equally. The determination of
the Closing Adjustment pursuant to this Section 2.4(b) shall be referred to as
the "FINAL CLOSING ADJUSTMENT".
(d) If the Final Closing Adjustment is greater than the Closing
Adjustment agreed to pursuant to Section 2.4(a), then the Seller shall pay the
difference to Buyer in cash, within 30 days after delivery to it of the Closing
Date Balance Sheet. If the Final Closing Adjustment is less than the Closing
Adjustment agreed to pursuant to Section 2.4(a), then Buyer shall pay the
difference to Seller within thirty (30) days after the delivery of the Closing
Date Balance Sheet; provided, however, in either case that if the Buyer shall
disagree with the Closing Date Balance Sheet, the payment shall be made within
thirty (30) days of the final determination of such disagreement. The parties
agree to add or deduct such payment from the next payment to be made under the
Note.
2.5 TIME AND PLACE OF CLOSING: TERMINATION OF AGREEMENT. The closing of
the purchase and sale provided for in this Agreement (herein called the
"CLOSING") shall be held at the office of Diehl and Rodewald, 1043 Pacific
Street, San Luis Obispo, California at 10:00 A.M. (the "CLOSING DATE") (i) on
the last Business Day of the month in which all of the conditions precedent set
forth in Section 7 hereof shall have been satisfied or waived, (ii) at Buyer's
election, on the calendar day of such month on which NRTC's accounting period
closes, or (iii) such other place, time or date as the parties may agree upon in
writing. Either party may terminate this Agreement by written notice to the
other party if the Closing has not occurred by April 30, 1996.
2.6 THE CLOSING. At the Closing:
(a) Seller shall transfer and assign to Buyer the Assets, and shall
deliver to Buyer such instruments or agreements of conveyance, transfer and
assignment as shall be sufficient to effectuate such conveyance, transfer and
assignment. All instruments shall be in form and substance reasonably
satisfactory to Buyer;
(b) Seller shall deliver to Buyer all originals or copies, as
provided herein, of Seller's files and records which are relevant to the
Assets, such relevance to be determined in Buyer's reasonable discretion, and
Seller shall put Buyer in actual possession of the Assets; and
(c) Seller and Buyer shall execute and deliver, each to the other.
the documents required to be executed and delivered by such parties pursuant to
Sections 7.2 and 7.3, respectively.
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(d) Buyer shall have completed the wire transfer referred to in
Section 2.2(a)(i), above.
2.7 FURTHER ASSURANCES. From and after Closing, Seller and Buyer shall
do, execute, acknowledge and deliver or cause to be done, executed, acknowledged
and delivered, all such further acts, deeds, assignments, documents,
instruments, transfers, conveyances, discharges, releases, assurances and
consents as the other party may, from time to time, reasonably request to
confirm, perfect and evidence the transfers and transactions contemplated by
this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER.
In order to induce Buyer to enter into this Agreement, Seller hereby
represents and warrants to Buyer that the following statements are true, correct
and complete. The representations and warranties of Seller set forth in this
Agreement-and in any other Acquisition Document are continuing in nature and
Seller shall promptly inform Buyer of any matter which would cause any such
representations or warranties to be untrue, incorrect or incomplete.
3.1 INCORPORATION. The Seller is a duly organized and validly existing
corporation in good standing under the laws of the State of California. The
Seller has full corporate power and authority to carry on its business and
operations as presently conducted and as planned to be conducted and is duly
qualified to do business in each jurisdiction in which it is either doing
business or in which the failure to qualify would have an adverse effect on the
Seller. Seller does not directly or indirectly own or otherwise control any
capital stock of, or have any ownership interest in, any corporation,
partnership or other entity. The current ownership structure has been approved
by all necessary governmental agencies. Attached hereto as Schedule 3.1 is a
complete and correct copy of the Articles of Incorporation and Bylaws (together
with all amendments thereto and restatements thereof) of the Seller.
3.2 CORPORATE AND GOVERNMENTAL AUTHORIZATIONS.
(a) The Seller has full corporate power and authority to execute
and deliver this Agreement and the other Acquisition Documents to which it is a
party, to perform its obligations hereunder and thereunder and to consummate
the transactions(s) contemplated by this Agreement. The execution, delivery and
performance of this Agreement and the other Acquisition Documents to which the
Seller is a party have been duly authorized by all requisite corporate action
of the Seller.
(b) No consent or authorization of, or filing with, any Person is
required on the part of the Seller in connection with the Seller's execution,
delivery or performance of this Agreement and the other Acquisition Documents to
which it is a party except for (a) those consents and authorizations listed on
Schedule 3.2(b), all of which have been obtained
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or made or will be obtained or made prior to Closing. Notwithstanding the
foregoing, Seller makes no representation or warranty with regard to the
application of California franchise law to the NRTC/Member Agreement. Buyer
shall have made Buyer's own determination with regard to such determination.
3.3 BINDING EFFECT. This Agreement has been duly and validly
authorized, executed and delivered by Seller. This Agreement constitutes, and,
on the Closing Date, the other Acquisition Documents executed and delivered by
the Seller will constitute the legal, valid and binding obligation of Seller
enforceable against Seller in accordance with their respective terms, subject to
bankruptcy, insolvency and similar laws of general application affecting
creditors' rights and remedies.
3.4 NO CONFLICT. Neither the execution and delivery by Seller of this
Agreement or the other Acquisition Documents nor the consummation of the
transactions contemplated by this Agreement, and the other Acquisition Documents
(i) violate any applicable law, regulation, order, judgment, injunction, decree,
rule or ruling of any governmental authority, (ii) violate any provision of the
articles of incorporation or bylaws of Seller, (iii) result in any breach of, or
constitute (with due notice or lapse of time or both) a default under any
agreement, instrument, license or permit to which Seller is a party or by which
or to which Seller or any of its assets are subject or bound, (iv) result in the
creation or imposition of any lien, charge or encumbrance on any of the Assets
other than as set forth in this Agreement, or (v) require the consent of any
third party not referenced herein.
3.5 TITLE TO PROPERTIES: LIENS: CONDITION OF PROPERTIES.
(a) Schedule 3.5(a) lists all Tangible Assets of Seller which
consists of all tangible assets used or otherwise necessary to conduct the
Business. Seller has good and valid title to the Tangible Assets free and clear
of any Lien. All Tangible Assets material to the operation of the Business are
in good working order and repair and comply in all material respects with
applicable rules, regulations and standards regarding their intended use.
Without limiting the generality of the foregoing, except as indicated in
Schedule 3.5(a), the Seller uses no furniture, fixtures or equipment which it
does not own.
(b) All leases of personal property to which Seller is a party are
valid, binding and enforceable in accordance with their terms, and neither
Seller nor, to Seller's knowledge, any other party thereto is in default
thereunder. Seller is the sole and exclusive owner of all right, title and
interest in and to all Assets. All of the Assets are free and clear of all
security interests, pledges, liens, conditional sales agreements and
encumbrances.
(c) Schedule 3.5(c) contains a description of all of Seller's
interests, including leasehold interests and easements, and rights in and
agreements with respect to real property used or intended for use in connection
with the operations of the Business (the "Real Property").
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(d) Seller has good title to the non-fee estates identified on
Schedule 3.5(c). The contracts with respect to Real Property listed on Schedule
3.5(c) constitute valid and binding obligations of Seller and of all other
parties thereto, and are in full force and effect as of the date hereof. Seller
is not in default under any of the contracts with respect to Real Property and,
to the best of Seller's knowledge, the other parties to such contracts are not
in default thereunder. Seller has not received or given written notice of any
default thereunder from or to any of the other parties thereto. Schedule 3.5(c)
lists all third party consents necessary to assign such contracts. Except as
disclosed on Schedule 3.5(c), Seller has full legal power and authority to
assign its rights under the contracts with respect to Real Property listed and
described on Schedule 3.5(c) to Buyer in accordance with this Agreement on
terms and conditions no less favorable than those in effect on the date hereof,
and such assignment will not affect the validity, enforceability or continuity
of any such contracts.
3.6 [INTENTIONALLY OMITTED.]
3.7 FINANCIAL CONDITION OF SELLER.
(a) Copies of the following financial statements (the "FINANCIAL
STATEMENTS") have heretofore been delivered to the Buyer:
(i) the unaudited balance sheet of the Seller as of December
31, 1994, and statements of operations, retained earnings and
cash flows for the fiscal year then ended; and
(ii) the unaudited balance sheet of the Seller as of February
9, 1996, and statements of operations, retained earnings and
cash flows for the previous two (2) month accounting period
close, prepared by the Seller (the "LATEST FINANCIAL
STATEMENTS").
The Financial Statements, together with the notes thereto, (i) are in accordance
with the books and records of the Seller, (ii) present fairly and accurately the
financial condition of the Seller as of the dates of the balance sheets, (iii)
present fairly and accurately in all material respects the results of operations
of the Seller for the periods covered by such statements, and (iv) have been
prepared in accordance with GAAP except as noted therein, and in the.. case of
the Latest Financial Statements, subject to normal year-end adjustments. As of
the Closing, the Seller shall have no debts, liabilities or obligations of any
nature (whether absolute, accrued or contingent and whether due or to become
due) that are not reflected on the Financial Statements or that are not
otherwise disclosed on schedules delivered pursuant to this Agreement. The
Financial Statements include appropriate reserves for all taxes and other
liabilities accrued as of the date of such statements but not yet payable.
Notwithstanding the foregoing, the parties acknowledge that certain calculations
of credits and debits relating to the accounting with the NRTC, including, but
not limited to the calculation of unearned revenues and advance payments, may
not be capable of calculation prior to Closing, and will
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therefore be addressed,pursuant to the Closing Adjustment concepts outlined in
Section 2.4, above.
(b) Except to the extent provided in the Latest Financial
Statements, there are no material liabilities or obligations of Seller or
otherwise relating to the Business. Since the date of the Latest Financial
Statements, there has been no change in the financial condition of Seller or
results of operations of the Business, or either of them, nor has any other
event or condition occurred which may have or has had a material adverse effect
on the Seller or the Business.
(c) All federal, state, county and local tax returns, reports and
declarations of estimated tax or estimated tax deposit forms required to be
filed by Seller have been duly and timely filed or extensions taken in timely
fashion. Seller has timely paid all taxes which have become due pursuant to such
returns or pursuant to any assessment received by it, and has paid in full all
installments of estimated taxes due. All taxes, levies and other assessments
which Seller is required by law to withhold or to collect have been duly
withheld and collected, and have been paid over to the proper governmental
authorities or are held by Seller for such payment.
(d) Seller's books and records are complete and accurately and
fairly reflect the transactions and dispositions of the Seller's assets. The
Seller has consistently maintained a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP or any other criteria applicable to such
statements and to maintain accountability for such assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. Notwithstanding the foregoing, the parties
acknowledge that certain calculations of credits and debits relating to the
accounting with the NRTC, including, but not limited to the calculation of
unearned revenues and advance payments, may not be capable of calculation prior
to Closing, and will therefore be addressed pursuant to the Closing Adjustment
concepts outlined in Section 2.4, above.
(e) The accounts receivable of the Seller relating to the
Business as set forth in the Latest Financial Statements, and such accounts
receivable that have arisen since the date of the Latest Financial Statements
(collectively, the "ACCOUNTS RECEIVABLE"), are and will be, unless previously
collected, valid and enforceable obligations due to the Seller, collectible by
the Seller in the ordinary course of business, and are not subject to any
contest, valid defense, claim or set-off, except routine customer complaints of
an immaterial nature.
3.8 ABSENCE OF CERTAIN CHANGES. Since February 9, 1996, or as otherwise
provided, except as expressly disclosed in this Agreement or the Schedules
thereto, there has
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not been (a) any pending or threatened union organizational activity, labor
dispute or grievance, strike or work stoppage affecting the Business; (b) any
physical damage, destruction or loss affecting the Business where the affected
assets have not been restored, repaired or replaced with assets of similar
quality, value and utility; (c) any material contract, commitment or transaction
entered into or consummated respecting the Business; (d) any sale, assignment,
lease or other transfer or disposition of any of Seller's properties or assets
except in the normal course of business; (e) any increase in compensation
payable or to become payable to, or any bonus paid or agreed to be paid to, any
employee or agent of the Business; or (f) any change in the service area of the
Business or any electronic interference with the Business or the System.
3.9 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Seller is not in
violation or breach of, or in default under, (a) any provision of its or other
organizational documents, (b) any provision of any law or regulation applicable
to it or to which any of its assets are subject, or any other state, federal, or
municipal administrative agency, which violation or breach would have a material
adverse effect on the Seller or the Business (and no notice has been received of
any violation or breach of law or regulation whatsoever), except as may be
listed in the Schedules to this Agreement, (c) any order, judgment or award of
any court, tribunal or state, federal, or municipal administrative or regulatory
authority applicable to it or to which any of its assets are subject, or (d) any
material agreement or instrument to which it is a party or to which any of its
assets is bound, including, without limitation, the NRTC/Member Agreement and
the DirecTv Agreement.
3.10 INTELLECTUAL PROPERTY. Schedule 3.10 lists all material
copyrights, trademarks, tradenames, service marks, Licenses, patents, permits,
jingles, privileges and other similar intangible property rights and interests
(exclusive of those required to be listed in other Schedules) applied for,
issued to or owned by Seller, or under which Seller is licensed or franchised,
and used or useful in the conduct of the businesses and operations of the
Business, all of which rights and interests are issued to or owned by Seller, or
if licensed or franchised to Seller, are valid and uncontested. Seller has
delivered to Buyer copies of all material documents, if any, establishing such
rights, Licenses or other authority. To Seller's knowledge, there is no pending
or threatened proceeding or litigation affecting or with respect to the
Intellectual Property. Seller has received no notice and has no knowledge of any
infringement or unlawful use of such property. The intellectual property listed
in Schedule 3.10 includes all such property necessary to conduct the Business as
now conducted.
3.11 LITIGATION.
(a) Except as set forth in Schedule 3.11 (a), there are no
actions, suits, proceedings or investigations (whether or not purportedly on
behalf of Seller) pending or threatened against or affecting Seller or the
Business at law or in equity or admiralty, or before or by any federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality, domestic or foreign which could have a material adverse
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effect on Seller or the Business, nor has any such action, suit, proceeding or
investigation been pending during the 12-month period preceding the date of this
Agreement.
(b) Except as listed in Schedule 3.11(b), Seller is not operating
under or subject to, or in default with respect to, any order, writ, injunction
or decree of any court or federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, domestic or foreign.
3.12 EMPLOYEE INFORMATION.
(a) Schedule 3.12(a) contains a true and complete list of all
Persons employed in connection with the Business. Except as set forth on
Schedule 3.12(a), there are no employment contracts or other compensation
arrangements respecting any employees of the Seller. It is acknowledged that
Buyer shall not be responsible to hire any of the employees of Seller, nor be
bound by any employment contracts or other compensation agreements regarding
employees of Seller.
3.13 FINDER'S FEE. No agent, broker or finder has acted for Seller in
connection with this Agreement, and the transactions contemplated hereby, and
Seller hereby agrees to indemnify and save Buyer harmless from any claims of
Persons claiming by or through Seller for commissions or fees by reason of this
Agreement or the transactions contemplated by this Agreement.
3.14 [INTENTIONALLY OMITTED.]
3.15 NON-FOREIGN STATUS. Seller is not a "non-resident alien", "foreign
corporation", "foreign partnership", "foreign trust" or "foreign estate" within
the meaning of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder and Seller agrees, at the Closing, to deliver to Buyer
any affidavit or certificate required pursuant to the Internal Revenue Code or
any regulations thereunder specifically relating to the matters represented in
this Section.
3.16 [INTENTIONALLY OMITTED.]
3.17 INSOLVENCY. No insolvency proceedings of any character, including
without limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting Seller or any of
the Business Assets, are pending or threatened, and Seller has not made any
assignment for the benefit of creditors or taken any action in contemplation of
or which would constitute the basis for the institution of such insolvency
proceedings.
3.18 SECURITIES LAW. Seller is not now and has never been subject to
the reporting requirements of the Securities and Exchange Commission ("SEC").
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3.19 CONTRACTS. Except for the contracts, plans, agreements, and leases
listed in Schedule 3.19, true and complete copies of which have been furnished
to Buyer as of the date hereof, Seller is not a party to any (i) contracts for
the future purchase of materials, supplies, equipment or services; (ii)
contracts not made in the ordinary and usual course of business; (iii)
employment or consulting contracts; (iv) contracts with any labor union or other
labor organization; (v) guarantees or accommodations; (vi) leases of personal or
real property; (vii) or shareholders of Seller, or (viii) contracts continuing
for a period of more than six (6) months from their respective dates. Seller has
performed all obligations required to be performed by it to date (including
having paid any amounts required to have been paid to date under any agreements
including, but not limited to, Programming agreements, all franchise fees, and
all payments to NRTC, Hughes, or DirecTv and has not breached and is not in
default under any agreement listed in Schedule 3.19 or to which it is -a party
or by which it is bound, and all of the same are enforceable in accordance with
their terms. All such agreements are in full force and effect and there does not
exist any default or event or condition which, after notice or lapse of time or
both, would constitute a default thereunder by Seller or to the knowledge of
Seller, by any other party thereto.
3.20 NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS
(a) Attached hereto as Schedule 3.20(a), is a true and complete
copy of the NRTC/Member Agreement together with all exhibits thereto.
(b) Attached hereto as Schedule 3.20(b) is a true and complete
copy of the DirecTv Agreement, with all exhibits thereto.
(c) Pursuant to the NRTC/Member Agreement, Seller has the
exclusive right to market, sell and retain revenue from Programming (except
Non-Select Services) transmitted over the NRTC/Member Agreement directly to
Committed Member Residences under the terms and conditions set forth in the
NRTC/Member Agreement. Seller also has the right to market, sell and retain
revenue from the distribution of Programming (except NonSelect Services)
directly to Commercial Establishments under the terms and conditions set forth
in the NRTC/Member Agreement.
(d) Pursuant to the NRTC/Member Agreement, Seller has (i) the
right to establish the terms and conditions upon which it will market and sell
Programming (except Non-Select Services) to Committed Member Residences or
Commercial Establishments, or both, and is entitled to all revenues from such
marketing and sales to such Committed Member Residences or Commercial
Establishments, or both, subject only to those Programming agreements set forth
on Schedule 3.20(d) ("Marketing Revenues"), and (ii) Seller has paid all sums
to NRTC or Hughes, as appropriate, required under the NRTC/Member Agreement
such that Seller is entitled to the Marketing Revenues. Seller has the right to
receive from NRTC, on a pro rata basis, all other net revenues received by NRTC
from Hughes in connection with the Programming which are directly attributable
to the
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Committed Member Residences or the Commercial Establishments.
(e) Seller is in full compliance in all material respects with
any and all membership, affiliation, licensing or other requirements or
arrangements as may have been established by NRTC, Hughes or DirecTv, if any,
pursuant to the NRTC/Member Agreement, the DirecTv Agreement, or otherwise.
(f) Seller is not in breach of the NRTC/Member or the DirecTv
Agreement Agreement nor has Seller failed to perform any material obligation
under the NRTC/Member Agreement or the DirecTv Agreement. Seller has not
received notice of any such breach or non-performance at any time.
(g) Except as disclosed on Schedule 3.20(g), none of the DBS
Services distributed by Seller has been suspended at any time since inception.
(h) Schedule 3.20(h)(i) sets forth all Customers, identified as
Committed Member Residence and Commercial Establishment, including the number of
months such Customer has been a Customer and whether such Customer's account is
past due.
3.21 TRUE AT CLOSING. The representations, warranties, covenants and
agreements of the Seller set forth in this Section 3, are and will be true both
on the date of this Agreement and on and as of the Closing, except for
representations, warranties, covenants and agreements made as of a specific
date, which will be true as of such specific date. All of the representations
and warranties by Seller shall survive the Closing for a period of thirty (30)
months with the exception of the tax representations and warranties, which will
survive for the respective tax statute of limitation periods.
3.22 DISCLOSURE BY SELLER. No representation or warranty made by Seller
in this Agreement and no statement made in any certificate to be delivered at
the Closing, Exhibit or Schedule furnished or to be furnished in connection with
the transactions herein contemplated contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make such representation or warranty or any such statement not
misleading to a prospective purchaser of assets of Seller who is seeking full
information with respect to Seller and the Business.
3.23 NO REPRESENTATIONS OR WARRANTIES RE PROFITABILITY. Seller does not
make any representations or warranties with regard to the potential
profitability of a company acquiring the assets of Seller. While Seller has
fully and accurately disclosed information necessary to give a financial history
of Seller's operation of such business for the past two years, Buyer is aware
that Seller is involved in a highly competitive business, and Buyer has made its
own determinations as to the potential profitability of a company utilizing the
assets of Seller in the future.
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3.24 RESOLUTION OF DISPUTES REGARDING SELLER'S REPRESENTATIONS AND
WARRANTIES. If a dispute or controversy arises between the parties relating to
an allegation of Seller's breach of any representation or warranty made
hereunder, the parties agree that Buyer shall not be entitled to withhold or
delay any payments due under Section 2.2, above, and the parties agree to use
the following procedures to resolve such disputes or controversies:
(a) A meeting will be held promptly between the parties in San
Luis Obispo, California, attended by individuals with
decision-making authority to attempt in good faith to
negotiate a resolution of the dispute. If either patty intends
to be accompanied at a meeting by an attorney, the other party
will be given at least three (3) business days' notice of such
intention, and that party also may be accompanied by an
attorney. All negotiations pursuant to this Section 3.24(a)
are confidential and will be treated as compromise and
settlement negotiations for purposes of the Federal and State
Rules of Evidence.
(b) If within five (5) days after such meeting, the parties have
not succeeded in negotiating a resolution of the dispute, they
will jointly appoint a mutually acceptable neutral person not
affiliated with either of the parties (the "Neutral"), seeking
assistance in such regard from the Center for Public Resources
("CPR") if they have been unable to agree upon such
appointment within ten (10) days from the initial meeting. The
obligation for payment of the fees of the Neutral will be
shared equally by the parties. In consultation with the
Neutral, the parties will select or devise an alternative
dispute resolution procedure ("ADR") by which they will
attempt to resolve the dispute, and a time for the ADR to be
held, with the Neutral making the decision as to the procedure
and time (but unless circumstances require otherwise, not
later than twenty (20) days after selection of the Neutral) if
the parties have been unable to agree on any of such matters
within ten (I 0) days after initial consultation with the
Neutral. Any ADR proceeding will be held in San Luis Obispo,
California, at a location mutually agreeable to the parties
or, if they are unable to agree, selected by the Neutral. The
parties agree to participate in good faith in the ADR to its
conclusion as designated by the Neutral.
(c) If the parties are not successful in resolving the dispute as
provided in Sections 3.24(a) or (b) above, then the parties
agree that such dispute will be settled by binding arbitration
conducted on a confidential basis pursuant to the CPR Rules
for Non-Administered Arbitration of Business Disputes by a
sole arbitrator selected from the CPR Panels of Neutrals. Any
decision or award as a result of any such arbitration
proceeding will include the assessment of costs. expenses and
reasonable
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attorneys' fees in favor of the prevailing party, which will
be selected in the discretion of the arbitrator. Absent an
agreement by the parties to the contrary, any such arbitration
will be conducted at a location, in San Luis Obispo,
California, selected by the arbitrator. The parties reserve
the right to object to any proposed arbitrator who is employed
by or affiliated with a competing organization or entity.
Prior to issuing the arbitrator's final award of arbitration,
the arbitrator will provide each party with the arbitrator's
written tentative award, which will include the findings of
fact as determined by the arbitrator upon which such tentative
award is based. Each party will have five (5) business days
from the delivery of such tentative award to submit to the
arbitrator a written rebuttal to the findings of fact set
forth in the tentative award, and the arbitrator will promptly
forward a copy of each party's rebuttal, if any, to the other
party. If neither party submits such a rebuttal, the tentative
award will be deemed final; if either or both parties submits
such a rebuttal, the arbitrator will promptly review the same
and will deliver a final award, in writing, to each of the
parties. An award of arbitration will be final and binding on
the parties hereto and may be confirmed in any appropriate
court with jurisdiction.
(d) All applicable statutes of limitation and defenses based upon
the passage of time will be tolled while the procedures
specified in this Section 3.24 are pending. The parties will
take all such actions, if any, necessary to effectuate such
tolling.
(e) The provisions of this Section 3.24 are intended solely to
address an allegation by Buyer of Seller's breach of any
representation or warranty made hereunder, and this dispute
resolution process shall not apply to any other dispute or
action between the parties including, but not limited to, any
action by Seller to enforce the terms and conditions of this
Agreement, the Note, the Collateral Assignment Agreement, the
Security and Pledge Agreement, or the Security Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
In order to induce Seller to enter into this Agreement, Buyer
represents and warrants to Seller that the following statements are true,
correct and complete. The representations and warranties of Seller set forth in
this Agreement and in any other Acquisition Document are continuing in nature
and Seller shall promptly inform Buyer of any matter which would cause any such
representations or warranties to be untrue, incorrect or incomplete.
4.1 ORGANIZATION, OWNERSHIP, ETC., OF BUYER. Buyer is a Delaware
limited
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partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware with full power and authority to carry on its business
and operations as presently conducted and is duly qualified to do business in
each jurisdiction in which it is doing business. The current ownership structure
has been approved by all necessary governmental agencies. Attached hereto as
Schedule 4.1 is a complete and correct copy of the Certificate of Limited
Partnership of Buyer, the Limited Partnership Agreement (together with all
amendments thereto and restatements thereof), and Articles of Incorporation and
Bylaws of any corporate general partner of Buyer.
4.2 AUTHORITY OF BUYER. Buyer has the power to execute, deliver, and
perform this Agreement, and the other Acquisition Documents to which it is a
party. Buyer has taken all necessary action to authorize the execution, delivery
and performance of this Agreement and the other Acquisition Documents to which
it is a party, and has full partnership power to perform its obligations
hereunder and thereunder and to consummate the transactions(s) contemplated by
this Agreement. No consent or authorization of, or filing with, any person is
required on the part of the Buyer in connection with the Buyer's execution,
delivery or performance of this Agreement, and the other Acquisition Documents
to which it is a party.
4.3 BINDING EFFECT. This Agreement and the other Acquisition Documents
have been duly and validly authorized, executed and delivered by Buyer. This
Agreement constitutes, and the other Acquisition Documents to which it is a
party, on the Closing Date, will constitute, the legal, valid, and binding
obligations of Buyer enforceable against it in accordance with the respective
terms hereof and thereof, subject to bankruptcy, insolvency, and similar laws of
general application affecting creditors' rights and remedies.
4.4 NO VIOLATION. Neither the execution and delivery by Buyer of this
Agreement or any other Acquisition Document nor the consummation of the
transactions contemplated hereby or thereby violate or will violate any
provision of law applicable to, or any provision of the certificate of limited
partnership or agreement of limited partnership of the Buyer or conflict with or
result in any breach of any term, condition or provision of, or constitute (with
due notice or lapse of time or both) a default under, or, except as contemplated
by the Security Agreement, result in the creation or imposition of any lien,
charge or encumbrance upon any of the properties or assets of Buyer pursuant to
the terms of, any mortgage, deed of trust or other agreement or instrument to
which Buyer is a party or by which or to which Buyer or any of its assets are
subject or bound.
4.5 FINDER'S FEE. No agent, broker or finder has acted for Buyer in
connection with this Agreement, and the transactions contemplated hereby, and
Buyer hereby agrees to indemnify and save Seller harmless from any claims of
Persons claiming by or through Buyer for commissions or fees by reason of this
Agreement or the transactions contemplated by this Agreement.
4.6 CONSENTS. Except as contemplated in Section 7.1 of this Agreement,
no
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consent or approval by, or filing with, any governmental authority is required
in connection with the execution or delivery of this Agreement by Buyer or the
performance of its obligations hereunder.
4.7 CAPITALIZATION OF BUYER. As of Closing, Buyer shall have been
capitalized with equity capital of no less than $1,000,000.00, exclusive of the
Closing Payment to be paid to Seller at Closing.
4.8 TRUE AT CLOSING. The representations, warranties, covenants and
agreements of the Buyer set forth in this Section 4 are, and will be true, both
on the date of this Agreement and on and as of the Closing, except for
representations, warranties, and agreements made as of a specific date, which
will be true as of such specific date. All of the representations and warranties
by Buyer shall survive the Closing for a period of thirty (30) months.
4.9 DISCLOSURE BY BUYER. No representation or warranty made by Buyer in
this Agreement, or to be furnished in connection with the transactions herein
contemplated contains or will contain any untrue statement of a material fact,
or omits or will omit to state any material facts necessary to make such
representation or warranty, or any such statement not misleading to a
prospective creditor of Buyer, who is seeking full information with respect to
Buyer's creditworthiness.
SECTION 5. COVENANTS OF SELLER.
Seller agrees that from the date hereof through and until the Closing
Date:
5.1 APPROVALS. It shall diligently prosecute any required applications
to NRTC,, Hughes and DirecTv for all consents, authorizations and approvals
necessary for assignment of the NRTC/Member Agreement and the DirecTv Agreement
to Buyer, (including, to the extent reasonably required, attendance by
representatives of Seller at meetings with NRTC, Hughes or DirecTv) and use its
best efforts to obtain such consents and approvals as promptly and expeditiously
as possible.
5.2 ACCESS. Buyer shall have the right, itself or through its
representatives, subject to the conditions and limitations set forth in this
Agreement, to inspect the properties of Seller and to inspect and make abstracts
and reproductions of all books and records of Seller including, without
limitation, applications and reports to and correspondence with NRTC, Hughes and
DirecTv, and Seller shall furnish Buyer with such information respecting the
Assets and the Business as Buyer may, from time to time, reasonably request.
Buyer and Seller agree to use such reasonable discretion so as to preserve the
confidentiality of the transaction.
5.3 CONDUCT OF BUSINESS. Unless performance of the following
obligations is waived by Buyer (made in its sole discretion) in advance and in
writing, Seller shall:
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(a) not sell or dispose of any of the Assets, other than in the
ordinary course of business, in which case such Assets disposed of shall be
replaced by assets of like kind, quality and utility;
(b) not modify, amend, alter or terminate the NRTC/Member
Agreement, the DirecTv Agreement or any of the Other Assumed Contracts, or
waive any default or breach thereunder except as may be coordinated with Buyer;
(c) comply in all material respects with the NRTC/Member
Agreement, the DirecTv Agreement and all Other Assumed Contracts, use its best
efforts to cure any material default or breach thereunder, and promptly notify
Buyer upon receipt of notice of any default or breach thereunder;
(d) maintain all applicable insurance policies in full force and
effect;
(e) maintain its books and records in accordance-with prior
practice, maintain all of its property and assets in their present condition,
ordinary wear and tear excepted, maintain supplies of technical materials,
supplies, inventory and spare parts consistent with past practice, and
otherwise use its best efforts to operate the Business in the ordinary course
in accordance with practices during the twelve (12) months preceding the date
of this Agreement;
(f) not increase the compensation payable or to become payable to,
and not pay or agree to pay any bonus to, any employee or agent of Seller
except in accordance with plans or policies set forth on SCHEDULE 3.12(a);
(g) not enter into any contract or renewal of any existing
contract for the employment of any employee of Seller other than contracts
which may be terminated by the employer without penalty on not more than thirty
(30) days' notice;
(h) not, without the prior written consent of Buyer, enter into any
other contract or commitment materially affecting the Business;
(i) use its best efforts to keep its business organization intact,
make available the services of key employees, and maintain good relationships
with its key employees, suppliers, advertisers and other having business
relations with it;
(j) use its best efforts to obtain prior to the Closing Date
consents from all third parties under the Other Assumed Contracts listed on
SCHEDULE 3.19 hereto;
(k) operate the Business in all material respects in accordance
with the Licenses, comply in all material respects with all laws, rules and
regulations applicable to it, including the regulations and policies of NRTC,
Hughes and DirecTv, and use its best efforts
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to cure any material violations of the Licenses;
(l) within ten (10) days after the accounting period close of each
month (commencing with the month in which this Agreement is executed) prior to
the Closing Date, furnish to Buyer or unaudited balance sheet and a statements
of operations, retained earnings and cash flows in respect of the Business for
the elapsed portion of the then current fiscal year of Seller, which financial
statements shall be prepared in accordance with GAAP, except for required
disclosures necessary under GAAP, and shall fairly present the results of such
operations of Seller as of the dates and for the periods covered thereby
(subject to normal year-end adjustments and subject to the availability of
information from the NRTC necessary to prepare such balance sheets);
(m) provide to Buyer, concurrently with filing thereof and at
Buyer's request, copies of all reports to and other filings and correspondence
with the NRTC, Hughes and DirecTv;
(n) not surrender or voluntarily modify any of the Licenses, or
take any action which would cause the institution of proceedings for the
suspension, revocation or limitation of rights under any of the Licenses;
(o) provide to Buyer, promptly upon receipt thereof by Seller, a
copy of (i) any notice of the revocation, suspension, or limitation of the
rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under any License, and (ii) copies of all protests,
complaints, challenges or other documents submitted to or FILED with the NRTC,
Hughes or DirecTv by third parties concerning the Business and, promptly upon
the filing or making thereof, copies of Seller's responses thereto; and
(p) notify Buyer in writing immediately upon learning of the
institution or threat of any action against Seller in any court, or any action
against Seller before any governmental agency, and notify Buyer in writing
promptly upon receipt of any administrative or court order relating to the
Business.
5.4 LIEN SEARCHES. As soon as practicable after the date hereof and in
any event not later than ten days prior to the Closing, the Seller shall obtain
and deliver to the Buyer at the Seller's expense Uniform Commercial Code, tax
lien, bankruptcy and judgment lien searches for the Seller. Such searches shall
be conducted under the present name of the Seller and such other names as it has
used during the past five years. All such names are listed in SCHEDULE 5.4
attached hereto.
SECTION 6. COVENANTS OF BUYER BEFORE AND AFTER CLOSING.
Buyer agrees that from the date hereof through and until the Closing Date:
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6.1 APPROVALS. It shall diligently prosecute any required applications
to NRTC, Hughes and DirecTv for all consents, authorizations and approvals
necessary for the assignment of the NRTC/Member Agreement and the DirecTv
Agreement to Buyer (including, to the extent necessary reasonably required,
attendance by representatives of Buyer at NRTC, Hughes and DirecTv meetings) and
use its best efforts to obtain such consents and approvals as promptly and
expeditiously as possible.
6.2 CONTROL OF BUSINESS. Subject to the provisions of Section 5.3.
Buyer shall not exercise any control over or supervise, directly or indirectly,
the operations or policies -of the Business, all of which shall be Seller's sole
right and responsibility.
6.3 COOPERATION FOR CONSENTS. Buyer agrees to make reasonable efforts
to respond to reasonable and customary inquiries relating to Buyer made by a
party (other than Seller) from whom, pursuant to Section 7.2(c) hereof, a
consent to the assignment of an assumed contract is a condition precedent to
Buyer's obligation to consummate the transaction contemplated hereby.
6.4 CONDUCT OF BUSINESS AFTER CLOSING. Buyer agrees that after the
Closing Date and until payment in full of the Subscriber Settlement Payment,
Buyer shall
(a) own or lease assets sufficient to operate the Business;
(b) not modify, amend, assign, alter or terminate the NRTC/Member
Agreement, the DirecTv Agreement or any of the Other Assumed Contracts or any
other material agreement relating to the Business which Buyer has entered into
with NRTC, DirecTv or Hughes, or waive any default or breach thereunder, except
as may be coordinated with Seller;
(c) comply in all material respects with the NRTC/Member
Agreement, the DirecTv Agreement and all Other Assumed Contracts or any
agreement which Buyer has entered into with NRTC, DirecTv or Hughes, use its
best efforts to cure any material default or breach thereunder, and promptly
notify Seller upon receipt of notice of any default of breach thereunder;
(d) maintain insurance adequate for the conduct of its business;
(e) maintain its books and records in accordance with sound
business practice;
(f) use its commercially reasonable efforts to keep its business
organization intact, make available the services of key employees, and maintain
good relationships with its employees, suppliers, advertisers and others having
business relations with it;
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(g) operate the Business in all material respects in accordance
with the Licenses (including any Licenses obtained by Buyer after Closing),
comply in all material respects with all laws, rules and regulations applicable
to it, including the regulations and policies of NRTC, Hughes and DirecTv, and
use its commercially reasonable efforts to cure any material violations of the
Licenses;
(h) within ten (10) days of receipt of applicable information
from NRTC after the end of each month (commencing with the month in which the
Closing occurs), furnish to Seller (if available) monthly updates on the
applicable subscriber counts, churn rates, program package breakdowns, and any
other marketing reports prepared or utilized in the Business;
(i) provide to Seller reasonable access to all reports to and other
filings and correspondence with the NRTC, Hughes and DirecTv and copies of any
written notice of default from the NRTC, Hughes or DirecTv received by Buyer;
(j) not surrender or voluntarily modify any of the Licenses, or
take any action which would cause the institution of proceedings for the
suspension, revocation or limitation of rights under any of the Licenses;
(k) provide to Seller (i) promptly upon receipt thereof by Buyer, a
copy of any notice of the revocation, suspension, or limitation of the rights
under, or of any proceeding for the revocation, suspension, or limitation of the
rights under any License, and (ii) reasonable access to Buyer's customer
complaint file, which shall include copies of all protests, complaints,
challenges or other documents submitted to or filed with the NRTC, Hughes or
DirecTv by third parties concerning the Business and provided to Buyer, as well
as copies of Buyer's responses thereto;
(l) notify Seller in writing immediately upon learning of the
institution or threat of any action against Buyer in any court, or any action
against Buyer before any governmental agency, and notify Seller in writing
promptly upon receipt of any administrative or court order relating to the
Business;
(m) maintain strict compliance with the requirements of the
Business Plan attached hereto as SCHEDULE 6.4(m);
(n) provide to Seller within thirty (30) days after the close of
each quarter, financial statements of Buyer;
(o) not make any distributions, including, but not limited to,
dividends, bonuses, or advances, to the partners of Buyer, the officers,
directors, or shareholders of Columbia DBS, Inc., or the limited partners of
Columbia DBS Investors, L.P., except for
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distributions to the partners of Buyer to pay such partners' income taxes
directly arising from said partners' operation of the business and as may be
otherwise permitted under the Security Agreement;
(p) not amend or modify the partnership agreement governing the
operation of Buyer, nor admit any additional partners thereto, without Seller's
prior written consent; and
(q) utilize good faith efforts to maximize the number of qualified
Subscribers, as that term is defined herein, as of the Subscriber Settlement
Date.
SECTION 7. CONDITIONS TO CLOSING.
7.1 MUTUAL CONDITIONS. The obligations of Buyer and Seller to
consummate the transactions contemplated hereby are subject to satisfaction at
the time of the Closing of, in addition to all other conditions set forth
herein, the condition precedent that NRTC, Hughes and DirecTv shall have issued
all necessary authorizations, consents and approvals in connection with the
transactions contemplated by this Agreement, without conditions which are
materially adverse to Buyer or Seller or which in any material way diminish the
operating rights with respect to the Assets or the Business.
7.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the transactions contemplated by the Closing shall be subject to (1)
receipt by Buyer of the Schedules required to be provided by Seller hereunder in
such form and substance as shall be satisfactory to Buyer and (2) the
fulfillment (or waiver by Buyer), on or prior to the Closing Date, of each of
the following conditions:
(a) The representations and warranties of Seller contained herein
shall have been true and correct in all material respects when made and shall
be repeated and be true and correct in all material respects as of the Closing
Date;
(b) Seller shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in this
Agreement, and the other Acquisition Documents required to be performed or
complied with by it prior to or at the Closing Date;
(c) All authorizations and approvals of or consents of, or filings
with, any governmental authority or other Person required to be obtained or made
by Seller in connection with the Closing shall have been obtained or made and
shall be in full force and effect;
(d) Each of the Acquisition Documents to which Seller is a party
shall have been duly authorized, executed and delivered by Seller and complete
and correct copies thereof shall have been delivered to Buyer.
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(e) At Closing, the Seller shall have not less than 3,200
Subscribers; provided, however, that Buyer may, in its sole discretion, elect
to waive compliance with this condition and proceed to Closing;
(f) Seller shall have delivered to Buyer a certificate executed
by an authorized officer of Seller, dated the Closing Date, to the effect that
the conditions set forth in paragraphs (a) through (e) of this Section 7.2 have
been fulfilled;
(g) All corporate and other proceedings of Seller in connection
with the transactions contemplated by this Agreement and the other Acquisition
Documents, and all documents and instruments incident to such corporate
proceedings, shall be satisfactory in substance and form to Buyer and its
counsel, and Buyer and its counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested;
(h) Other than as referenced in Schedule 3.11(a), no action or
proceeding shall have been instituted or threatened against Seller which could
have a material adverse effect on the Seller or the Business; no action or
proceeding shall have been instituted or threatened against any of the parties
to this Agreement or their directors or officers, before any court or
governmental department, agency or commission to restrain or prohibit, or to
obtain substantial damages in respect of, this Agreement or the consummation of
the transactions contemplated hereby; and neither Seller nor Buyer shall have
received written notice from any court or governmental department, agency or
commission of its intention to institute any action or proceeding to restrain or
enjoin or continence any investigation (other than a routine letter of inquiry)
into the consummation of this Agreement and the transactions contemplated hereby
or to nullify or render ineffective this Agreement or such transactions if
consummated, which in the opinion of Buyer would make it inadvisable to
consummate such transactions;
(i) Prior to the Closing, there shall not have occurred any
material adverse change in the financial condition, operations, business or
prospects of Seller, including, but not limited to, becoming subject to any
state or federal regulatory proceedings which could culminate in an order or
other action which could cause such a material adverse change;
(j) Prior to the Closing, there shall not have occurred any damage,
destruction or loss to Tangible Assets exceeding $10,000 or other loss that has
a material adverse effect on the products, properties, business operations or
prospects of Seller;
(k) Seller shall have obtained and delivered to Buyer consents
from all third parties under the Other Assumed Contracts, where such consents
are required in order to transfer and assign such Other Assumed Contracts, and
neither Seller nor, to Seller's knowledge, any third party shall be in material
breach or default under the NRTC/Member Agreement, the DirecTv Agreement or any
Other Assumed Contract;
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<PAGE> 29
(l) None of the Licenses shall have been revoked or suspended, or
modified in any manner which could have a material adverse effect on the
Business or its operation and no proceeding for such revocation, suspension, or
modification shall be in effect;
(m) Seller shall have executed and delivered the Security
Agreement; and
(n) Seller shall have executed and delivered the Security and
Pledge Agreement.
7.3 CONDITIONS TO OBLIGATIONS OF SELLER. Seller's obligation to
consummate the transactions contemplated by this Agreement is subject to
satisfaction at the time of Closing of each of the following conditions
precedent, any of which may be waived by Seller:
(a) Each of the representations and warranties of Buyer contained
in this Agreement shall be true and correct in all material respects on the
Closing Date as though made on and as of the Closing Date; and Buyer shall, on
or before the Closing Date, have performed in all material respects all of its
covenants and obligations hereunder which by the terms hereof are to be
performed on or before the Closing Date;
(b) No action or proceeding shall have been instituted or
threatened against Buyer or Seller before any court or governmental agency or
commission seeking to restrain or prohibit this Agreement or consummation of
the transactions contemplated hereby;
(c) All authorizations and approvals of or consents of, or filings
with, any governmental authority or other person required to be obtained or made
by Buyer in connection with the Closing shall have been obtained or made and
shall be in full force and effect;
(d) Each of the Acquisition Documents to which Buyer is a party
shall have been duly authorized, executed and delivered by Buyer and complete
and correct copies thereof shall have been delivered to Seller;
(e) Buyer shall have delivered to Seller the certificate of Buyer,
dated as of the Closing Date, certifying as to the matters set forth in the
foregoing clauses (a) and (b) (except that, with regard to clause (b), such
certificate shall not certify as to matters relating to Seller);
(f) All of the partners of Buyer shall have executed and
delivered the Security and Pledge Agreement;
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<PAGE> 30
(g) All corporate, partnership, and other proceedings of the
Buyer in connection with the transactions contemplated by this Agreement and
the other Acquisition Documents, and all documents and instruments incident to
such corporate proceedings, shall be satisfactory in substance and form to
Seller and its counsel, and Seller and its counsel shall have received all such
documents and instruments, or copies thereof, certified if requested, as may be
reasonably requested;
(h) No action or proceeding shall be instituted or threatened
against Buyer or the partners of Buyer which could have a materially adverse
effect on the Buyer or; no action or proceeding shall be instituted or
threatened against any of the parties to this Agreement or their directors,
officers, or partners, before any court or governmental department, agency, or
commission to restrain or prohibit, or to obtain substantial damages in respect
of, this Agreement or the consummation of the transactions contemplated herein
by; and neither Seller nor Buyer shall have received written notice from any
court or governmental department, agency or commission of its intention to
institute any action or proceeding to restrain or enjoin or commence any
investigation (other than a routine letter of inquiry) into the consummation of
this Agreement and the transactions contemplated hereby or to nullify or render
ineffective this Agreement or such transactions if consummated, which in the
opinion of Seller make it inadvisable to consummate such transactions;
(i) Buyer shall have executed and delivered the Security Agreement;
(j) Buyer shall have executed and delivered the Note;
(k) Buyer, NRTC and Hughes shall have executed and delivered to
Seller the Collateral Assignment Agreement;
(l) Seller shall have received confirmation satisfactory to
Seller and Seller's accountants that Buyer has been capitalized with at least
$1,000,000 in equity capital for purposes specified in the Business Plan
attached as Schedule 6.4(m) after Closing; and (in) Buyer shall have completed
the wire transfer referred to in Section 2.2(a)(i) above.
SECTION 8. INDEMNIFICATION.
8.1 RIGHT TO INDEMNIFICATION.
(a) Seller shall indemnify, reimburse, and hold harmless Buyer
from and against all claims, losses, damages, costs (including, without
limitations, court costs and attorneys' fees), expenses and liabilities
suffered, incurred, or sustained by Buyer on account of (i) any
misrepresentation, breach of warranty, or nonfulfillment of any agreement on
the part of Seller under this Agreement, or under any Acquisition Document,
(ii) the failure of Seller to pay and perform promptly when due all of its
obligations, liabilities and debts, (iii) the operation of
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<PAGE> 31
the Business prior to the Closing, (iv) any breach of the NRTC/Member Agreement,
the DirecTv Agreement or any of the Other Assumed Contracts, (v) any other
matter or event respecting Seller and which occurs with respect to the period
prior to the Closing (other than liabilities specifically assumed by Buyer under
the NRTC/Member Agreement, the DirecTv Agreement or any of the Other Assumed
Contracts).
(b) Buyer shall indemnify, reimburse, and hold harmless Seller
from and against all claims, losses, damages, costs (including, without
limitation, court costs and attorneys' fees), expenses and liabilities
suffered, incurred, or sustained by Seller on account of (i) any
misrepresentation, breach of warranty, or nonfulfillment of any agreement on
the part of Buyer under this Agreement, or under any Acquisition Document, (ii)
the failure of Buyer to pay and perform promptly when due all of its
obligations, liabilities, and debts as provided under this Agreement and under
any of the Acquisition Documents, (iii) the operation of the Business after the
Closing, and (iv) any breach or default after the Closing Date by Buyer under
the NRTC/Member Agreement, the DirecTv Agreement or any of the Other Assumed
Contracts or any agreement which Buyer has entered into with NRTC, DirecTV or
Hughes; provided, however, that Seller shall not be entitled to indemnification
hereunder with respect to matters arising under contracts, commitments or
agreements of Seller not assumed by Buyer hereunder.
8.2 RIGHT TO CONTEST. Before being required to make any payment
pursuant to Section 8.1 hereof, Seller or Buyer, whichever is the indemnifying
party (the "Indemnifying Party"), may, at its expense, elect to undertake and
control the defense of, and take all necessary steps properly to contest any,
claim, liability or action in respect thereof involving third parties or to
prosecute such contest or action to conclusion or settlement satisfactory to the
party to be indemnified (the "Indemnified Party"). The Indemnified Party shall
notify the Indemnifying Party of any claims to indemnification involving third
parties it may wish to assert pursuant to Section 8.1 hereof as soon as
reasonably practicable; thereafter, the Indemnified Party shall, at the expense
of the Indemnifying Party, cooperate fully with the Indemnifying Party in the
conduct of any such contest or action. If the Indemnifying Party makes the
foregoing election, then the Indemnified Party shall have the right to
participate, at its own expense, in all proceedings. If the Indemnifying Party
does not make such election, it shall be bound by whatever result is obtained by
the Indemnified Party respecting such third party matter.
8.3 LIMITATION OF CLAIMS. Any claim by a party hereunder arising from a
claimed breach by the other party of any representation, warranty or covenant
hereunder (other than tax claims in respect of which there shall be no
limitation period) shall be made in writing and delivered to such other party no
later than thirty (30) months after the Closing Date.
SECTION 9. ACCESS.
9.1 ACCESS. Buyer and Seller each acknowledges that, to the best of its
knowledge, it has been afforded such opportunity to obtain information, inspect
and examine the other party and the Assets as it deems necessary to enter into
this Agreement; however, the
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<PAGE> 32
foregoing acknowledgment of present belief shall not be deemed to relieve either
party under, or impair or otherwise affect, any representation, warranty or
covenant contained in this Agreement, the Interim Management Agreement or any of
the other Acquisition Documents or the rights and obligations of either party in
respect of a breach thereof.
9.2 NOTICE OF BREACH. Buyer and Seller each agrees to give to the other
prompt written notice of a breach by such other party of any of its
representations, warranties and covenants of which Buyer or Seller, as the case
may be, obtains actual knowledge prior to the Closing Date. The term "actual
knowledge" shall be deemed to include information which is actually known and in
good faith recognized to be such a breach, it being the intention hereby that a
party be afforded as much opportunity as reasonably possible to cure prior to
Closing breaches which hereafter are found to exist.
SECTION 10. MISCELLANEOUS.
10.1 FEES AND EXPENSES.
(a) Unless otherwise provided in this Agreement, all costs of
transferring the Assets in accordance with this Agreement, including
recordation, transfer and documentary taxes and fees, shall be paid equally by
Buyer and Seller.
(b) Each of the parties shall bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement.
10.2 LAW GOVERNING. This Agreement and the Acquisition Documents shall
be construed under and governed by the laws of the state of California. The
parties agree that, except as set forth in Section 3.24 hereof, any suit,
action, or proceeding arising out of or relating to this Agreement, or the
interpretation, performance, or breach of this Agreement, shall be instituted in
the Superior Court for the County of San Luis Obispo, State of California, and
each party irrevocably submits to the jurisdiction of that court and waives all
objections to jurisdiction or venue that it may have under the laws of the State
of California or otherwise in those courts in any suit, action, or proceeding.
10.3 NOTICE. All notices, requests, demands, or other communications
under this Agreement shall be in writing. Notice shall be sufficiently given for
all purposes as follows:
(a) Personal Delivery. When personally delivered to the recipient.
Notice is effective on delivery.
(b) Certified Mail. When mailed certified mail, return receipt
requested. Notice is effective on receipt, if delivery is confirmed by a return
receipt.
(c) Overnight Delivery. When delivered by Federal Express,
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Airborne, United Parcel Service, or DHL WorldWide Express, charges prepaid or
charged to the sender's account. Notice is effective on delivery, if delivery is
confirmed by the delivery service.
(d) Telex or Facsimile Transmission. When sent by telex or fax
to the last telex or fax number of the recipient known to the party giving
notice. Notice is effective on receipt, provided that (a) a duplicate copy of
the notice is promptly given by first-class or certified mail or by overnight
delivery, or (b) the receiving party delivers a written confirmation of
receipt. Any notice given by telex or fax shall be deemed received on the next
business day if it is received after 5:00 p.m. (recipient's time) or on a
nonbusiness day.
Addresses for purpose of giving notice are as follows:
SELLER: PACIFIC COAST DBS, INC.
7935 El Camino Real
Atascadero, CA 93422
Facsimile: (805) 466-3044
Attention: Albert L. Labrie
With Copy (which, standing alone, shall not constitute notice) to:
Roderick A. Rodewald
Diehl & Rodewald
1043 Pacific
San Luis Obispo, CA 93401
Facsimile: (805) 541-6870
BUYER: Columbia DBS San Luis Obispo L.P.
201 N. Union, Suite 300
Alexandria, VA 22314
Attention: Harry F. Hopper, III
Facsimile: (703) 519-3904
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<PAGE> 34
With Copy (which, standing alone, shall not constitute notice) to:
Swidler & Berlin, Chartered
3000 K Street, N.W.
Suite 300
Washington, D.C. 20007
Attention: John J. Klusaritz, Esq..
Facsimile: (202) 424-7643
Any correctly addressed notice that is refused, unclaimed, or
undeliverable because of an act or omission of the party to be notified shall be
deemed effective as of the first day that said notice was refused, unclaimed, or
deemed undeliverable by the postal authorities, messenger, or overnight delivery
service.
Any party may change its address or telex or fax number by giving the
other party notice of the change in any manner permitted in this Agreement.
10.4 CONSTRUCTION.
(a) The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
(b) Words such as "herein" and "hereof" shall be deemed to refer
to this Agreement as a whole and not to any particular provision of this
Agreement.
10.5 ASSIGNMENT; BINDING EFFECT. This Agreement may not be assigned by
Buyer or Seller prior to the Closing without the prior written consent of the
other party. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their successors and permitted assigns.
10.6 AMENDMENT; WAIVER. This Agreement may be amended only by a written
instrument signed by Buyer and Seller. No provisions of this Agreement may be
waived except by an instrument in writing signed by the party sought to be
bound. No failure or delay by any party in exercising any right or remedy
hereunder shall operate as a waiver thereof, and a waiver of a particular right
or remedy on one occasion shall not be deemed a waiver of any other right or
remedy or a waiver on any subsequent occasion.
10.7 ENTIRE AGREEMENT. Except as provided in Section 10.9 hereof, this
Agreement and the Acquisition Documents set forth the entire understanding
between the parties relating to the subject matter hereof, any and all prior
correspondence, conversations and memoranda or other writings being merged
herein and replaced. No promises, covenants or representations of any character
or nature other than those expressly stated herein have
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<PAGE> 35
been made to induce either party to enter into this Agreement and the
Acquisition Documents.
10.8 INITIAL NOTICE TO PUBLIC. Seller and Buyer shall mutually agree in
advance on the manner in which the public is first informed of the execution of
this Agreement.
10.9 TERMINATION OF LETTER OF INTENT. All provisions of those certain
Letters of Intent dated November 28, 1995 and February 27, 1996, between Seller
and Columbia Capital Corporation ("Columbia"), an affiliate of Buyer, are hereby
terminated, other than the confidentiality provisions set forth in Paragraphs 2
thereof. Buyer hereby assumes and agrees to be bound by the obligations imposed
upon Columbia pursuant to such Paragraphs 2.
10.10 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two
or more counterparts, all of which together shall constitute one and the same
Agreement.
10.11 FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed by their respective duly authorized general partners as of the date
first above written.
ATTEST/WITNESS: SELLER:
PACIFIC COAST DBS, INC.
- -------------------
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
BUYER:
COLUMBIA DBS SAN LUIS OBISPO, L.P.
- ------------------- By: COLUMBIA DBS, INC.
Its: General Partner
By:
---------------------
Name:
---------------------
Title:
---------------------
35
<PAGE> 1
EXHIBIT 10.4(b)
FIRST AMENDMENT OF ASSET PURCHASE AGREEMENT
This First Amendment of Asset Purchase Agreement (this "Amendment") is
made as of April 1, 1996, between Columbia San Luis Obispo DBS, L.P., a
Delaware limited partnership ("Buyer") and Pacific Coast DBS, Inc., a
California corporation ("Seller").
RECITALS
A. Buyer and Seller entered into an Asset Purchase Agreement on March
19, 1996, at San Luis Obispo, California ("the Original Agreement"). A copy of
the Original Agreement is attached to this Amendment as Exhibit "A".
B. Since the date of the Original Agreement, the parties have
confirmed that the reference to the Buyer under the Original Agreement as
Columbia DBS San Luis Obispo, L.P. was incorrect, in that the actual name of
Buyer is Columbia San Luis Obispo DBS, L.P.
C. Since the date of the Original Agreement, the parties have further
acknowledged that the expenses and prepayments in connection with the assets to
be prorated between Buyer and Seller should be prorated as of 12:01 a.m. on
April 1, 1996, which is the Closing Date for the transaction, so that Paragraph
2.2(b) of the Agreement will require modification.
NOW THEREFORE, in consideration of the mutual obligations in this
Amendment, and for other good consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement agree as follows:
1. All reference to Columbia DBS San Luis Obispo, L.P., as Buyer in
the Original Agreement and any exhibits or schedules thereto shall be amended
to read Columbia San Luis Obispo DBS, L.P.
2. Paragraph 2.2(b) is hereby amended to read as follows:
"(b) Pro Rations. All expenses and prepayments in connection
with the assets shall be prorated among Buyer and Seller as of 12:01
a.m. on the Closing Date, and the net amount thereof shall be paid to
Seller or Buyer, as appropriate. Such prorations shall include, without
limitation, all Customer programming prepayments, rental payments,
business and license fees (but only for Licenses transferred hereunder)
and utility expenses. Seller shall be responsible for all expenses
arising out of contracts, agreements and commitments of the Business
(other than the NRTC/Member Agreement, DirecTv Agreement and the Other
Assumed Contracts, performance of which shall be prorated pursuant to
Section 2.1 hereof) for all periods prior to the Closing Date. Buyer
shall in no event be responsible for any amounts associated with the
Excluded Assets. Expenses, costs and liabilities incurred shall be
allocated to the time of occurrence of such programs and announcements
without regard to the date of payment therefor. All prorations shall,
to the extent feasible, be determined and paid on the Closing Date,
with a final settlement and payment thereof to be made as part of the
Final Consideration Adjustment
<PAGE> 2
pursuant to Section 2.4. If any dispute arises under this Agreement
regarding amounts determined in accordance with this Section, it shall
be referred to an Independent Accountant. The determination made by the
Independent Accountant shall be conclusive and binding on each party
and the fees of the Independent Accountant shall be divided equally
between Buyer and Seller."
3. This Amendment shall be effective as of April 1, 1996, subject to
each party's full and complete compliance with the conditions of Closing
contained in the Original Agreement, and the acquisition documents.
4. All provisions of the Original Agreement, except as modified by
this Amendment, shall remain in full force and effect and are reaffirmed.
IN WITNESS WHEREOF, Seller and Buyer have caused this First Amendment
of Asset Purchase Agreement to be executed by their respective duly authorized
officers and/or general partners as of the date first above written.
SELLER: BUYER:
PACIFIC COAST DBS, INC. COLUMBIA SAN LUIS OBISPO DBS, L.P.
By: /s/ By: COLUMBIA SAN LUIS OBISPO DBS, L.P.
------------------------- Its: General Partner
Name:
-------------------------
Title: By: /s/
------------------------- -----------------------------
Name:
-----------------------------
Title:
-----------------------------
2
<PAGE> 1
EXHIBIT 10.5(a)
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 11th day of June, 1996, by and between Digital Television
Services of Colorado, LP, a Georgia limited partnership ("Purchaser"), Omega
Cable, a Colorado general partnership ("Seller"), Dale Hazard, a resident of the
State of Colorado ("Hazard"), and Scott Alexander, a resident of the State of
Colorado ("Alexander") (Hazard and Alexander are hereinafter collectively
referred to as the "Owners").
RECITALS
A. Seller owns and operates an exclusive distributorship of the
National Rural Telecommunications Cooperative's DBS Services and of Hughes
Communications Galaxy, Inc.'s DirecTV service (the "Business") in Chaffee and
Saguache Counties, Colorado (the "Locations").
B. Owners are the general partners of Seller.
C. Seller desires to transfer and assign to Purchaser, and Purchaser
desires to acquire and accept from Seller, all of Seller's rights under the
NRTC/Member Agreement and the NRTC/Retail Agreement relating to the Locations
and certain other assets, upon the terms, and subject to the conditions, set
forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Seller, Purchaser and Owners hereby
agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
CABLE PROGRAMMING shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
CLOSING and CLOSING DATE shall have the meanings set forth in
Section 2.3 herein.
COMMERCIAL ESTABLISHMENT shall have the meaning ascribed to
such term in the NRTC/Member Agreement.
COMMITTED MEMBER RESIDENCE shall have the meaning ascribed to
such term in the NRTC/Member Agreement.
CUSTOMER shall mean any customer of the Business (including a
Subscriber).
<PAGE> 2
DBS SERVICES shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
DIRECTV means DirecTv, Inc., a California corporation.
HCG DIRECTV shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
HUGHES shall mean Hughes Communications Galaxy, Inc.
LIEN shall mean with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim or restriction of any kind in respect of such property or asset. For
purposes of this Agreement, any restriction or limitation with respect to a
security or other ownership interest (including any restriction on the right to
vote, sell or otherwise dispose of such security or ownership interest) shall
constitute a "Lien" thereon. For the purposes of this Agreement, a Person shall
be deemed to own subject to a Lien any property or asset which it has acquired
or holds subject to the interest of a vendor or lessor under any conditional
sale relating to such property or asset.
LOCATIONS shall have the meaning set forth in Paragraph S.1 of
Schedule 1.
NON-SELECT SERVICES shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
NRTC shall mean the National Rural Telecommunications
Cooperative, a District of Columbia corporation.
NRTC AGREEMENTS shall mean the NRTC/Member Agreement, the
NRTC/Retail Agreement, and any Other Assumed Agreements identified as NRTC
Agreements in Paragraph S.4 of Schedule 1.
NRTC/MEMBER AGREEMENT shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services between the NRTC and Seller
identified in Paragraph S.2 of Schedule 1.
NRTC/RETAIL AGREEMENT shall mean the NRTC/Member DBS Retail
product Agreement identified in Paragraph S.3 of Schedule 1.
OTHER ASSUMED AGREEMENTS shall mean the contracts and
agreements, if any, set forth in Paragraph S.4 of Schedule 1.
PERSON shall mean an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization
including a government or political subdivision or agency or instrumentality
thereof.
PROGRAMMING shall mean Cable Programming and HCG DirecTv.
2
<PAGE> 3
SUBSCRIBER as of any date shall mean a Customer who, at a
minimum, is subscribing to a package of basic services and: (1) on the last day
of the calendar month prior to such date, whose account is not more than sixty
(60) days past due from the date payment is due; (2) who is not an employee or
agent of the service provider or charged a fee that is nominal (e.g.,
demonstration unit) or substantially below the service provider's published
rates; and (3) who has not given notice of intent to discontinue service.
SECTION 2. PURCHASE AND SALE; CLOSING.
2.1 PURCHASE AND SALE OF ASSETS; ASSUMPTION OF CERTAIN
LIABILITIES.
(a) Subject to the provisions of this Agreement, Seller
agrees to transfer and assign to Purchaser, and Purchaser agrees to acquire and
accept from Seller, as of the "Closing Date" (hereinafter defined), free and
clear of any and all Liens, all: (i) NRTC Agreements, (ii) relationships,
contracts, and accounts with Customers, (iii) other tangible assets used or
useful in the provision of DBS Services, including, without limitation, any MTE
terminals and demonstration units; (iv) files, books and records relating to
the provision of DBS Services by Seller, including, without limitation,
Customer and prospective customer lists, computer programs, tapes and
electronic data processing software, accounting journals and ledgers, accounts
receivable records, copies of NRTC reports and correspondence and other
documents relating to the NRTC Agreements and compliance therewith
(collectively, "Records"); (v) exclusive rights to the telephone numbers used
in the Business; and (vi) cash in Seller's account at Huntington Bank, accounts
receivable from Customers, maintenance and security deposits, prepaid expenses,
supplies and other current assets (excluding inventory) (collectively, the
"Assets").
(b) Upon the assignment of the Assets, Purchaser shall
assume (i) Seller's obligations to be performed after 12:01 A.M. on the date
following the Closing Date under and as set forth in the NRTC Agreements (but
not obligations required to have been performed by Seller prior to such time)
to the extent that such obligations arise out of the provision of DBS Services
to Customers on or after such time, (ii) accounts payable to the NRTC, and
(iii) Seller's liabilities associated with unearned revenue, advance payments
and Customer credit balances to the extent such liabilities are taken into
account in the price adjustments described in Section 2.4 herein. Except as
expressly set forth in this Section 2.1(b), Purchaser shall not assume or be
deemed to have assumed under this Agreement, by reason of the transactions
contemplated by this Agreement, or otherwise, any debts, liabilities,
obligations or commitments of Seller of any nature whatsoever, known or
unknown, and the execution, delivery and performance of this Agreement shall
not render Purchaser liable for any such debt, liability, obligation or
commitment.
2.2 PURCHASE PRICE. The Purchase Price for the Assets pursuant
to this Agreement (the "Purchase Price") shall be Six Hundred Thirty-Three
Thousand Dollars ($633,000), plus the assumption of certain liabilities
described in Section 2.1(b) herein, subject to adjustment as provided in Section
2.4 herein, to be paid as follows:
(a) The sum of Three Hundred Thousand Dollars ($300,000),
subject to adjustment as described in Section 2.4(a) herein, on the Closing
Date by certified or cashier's
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<PAGE> 4
check, or by wire transfer of immediately available funds to an account or
accounts designated in writing by Seller (the "Closing Payment").
(b) The sum of Three Hundred Thirty-Three Thousand Dollars
($333,000) on the Closing Date by the delivery of a promissory note
substantially in the form attached hereto as SCHEDULE 2.2(b) (the "Note"), less
any adjustments and reductions as provided in Section 2.4 herein and the Right
of Setoff as provided in Section 5.4 hereof. The Note will be secured pursuant
to the Security Agreement substantially in the form attached hereto as SCHEDULE
2.2(c) (the "Security Agreement").
2.3 THE CLOSING. Subject to the satisfaction of the conditions
set forth herein, the closing of the assignments and transfers provided for in
this Agreement (the "Closing") shall be held at the offices of the Purchaser at
10:00 A.M. (i) at Purchaser's election, on (a) the last business day of the
month in which all of the conditions precedent set forth in Section 4 herein
have been satisfied or waived, or (b) on the calendar day of such month on which
NRTC's accounting period closes, or (ii) such other place, time or date as the
parties may agree upon in writing (the "Closing Date"). Either party may
terminate this Agreement by written notice to the other party if the Closing has
not occurred by the Termination Date set forth in Paragraph S.6 of Schedule 1;
provided, however, the Termination Date shall be automatically extended for an
additional ninety (90) days if the consent of the NRTC to the transfer of the
NRTC Agreements to Purchaser has not been obtained.
2.4 PRORATIONS AND CONSIDERATION ADJUSTMENTS; ALLOCATION OF
PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the current assets of Seller relating to DBS Services
and decreased by the current liabilities of Seller relating to DBS Services,
each as determined in accordance with Paragraph (c) hereof (the "Closing
Adjustment"), which adjustment shall be subject to final adjustment as provided
in Paragraph (e) hereof.
(b) All prepaid expenses and unearned revenue in
connection with the NRTC Agreements shall be prorated among Seller and
Purchaser as of 12:01 A.M. on the day following the Closing Date. Such
prorations shall include, without limitation, all Customer programming
prepayments. Expenses, costs and liabilities incurred shall be allocated to the
time of occurrence of such programs without regard to the date of payment
therefor.
(c) (i) Promptly after the Closing, Seller shall prepare a
Schedule of current assets and current liabilities of Seller relating to the
DBS Services as of the Closing Date (the "Closing Date Accounting"). The
Closing Date Accounting shall be prepared on a basis consistent with the "Pro
Forma Accounting" attached hereto as SCHEDULE 2.4(c).
(ii) The accounting data in the Closing Date
Accounting shall be derived from NRTC Central Billing System Reports,
including, but not limited to, Report 18A (Subscriber Accounts Receivable),
Report 19A (Accounts Receivable Summary), Report 17 (Unearned Revenue Report),
and the NRTC Wholesale Invoice. The Closing Date Accounting shall include: (A)
cash in the Seller's account at Huntington Bank, (B) accounts
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receivable from Customers, (C) accounts payable to Customers, (D) accounts
payable to NRTC, and (E) any unearned revenue, advance payments and credit
balances associated with Customer accounts. Except as set forth in this
Paragraph (c)(ii), no other assets or liabilities shall be included in the
Closing Date Accounting. Accounts receivable shall be included at the full face
amount, less an allowance for uncollectible accounts based upon an aging
analysis and consistent with past practices and experience.
(d) No later than thirty (30) days after the Closing Date,
Seller shall deliver to Purchaser a copy of the Closing Date Accounting
together with the Seller's determination of the Closing Adjustment pursuant to
the Closing Date Accounting. The Closing Date Accounting and the determination
of the Closing Adjustment shall be subject to review by Purchaser and its
auditors at Purchaser's expense. Such review by Purchaser shall be completed
within fifteen (15) business days after delivery of the Closing Date Accounting
to Purchaser. In the event of any disagreement between Seller and Purchaser
concerning the amount of the Closing Adjustment which has not been resolved
within sixty (60) days after the Closing Date, unless such date shall have been
extended by mutual written agreement of the parties, either party may refer to
an independent accountant mutually acceptable to Seller and Purchaser, whose
final determination shall be made within thirty (30) days of such referral, and
shall be final and binding upon the parties. The fees and expenses of such
independent accountant shall be borne by Seller and Purchaser equally. The
determination of the Closing Adjustment pursuant to this Paragraph (d) shall be
referred to as the "Final Closing Adjustment."
(e) If, after the Final Closing Adjustment, Seller owes
any amount to Purchaser, then the Seller, at the Seller's option, shall (i) pay
the difference to the Purchaser in cash, within five (5) days after the
determination of the Final Closing Adjustment, or (ii) permit Purchaser to
reduce the next following payment(s) due under the Note by such amount on a
dollar-for-dollar basis. If, after the Final Closing Adjustment, Purchaser owes
any amount to Seller, then Purchaser shall pay the difference to Seller by
increasing the next following payment(s) due under the Note by such amount.
(f) If, following any final payment of a consideration
adjustment pursuant to this Section 2.4, an error (in billing or reporting by
NRTC or otherwise) is thereafter discovered which would have affected such
final payment, the parties shall agree in good faith on the amount of such
adjustment, and the next payment made pursuant to the Note shall be increased
or decreased accordingly.
(g) The Purchase Price shall be allocated by the
Purchaser and Seller as set forth on SCHEDULE 2.4(g), and the parties shall
make all federal, state and local tax filings consistent therewith.
2.5 PURCHASE OF INVENTORY. Purchaser may, by providing Seller
with at least five (5) days' written notice prior to closing, elect to purchase
the inventory identified on SCHEDULE 2.5 (the "Inventory") at Closing. If
Purchaser elects to purchase the Inventory, the purchase price for the Inventory
shall be Seller's reasonably documented wholesale cost for the Inventory, to be
paid in cash at closing, and Seller shall be deemed to have represented at
Closing that the Inventory consists solely of undamaged original units in
original sealed cartons,
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located at Seller's principal place of business, and that Seller owns all of the
Inventory free and clear of any Liens and has full power and authority to
transfer the Inventory to Purchaser.
2.6 CONSENT OF NRTC AND OTHERS. Within five (5) business days
after the date of this Agreement, Seller shall cause its counsel to prepare a
request for the consent of the NRTC to the transfer of the NRTC Agreements and
such other requests for consent that Purchaser determines may be necessary or
appropriate to consummate the transactions contemplated hereby, and deliver
drafts of same to Purchaser's counsel. After review by Purchaser's counsel, but
in any event within ten (10) business days after submission to Purchaser's
counsel, Seller and Purchaser shall join in the delivery of the consents, and
they will each diligently take all steps necessary or desirable to obtain the
consents. The failure of either party to timely file or diligently seek the
consents, or to cooperate fully with the other party with respect thereto, shall
be deemed a material breach of this Agreement.
2.7 FURTHER ASSURANCES. From and after the Closing, Purchaser
and Seller shall do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered, all such further acts, deeds, assignments,
documents, instruments, transfers, conveyances, discharges, releases, assurances
and consents as Purchaser or Seller may, from time to time, reasonably request
to confirm, perfect and evidence the transfers, assignments and transactions
contemplated by this Agreement.
2.8 NONCOMPETITION AND CONSULTING AGREEMENT. Each of the
Owners shall enter into a Noncompetition and Consulting Agreement with Purchaser
on the Closing Date, substantially in the form attached hereto as SCHEDULE 2.8,
whereby each of the Owners will agree (i) not to engage in the Business in the
Locations or within a 100 mile radius thereof for a period of three (3) years
and (ii) to provide consulting services to Purchaser in accordance therewith
(the "Noncompetition and Consulting Agreement").
2.9 DEALER AGREEMENT. Purchaser and Seller shall enter into an
Exclusive DBS Dealer Agreement on the Closing Date substantially in the form
attached hereto as SCHEDULE 2.9 (the "Exclusive DBS Dealer Agreement").
SECTION 3. REPRESENTATIONS AND WARRANTIES.
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER AND OWNERS. To
induce the Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller and Owners hereby, jointly and
severally, represent and warrant to the Purchaser as follows:
(a) DUE AUTHORIZATION; BINDING EFFECT; NO CONFLICTS.
(i) Seller is a general partnership validly existing under the laws of the
State of Colorado and has the requisite power to carry on its business and to
consummate the transactions contemplated hereby; (ii) all actions necessary for
the authorization, execution, delivery and performance by Seller of this
Agreement, and the transactions contemplated hereby, have been taken; (iii)
this Agreement is a legal, valid and binding obligation of Seller, enforceable
in accordance with its terms; and (iv) neither the execution and delivery of
this Agreement, nor the consummation by the Seller of the transactions
contemplated hereby, or the fulfillment by the Seller of the terms hereof, will
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(A) conflict with or result in a breach of any provision of the Seller's
partnership agreement or any agreement or understanding to which Seller is a
party, (B) require the consent of any third party other than NRTC, Hughes and
the parties identified on SCHEDULE 3.1(A), which consents shall be obtained
prior to Closing, or (C) violate or conflict with any judgment, order, writ,
injunction, decree, statute, rule or regulation applicable to the Seller.
(b) NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(i) Attached hereto as SCHEDULE 3.1(b)(i), is a true
and complete copy of the NRTC/Member Agreement together with all amendments,
schedules and exhibits thereto.
(ii) Attached hereto as SCHEDULE 3.1(b)(ii) is a true
and complete copy of the NRTC/Retail Agreement, together with all amendments,
schedules and exhibits thereto.
(iii) Attached hereto as SCHEDULE 3.1(b)(iii) are
true and complete copies of the Other Assumed Agreements, if any, together with
all amendments, schedules and exhibits thereto.
(iv) Pursuant to the NRTC/Member Agreement, the
Seller has the exclusive right to market, sell and retain revenue from
Programming (except Non-Select Services) transmitted over the NRTC/Member
Agreement directly to Committed Member Residences in the Locations under the
terms and conditions set forth in the NRTC/Member Agreement. The Seller also
has the right to market, sell and retain revenue from the distribution of
Programming (except Non-Select Services) directly to Commercial Establishments
in the Locations under the terms and conditions set forth NRTC/Member
Agreement.
(v) Pursuant to the NRTC/Member Agreement, the Seller
has (A) the right to establish the terms and conditions upon which it will
market and sell Programming (except Non-Select Services) to Committed Member
Residences or Commercial Establishments, or both, in the Locations and is
entitled to all revenues from such marketing and sales to such Committed Member
Residences or Commercial Establishments, or both, in the Locations, subject
only to those Programming agreements set forth on SCHEDULE 3.1(b)(v)
("Marketing Revenues"), and (B) the Seller has paid all sums to NRTC or Hughes,
as appropriate, required under the NRTC/Member Agreement such that the Seller
is entitled to the Marketing Revenues. The Seller has the right to receive from
NRTC, on a pro rata basis, all other net revenues received by NRTC from Hughes
in connection with the Programming which are directly attributable to the
Committed Member Residences or the Commercial Establishments in the Locations.
(vi) The Seller is in full compliance in all
material respects with any and all membership, affiliation, licensing or other
requirements or arrangements as may have been established by NRTC, Hughes or
DirecTv, if any, pursuant to the NRTC/Member Agreement, the DirecTv Agreement,
or otherwise.
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(vii) The Seller is not in breach of the NRTC/Member
Agreement, the NRTC/Retail Agreement or any of the Other Assumed Agreements (if
any), nor has the Seller failed to perform any material obligation under the
NRTC/Member Agreement, the NRTC/Retail Agreement or any Other Assumed
Agreement. The Seller has not received notice of any such breach or
non-performance at any time. To the best of Seller's knowledge, no other party
to the NRTC/Member Agreement, the NRTC/Retail Agreement or any Other Assumed
Agreement is in default thereunder or has failed to perform any material
obligation thereunder.
(viii) Except as disclosed on SCHEDULE 3.1(b)(viii),
none of the DBS Services distributed by the Seller has been suspended at any
time since inception.
(ix) SCHEDULE 3.1(b)(ix) (as supplemented by
applicable NRTC reports) sets forth all Customers, identified as Committed
Member Residence and Commercial Establishment, including the number of months
such Customer has been a Customer, whether such Customer's account is past due,
the amount of the receivable, and the aging of amounts due thereunder. SCHEDULE
3.1(b)(ix) will be updated not more than three (3) days prior to the Closing
Date. The accounts receivables will be fully and completely collectible by
Purchaser in the ordinary course of business within one hundred and twenty
(120) days of the Closing Date without resort to legal proceedings. The Seller
has maintained full and complete information regarding the location of each
Customer's descrambler. As soon as practicable after the Closing Date, Seller
shall also provide to Purchaser a list of Customers and programs in the form of
NRTC's Report 30 (Average Service Retail Report), dated as of the Closing Date.
(c) TRUE AT CLOSING; SURVIVES CLOSING. The
representations and warranties of Seller and Owners set forth in this Section
3.1 are and will be true both on the date of this Agreement and on and as of
the Closing. All of the representations and warranties by Seller and Owners,
and the agreement in Section 5 herein to indemnify the Purchaser for a breach
thereof, shall survive the Closing.
(d) DISCLOSURE BY SELLER. No representation or warranty
made by Seller and Owners in this Agreement and no statement made in any
certificate, Exhibit or Schedule or other document furnished or to be furnished
in connection with the transactions herein contemplated, contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary to make such representation or warranty or any such
statement not misleading to a prospective purchaser of assets of the Seller who
is seeking full information with respect to the Seller.
3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. To induce
Seller and Owners to enter into this Agreement and consummate the transactions
contemplated hereby, the Purchaser hereby represents and warrants to the Seller
as follows:
(a) DUE AUTHORIZATION; BINDING EFFECTS; NO CONFLICTS.
(i) Purchaser is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Georgia and has the requisite
power to carry on its business and to consummate the actions contemplated
hereby; (ii) all actions necessary for the authorization, execution, delivery
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and performance by Purchaser of this Agreement and the actions contemplated
hereby, have been taken; (iii) this Agreement is a legal, valid and binding
obligation of Purchaser, enforceable in accordance with its terms; and (iv)
neither the execution and delivery of this Agreement, nor the consummation by
the Purchaser of the transactions contemplated hereby, or the fulfillment by
the Purchaser of the terms hereof, will (A) conflict with or result in a breach
of any provision of the Purchaser's organizational documents or any agreement
or understanding to which Purchaser is a party, (B) require the consent of any
third party unless such consent shall be obtained prior to Closing, or (C)
violate or conflict with any judgment, order, writ, injunction, decree,
statute, rule or regulation applicable to the Purchaser.
(b) TRUE AT CLOSING; SURVIVES CLOSING. The
representations and warranties of Purchaser set forth in this Section 3.2 are
and will be true both on the date of this Agreement and on and as of the
Closing. All of the representations and warranties by Purchaser, and the
agreement in Section 5 herein to indemnify the Seller for a breach thereof,
shall survive the Closing.
(c) DISCLOSURE BY PURCHASER. No representation or warranty
made by Purchaser in this Agreement and no statement made in any certificate,
Exhibit or Schedule or other document furnished or to be furnished in
connection with the transactions herein contemplated, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make such representation or warranty or any such
statement not misleading.
SECTION 4. CONDITIONS TO CLOSING.
4.1 CONSENT. The obligations of Seller and Purchaser to
consummate the transactions contemplated by this Agreement are subject to
satisfaction at the time of Closing of the condition that NRTC and Hughes shall
have issued all necessary authorizations, consents and approvals in connection
with the transactions contemplated by this Agreement, without conditions which
are materially adverse to either Purchaser or Seller.
4.2 CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser's
obligation to consummate the transactions contemplated by this Agreement is
subject to:
(a) The satisfactory completion, in Purchaser's sole
discretion, of Purchaser's due diligence investigation concerning the Business.
(b) Satisfaction (or waiver by Purchaser) on or before the
Closing Date of each of the following conditions:
(1) Each of the representations and warranties of
Seller and Owners contained in this Agreement shall have been
true and correct in all material respects when made and as of
the Closing Date.
(2) Seller and Owners shall have performed and
complied with, in all material respects, all agreements,
covenants, conditions
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and obligations contained in this Agreement and required to be
performed or complied with by them on or before the Closing
Date.
(3) All authorizations and approvals of or consents
of, or filings with, any governmental authority or other
Person required to be obtained or made by Seller in connection
with the Closing (including, without limitation, any consents
required under any Other Assumed Agreements) shall have been
obtained or made and shall be in full force and effect.
(4) Seller shall have at least 400 Committed Member
Residences and Commercial Establishments which subscribe for
DBS Services from Seller on the Closing Date.
(c) Receipt by the Purchaser, at the Closing of
(1) Such bills of sale, assignments and other
instruments of transfer required to effectively transfer and
assign good and marketable title to the Assets to Purchaser in
accordance therewith.
(2) Certified copies of resolutions duly adopted by
the Owners approving this Agreement and the transactions
contemplated hereby.
(3) All Records or copies of the Records pursuant to
Section 2.1(a) herein.
(4) A certificate signed by the Owners dated the
Closing Date, to the effect that the conditions set forth in
Paragraph (b) of this Section 4.2 have been satisfied.
(5) Owners shall have executed and delivered to
Purchaser the Noncompetition and Consulting Agreement and the
Exclusive DBS Dealer Agreement.
(6) Updated Schedule 3.1(b)(ix).
(7) Such other documents and instruments as may be
reasonably requested and satisfactory to Purchaser and its
counsel in connection with the Seller's and Owners'
satisfaction of each of its obligations hereunder.
4.3 CONDITIONS TO OBLIGATIONS OF SELLER. Seller's obligation
to consummate the transaction contemplated by this Agreement is subject to:
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(a) Satisfaction (or waiver by Seller) on or before the
Closing Date of each of the following conditions:
(1) Each of the representations and warranties of
Purchaser contained in this Agreement shall have been true and
correct when made and as of the Closing Date.
(2) Purchaser shall have performed and complied with,
in all material respects, all agreements, covenants,
conditions and obligations contained in this Agreement and
required to be performed or complied with by Purchaser on or
before the Closing Date.
(3) All authorizations and approvals of or consents
of, or filings with, any governmental authority or other
Person required to be obtained or made by Purchaser in
connection with the Closing shall have been obtained or made
and shall be in full force and effect.
(b) Receipt by the Seller, at the Closing, of
(1) The Closing Payment, the Note and the Security
Agreement described in paragraph 2.2 herein executed and
delivered by the Purchaser.
(2) A certified copy of Resolutions of the general
partner of Purchaser approving this Agreement and the
transactions contemplated hereby.
(3) A certificate signed by the Purchaser's general
partner, dated the Closing Date, to the effect that the
conditions set forth in paragraph (a) of this Section 4.3 have
been satisfied.
(4) Purchaser shall have executed and delivered to
the Owners the Exclusive DBS Dealer Agreement.
(5) Such other documents and instruments as may be
reasonably requested and satisfactory to Seller and its
counsel in connection with the Purchaser's satisfaction of
each of its obligations hereunder.
(c) Execution and delivery of the Noncompetition and
Consulting Agreement.
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SECTION 5. INDEMNIFICATION.
5.1 RIGHT TO INDEMNIFICATION.
(a) Seller and each of the Owners, jointly and severally,
shall indemnify, reimburse, and hold harmless Purchaser from and against all
claims, losses, damages, costs (including, without limitation, court costs and
attorneys' fees), expenses and liabilities suffered, incurred, or sustained by
Purchaser on account of (i) any misrepresentation, breach of warranty or
nonfulfillment of any term, covenant or agreement on the part of Seller and
Owners under this Agreement, or in any certificate, Schedule or other document
delivered pursuant hereto, (ii) the failure of Seller to pay and perform
promptly when due all of its obligations, liabilities and debts as provided
under this Agreement, (iii) the operation of the Business prior to the Closing
Date, (iv) any breach or default prior to the Closing by Seller under the
NRTC/Member Agreement, the NRTC/Retail Agreement or any of the Other Assumed
Agreements, and (v) any liability, obligation or claim with respect to the
Business arising prior to the Closing (other than liabilities specifically
assumed by Purchaser under this Agreement).
(b) Purchaser shall indemnify, reimburse, and hold
harmless Seller from and against all claims, losses, damages, costs (including,
without limitation, court costs and attorneys' fees), expenses and liabilities
suffered, incurred, or sustained by Seller on account of (i) any
misrepresentation, breach of warranty or nonfulfillment of any term, covenant
or agreement on the part of Purchaser under this Agreement, or in any
certificate, Schedule or other document delivered pursuant hereto, (ii) the
failure of Purchaser to pay and perform promptly when due all of its
obligations, liabilities, and debts as provided under this Agreement, (iii) the
operation of the Business after the Closing Date, and (iv) any breach or
default after the Closing by Purchaser under the NRTC/Member Agreement, the
NRTC/Retail Agreement or any Other Assumed Agreement; provided, however, that
Seller shall in no event be entitled to indemnification hereunder with respect
to matters arising under contracts, commitments or agreements of Seller not
specifically assumed by Purchaser under this Agreement.
5.2 RIGHT TO CONTEST. If the Seller or Purchaser, as the case
may be (the "Indemnified Party") receives notice or has knowledge of any claim
for which it believes the other party hereto is obligated to provide
indemnification pursuant to Section 5.1 herein (the "Indemnifying Party"), the
Indemnified Party shall notify the Indemnifying Party in writing of such claim
within twenty (20) days of its receipt of same. The Indemnified Party shall, at
the expense of the Indemnifying Party, provide all information regarding the
contest or defense of the claim and cooperate fully with the Indemnifying Party
in the conduct of any such contest or defense. Before being required to make any
payment pursuant to Section 5.1 herein, the Indemnifying Party may, at its own
expense, elect to undertake and control the defense of, and take all necessary
steps properly to contest any claim in respect thereof involving third parties
or to prosecute such claim to conclusion or settlement satisfactory to the
Indemnified Party. If the Indemnifying Party makes the foregoing election, then
the Indemnified Party shall have the right to participate, at its own expense,
in all proceedings but shall not admit any liability, settle, compromise, pay or
discharge the claim without the prior written consent of the Indemnifying Party.
If the Indemnifying Party does not make such election, it shall be obligated to
pay the costs of defending or prosecuting such claim and shall be bound by
whatever result is obtained by the Indemnified Party respecting such claim.
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5.3 LIMITATION OF CLAIMS. Any claim by a party hereunder
arising from a claimed breach by the other party of any representation, warranty
or covenant hereunder shall be made in writing and delivered to such other party
no later than forty-eight (48) months after the Closing Date.
5.4 RIGHT OF OFFSET. Purchaser shall have the right to offset
against the amounts owing to the Seller pursuant to the Note any amounts owing
to Purchaser by Seller or the Owners pursuant to this Agreement, including,
without limitation, amounts due Purchaser pursuant to Sections 2.4 and 5 hereof
(the "Right of Offset"). Before exercising its Right of Offset, Purchaser shall
provide written notice of its intent to exercise such right.
SECTION 6. MISCELLANEOUS.
6.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Unless performance
of the following obligations is waived by Purchaser (in its sole discretion) in
advance and in writing, Seller shall:
(a) not modify, amend, alter or terminate the NRTC/Member
Agreement, the NRTC/Retail Agreement or any Other Assumed Agreement, or waive
any default or breach thereunder except as may be coordinated with Purchaser;
(b) comply in all material respects with the NRTC/Member
Agreement, the NRTC/Retail Agreement and any Other Assumed Agreements, use its
best efforts to cure any material default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(c) maintain its books and records in accordance with
prior practice, maintain all of its property and assets in their present
condition, ordinary wear and tear excepted, maintain technical materials,
supplies, inventory and spare parts consistent with past practice, and
otherwise use its best efforts to operate the business in the ordinary course
in accordance with practices during the twelve (12) months preceding the date
of this Agreement;
(d) use its best efforts to keep its business organization
intact, make available the services of key employees, and maintain good
relationships with its key employees, suppliers, advertisers and others having
business relations with it;
(e) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC, Hughes and DirecTv;
(f) provide to Purchaser, concurrently with filing,
sending or receipt thereof, copies of all reports to and other filings and
correspondence with the NRTC, Hughes and DirecTv;
(g) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension, or limitation
of the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under any NRTC
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Agreements, and (ii) copies of all protests, complaints, challenges or other
documents submitted to or filed with the NRTC, Hughes or DirectTv by third
parties concerning the business and, promptly upon the filing or making
thereof, copies of Seller's responses thereto; and
(h) notify Purchaser in writing immediately upon
learning of the institution or threat of any action against Seller in any
court, or any action against Seller before any governmental agency, and notify
Purchaser in writing promptly upon receipt of any administrative or court order
relating to the Business.
6.2 LAW GOVERNING. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia, without regard to
the choice of law provisions thereof.
6.3 NOTICE. All notices, requests, demands, or other
communications under this Agreement shall be in writing. Notice shall be
sufficiently given for all purposes as follows:
(a) PERSONAL DELIVERY. When personally delivered to the
recipient, notice is effective on delivery.
(b) CERTIFIED MAIL. When mailed certified mail, postage
paid, return receipt requested, notice is effective on receipt, if delivery is
confirmed by a return receipt.
(c) OVERNIGHT DELIVERY. When delivered by Federal Express,
Airborne, United Parcel Service, or DHL WorldWide Express, charges prepaid or
charged to the sender's account, notice is effective on delivery, if delivery
is confirmed by the delivery service.
(d) TELEX OR FAX TRANSMISSION. When sent by telex or fax
to the last telex or fax number of the recipient known to the party giving
notice, notice is effective on receipt of a confirmed transmission; provided
that (a) a duplicate copy of the notice is promptly given by first-class or
certified mail or by overnight delivery, or (b) the receiving party delivers a
written confirmation of receipt. Any notice given by telex or fax shall be
deemed received on the next business day if it is received by 5:00 p.m.
(recipient's time) or on a non-business day.
Addresses for purpose of giving notice are:
DIGITAL TELEVISION SERVICES OMEGA CABLE
OF COLORADO, LP 404 Denver Avenue
Building 100, Suite 300 P. O. Box 627
1080 Holcomb Bridge Road Saguache, Colorado 81149-0627
Roswell, Georgia 30076 Attn: Scott Alexander
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with a copy to: with a copy to:
Nelson Mullins Riley & Morgan Queal, Esq.
Scarborough, L.L.P. P.O. Box 746
NationsBank Corporate Center Saguache, Colorado 81149
100 North Tryon Street, Suite 3350
Charlotte, North Carolina 28202
Attention: C. Mark Kelly, Esq.
Any correctly addressed notice that is refused, unclaimed, or
undeliverable because of an act or omission of the party to be notified shall be
deemed effective as of the first day that said notice was refused, unclaimed, or
deemed undeliverable by the postal authorities, messenger, or overnight delivery
service.
Any party may change its address or telex or fax number by giving the
other party notice of the change in any manner permitted in this Agreement.
6.4 ASSIGNMENT; BINDING EFFECT. This Agreement may not be
assigned by Purchaser (except to a party which, directly or indirectly, is
controlled by, controls or is under common control with, Purchaser) or by Seller
prior to the Closing without the prior written consent of the other party. This
Agreement shall be binding upon, and shall inure to the benefit of the parties
hereto and their successors and permitted assigns, if any.
6.5 AMENDMENT; WAIVER. This Agreement may be amended only by a
written instrument signed by Purchaser and Seller. No provisions of this
Agreement may be waived except by an instrument in writing signed by the party
sought to be bound. No failure or delay by any party in exercising any right or
remedy hereunder shall operate as a waiver thereof, and a waiver of a particular
right or remedy on one occasion shall not be deemed a waiver of any other right
or remedy or a wavier on any subsequent occasion.
6.6 ENTIRE AGREEMENT. This Agreement, together with the
Schedules attached hereto, sets forth the entire understanding between the
parties relating to the subject matter hereof, any and all prior correspondence,
conversations and memoranda or other writings being merged herein and replaced.
No promises, covenants, or representations of any character or nature other than
those expressly stated herein have been made to induce either party to enter
into this Agreement.
6.7 CONFIDENTIALITY; INITIAL NOTICE TO PUBLIC. Seller and
Purchaser shall mutually agree in advance on the manner in which the public is
first informed of the execution of this Agreement. Each of the parties hereto
agree to maintain the confidentiality of this Agreement and the terms thereof
and any information exchanged by the parties in connection with the consummation
of the transactions contemplated hereby prior to Closing, and neither party
shall make any disclosure thereof to any third party without the prior consent
of the other party, except as may be required by law.
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6.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in two or more counterparts, each of which will be deemed an original, and all
of which together shall constitute one and the same Agreement.
6.9 FACSIMILE SIGNATURE. Facsimile signatures shall be
considered original signatures for purposes of execution and enforcement of the
rights delineated in this Agreement.
6.10 SCHEDULES. The Schedules referred to in this Agreement
are attached hereto, made a part hereof and incorporated herein by this
reference.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
PURCHASER:
Digital Television Services of Colorado, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
---------------------------------------
Douglas S. Holladay, Jr., President
SELLER:
Omega Cable
By:
---------------------------------------
Its:
---------------------------------
(SEAL)
------------------------------------
Dale Hazard
(SEAL)
------------------------------------
Scott Alexander
17
<PAGE> 18
Schedules have been omitted. Copies shall be furnished upon request.
<PAGE> 1
EXHIBIT 10.5(b)
FIRST AMENDMENT
TO
PURCHASE AGREEMENT
This FIRST AMENDMENT TO PURCHASE AGREEMENT (this "Amendment") is made
as of July 11, 1996 by and among Digital Television Services of Colorado, LP, a
Georgia limited partnership ("Purchaser"), Omega Cable, a Colorado general
partnership ("Seller"), Dale Hazard, a resident of the State of Colorado
("Hazard"), and Scott Alexander, a resident of the State of Colorado
("Alexander")(Hazard and Alexander are hereinafter collectively referred to as
the "Owners").
RECITALS
Purchaser, Seller and Owners entered into a Purchase Agreement dated as
of June 11, 1996 (the "Asset Purchase Agreement"). Capitalized terms used herein
which are not otherwise defined shall have the meanings set forth in the Asset
Purchase Agreement. Purchaser, Seller and Owners have determined that it is in
their mutual best interest to clarify and amend the Asset Purchase Agreement in
accordance with Section 6.5 thereof.
TERMS OF AMENDMENT
Purchaser, Seller and Owners agree as follows:
1. AMENDMENT OF SCHEDULE 2.2(c). Schedule 2.2(c) shall be deleted in
its entirety and the new Schedule 2.2(c) attached hereto shall be inserted in
lieu thereof.
2. MODIFICATION. Except as modified hereby, the terms and conditions of
the Asset Purchase Agreement shall remain in full force and effect.
3. LAW GOVERNING. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia, without regard to the choice
of law provisions thereof.
4. EXECUTION IN COUNTERPARTS. This Amendment may be executed in two or
more counterparts, each of which will be deemed an original, and all of which
together shall constitute one and the same Amendment.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first set forth above.
PURCHASER:
Digital Television Services of Colorado, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
-----------------------------------
Douglas S. Holladay, Jr., President
SELLER:
Omega Cable
By:
-----------------------------------
Its:
------------------------------
(SEAL)
-----------------------------------
Dale Hazard
(SEAL)
-----------------------------------
Scott Alexander
2
<PAGE> 1
EXHIBIT 10.6(a)
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 26th day of June, 1996, by and between Digital Television
Services of New York II, LP, a Georgia Limited Partnership ("Purchaser"), Falls
Earth Station, Inc. a New York corporation ("Seller") and Gerald R. Barnes, a
resident of the State of New York (the "Owner").
RECITALS
1. Seller owns and operates an exclusive distributorship of the
National Rural Telecommunications Cooperative's DBS Services and of DirecTV,
Inc., as successor to Hughes Communications Galaxy, Inc. (the "Business") within
those counties designated under the NRTC/Member Agreement for Marketing and
Distribution of Services dated March 4, 1993, as amended (the "Locations").
2. The Owner owns all of the issued and outstanding stock of all
classes of Seller.
3. Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser all of Seller's rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations and certain of the assets used
in the Business, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, Seller, Owner and
Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Seller to the
NRTC as of the Closing Date relating to the Business.
"Accounts Receivable" shall mean all of the accounts receivable of
Seller as of the Closing Date for all Customers which are listed on Report 19A
(Accounts Receivable Summary) of the NRTC Central Billing Systems Reports.
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
<PAGE> 2
"Cash" shall mean all cash on hand and in Seller's bank accounts at
Huntington Bank as of the Closing Date, as determined in accordance with GAAP.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Nelson Mullins Riley
& Scarborough, L.L.P., 100 North Tryon Street, Suite 3350, Charlotte, North
Carolina, 28202 (i) at Purchaser's election, on (a) the last business day of the
month in which all of the conditions precedent set forth in Articles VIII and IX
herein have been satisfied or waived, or (b) on the calendar day of such month
on which NRTC's accounting period closes, or (ii) such other date or at such
other time or place (including via mail overnight courier) as the parties may
mutually agree upon in writing. The Closing shall be as effective as of the
close of business on the Closing Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Current Assets" shall mean Cash, Accounts Receivable, Prepaid
Expenses, Leased Subscriber Equipment and Inventory of Seller which will be
acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Seller which will be assumed by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased telecommunications services, or entered into a binding agreement to
purchase telecommunications and related services, from Seller at any time during
the five (5) year period immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTV" shall mean DirecTV, Inc., a California corporation, the
successor in interest and rights holder to Hughes Communication Galaxy, Inc.
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, the Leased Subscriber Equipment and any MTE
terminals and demonstration units owned by Seller and used or useable in
connection with the Business, which equipment and tangible assets are listed on
Schedule 1.1 attached hereto.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Inventory" shall mean any DSS(TM) subscriber equipment of Seller which
the Purchaser notified the Seller pursuant to Section 4.3(b) hereof it desires
to purchase pursuant to this
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<PAGE> 3
Agreement, which Inventory shall be valued at the lesser of (i) each item's
current wholesale cost and (ii) each item's original cost.
"Leased Subscriber Equipment" shall mean all DSS(TM) subscriber
equipment of Seller which is leased to Subscribers, which equipment shall be
valued at its net book value, but in no event shall the aggregate value
attributable thereto exceed Seventy Thousand Dollars ($70,000).
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
"Mini-Cable Business" shall mean the mini-cable systems business of
Seller operated on college campuses.
"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement, and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated March 4, 1993, by and between
the NRTC and Seller, as amended from time to time, together with all schedules
and exhibits thereto, a copy of which is attached hereto as Schedule 1.2.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement by and between the NRTC and Seller dated October 8, 1993, as amended
from time to time, together with all schedules and exhibits thereto, a copy of
which is attached hereto as Schedule 1.3.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.4, including any contracts and agreements with (i)
DirecTV and (ii) Customers with respect to the Leased Subscribers Equipment,
copies of which are attached to such Schedule.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
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<PAGE> 4
"Prepaid Expenses" shall mean all prepaid property taxes, prepaid
supplies, advances, deposits, deferred charges and other prepaid expenses (other
than prepaid insurance) shown on Seller's books and records as of the Closing
Date relating to the Business which Prepaid Expenses can be credited to
Purchaser's account after the Closing Date, as determined in accordance with
GAAP.
"Programming" shall mean Cable Programming and any programming provided
DirecTv pursuant to the NRTC Agreements.
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
"Purchased Assets" shall mean only the (i) NRTC Agreements, (ii)
Current Assets, (iii) relationships, contracts and accounts with Customers, (iv)
Fixed Assets, (v) Records and (vi) telephone numbers used in the Business, and
shall specifically exclude all assets relating to the Mini-Cable Business.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Seller, including, without limitation, Customer
and prospective customer lists, computer programs, tapes and electronic data
processing software, accounting journals and ledgers, accounts receivable
records, and copies of all NRTC reports, correspondence and other documents
relating to the NRTC Agreements and Other Assumed Agreements and compliance
therewith.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i) is an active subscriber subscribing to a package of basic services, (ii) on
the last day of the calendar month prior to such date, whose account is not more
than sixty (60) days past due from the date payment is due, (iii) who is not an
employee or agent of the service provider or charged a fee that is nominal
(e.g., demonstration unit) or substantially below the service provider's
published rates, and (iv) who has not given notice of intent to discontinue
service.
"Termination Date" shall mean September 26, 1996; provided, however, if
the NRTC has not given its consent contemplated in Section 7.3 hereof, then the
Termination Date shall be extended for an additional sixty (60) days.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Seller as of the
Closing Date which are listed on Report 17 (Unearned Revenue Report) of the NRTC
Central Billing System Reports.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Seller all of Seller's right, title and interest in and to the Purchased Assets,
free and clear of any and all Liens, on the Closing Date for the consideration
set forth in this Agreement. The sale, transfer, assignment and conveyance of
the
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<PAGE> 5
Purchased Assets shall be made by the execution and delivery at Closing of (i)
an Assignment and Assumption Agreement substantially in the form attached hereto
as Schedule 2.1(a) (the "Assignment"), and (ii) a bill of sale substantially in
the form attached hereto as Schedule 2.1(b) (the "Bill of Sale"), and (iii) such
other recordable instruments of assignment, transfer and conveyance as Purchaser
shall reasonably request.
ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLER. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Seller with respect to the following:
(a) the NRTC Agreements to the extent the obligations therein
arise out of the provision of DBS Services to Customers and accrue on or after
the Closing Date; and
(b) all Current Liabilities as of the Closing Date.
Anything in this Agreement to the contrary notwithstanding,
except for the liabilities specifically set forth in this Section 3.1, Purchaser
shall not assume or be deemed to have assumed under this Agreement, by reason of
the transactions contemplated by this Agreement, or otherwise, any other trade
or other accounts payable, accrued expenses, debts, liabilities, obligations or
commitments of Seller of any nature whatsoever, known or unknown, and the
execution, delivery and performance of this Agreement shall not render Purchaser
liable for any such debt, liability, obligation or commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Seller are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Seller under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Seller with or
for the benefit of any employee of Seller; and
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Seller,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution, sale or provision
of any services of Seller, or (ii) any failure or alleged failure to comply
with any federal, state or local law, rule or regulation applicable to Seller
or the Business.
Purchaser agrees to promptly notify Seller of any claims which Purchaser obtains
knowledge of which arise out of or result from liabilities of Seller not assumed
by Purchaser pursuant to this Agreement.
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ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PAYMENT OF PURCHASE PRICE. The purchase price for the Purchased
Assets (the "Purchase Price") shall be One Million Four Hundred Sixty Thousand
Dollars ($1,460,000), subject to adjustment as provided in Section 4.3 herein.
4.2. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Seller as follows:
(a) The sum of Three Hundred Sixty Thousand Dollars
($360,000), subject to adjustment as provided for in Section 4.3 herein, by
certified or cashier's check, or by wire transfer of immediately available funds
to an account or accounts designated in writing by Seller (the "Closing
Payment").
(b) the sum of One Million One Hundred Thousand Dollars
($1,100,000) by the delivery of a Promissory Note substantially in the form
attached hereto as Schedule 4.2(b) (the "Note"), less any adjustments and
reductions as provided in Section 4.3 herein. The Note will be secured by all of
the assets of Purchaser pursuant to the Security Agreement substantially in the
form attached hereto as Schedule 4.2(c) (the "Security Agreement").
4.3. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the Current Assets of Seller and decreased by the Current
Liabilities of Seller as of the Closing Date (the "Closing Adjustment"), which
adjustment shall be subject to final adjustment as provided for in paragraph (c)
below.
(b) No later than thirty (30) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Seller shall make and deliver
to Purchaser a balance sheet reflecting the Current Assets and Current
Liabilities of Seller as of the Closing Date (the "Closing Date Balance Sheet"),
prepared on a basis consistent with the "Pro Forma Accounting" attached hereto
as Schedule 4.3(b). For purposes of the Closing Adjustment and the Final Closing
Adjustment, the amount of Accounts Receivable of Seller to be included in the
Closing Date Balance Sheet shall include only Accounts Receivable of Subscribers
as reflected on Report 18A (Subscriber Accounts Receivable Aging by Account) of
the NRTC Central Billing System Reports less a reserve for Accounts Receivable
which are not collectible as determined in accordance with GAAP. Purchaser may,
by providing Seller with written notice at least five (5) days prior to the
Closing, elect to purchase all, or certain of, the DSS(TM) subscriber equipment
owned by Seller on the Closing Date; provided, however, Purchaser shall not have
the right to acquire any assets attributable to Seller's mini-cable systems
business operated on college campuses. Any such equipment which is purchased by
Purchaser shall be included as Inventory in the Closing Date Balance Sheet.
Except as set forth in this Section 4.4(b), no other assets or liabilities shall
be included in the Closing Date Balance Sheet. Seller shall make available
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to Purchaser such documentation, back-up, invoices, and books and records of
Seller as Purchaser may reasonably request.
(c) Seller and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Seller and Purchaser are unable to
reconcile such determination, Purchaser shall have fifteen (15) days from
presentment by Seller to notify Seller if Purchaser wishes to have Seller's
determination examined. If Purchaser elects to have Seller's determination
examined, it shall be submitted to the determination in Charlotte, North
Carolina, by the Certified Public Accounting firm of Arthur Andersen & Co., the
cost of such examination to be paid fifty percent (50%) by Seller and fifty
percent (50%) by Purchaser. The determination by Seller shall be final and
binding on the parties unless Purchaser elects to have an examination as
provided herein, in which case the results of the examination shall be made
within thirty (30) days of such referral, and shall be final and binding on the
parties (the "Final Closing Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Seller shall (i) pay the difference in cash to Purchaser
within five (5) days after the final determination, or (ii) in the event of
nonpayment, Purchaser may exercise its Right of Offset pursuant to Section 10.5
hereof. In the event the Final Closing Adjustment is greater than the Closing
Adjustment, Purchaser shall immediately pay such excess to Seller by increasing
the next following payment(s) due under the Notes by such amount. If, following
any payment pursuant to this Section 4.3(d), an error (in billing or reporting
by NRTC or otherwise) is thereafter discovered which would have affected the
Final Closing Adjustment, the party in whose favor the error was made shall
immediately pay in cash the amount of such error to the other party.
4.4. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.4 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
ARTICLE V
SELLER'S AND OWNER'S REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, each of Seller and Owner hereby, jointly and
severally, represents and warrants to Purchaser as follows:
5.1. ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, with all
requisite power and authority to own and operate the Business as it is now
conducted and to own the Purchased Assets in the places where the Business is
now conducted and where the Purchased Assets are now owned or operated.
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5.2. AUTHORITY.
(a) Seller and Owner each have full power and authority to
execute, deliver and perform this Agreement and all agreements and transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and all transactions contemplated hereby have been duly authorized by the Seller
and no other action or proceeding on the part of any other party is necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Seller and
Owner, and constitutes, and each of the other agreements to be executed pursuant
to the terms hereof upon execution and delivery will constitute, a legal, valid
and binding obligation of Seller and Owner, enforceable in accordance with its
terms.
(b) Except for the NRTC, DirecTV and the other Persons set
forth on Schedule 5.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any document related hereto by Seller and Owner
and the consummation by Seller and Owner of all of the transactions contemplated
hereby or thereby will not (with or without the giving of notice or the lapse of
time or both) (i) violate or require any consent or approval under any
applicable provision of any judgement, order, writ, injunction, decree, rule,
regulation or law; (ii) require any consent under, conflict with, result in
termination of, accelerate the performance required by, result in a breach of,
constitute a default under or otherwise violate the terms of any agreements,
instruments or other obligations to which Seller or Owner are a party or by
which they or any of the Purchased Assets may be bound or affected; (iii)
require any consent or approval by, notice to or registration with any
governmental authority or any other Person; (iv) conflict with or violate any
provision of Seller's organization documents; or (v) result in the creation of a
Lien upon any of the Purchased Assets howsoever arising.
5.3. TITLE TO THE PURCHASED ASSETS.
(a) Seller has good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) attached hereto.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Seller was conducting the Business in the
ordinary course prior to the Closing Date.
5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.1 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Seller in the past, and no
currently needed repairs are reasonably likely to cost, either singularly or in
the aggregate with respect to all Fixed Assets, in excess of Five Thousand
Dollars ($5,000).
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5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Attached hereto as Schedules 1.3, 1.4 and 1.5, are true
and complete copies of each of the NRTC/Member Agreement, the NRTC/Retail
Agreement, and the Other Assumed Agreements, if any, respectively, together with
all amendments, schedules and exhibits thereto.
(b) Seller has paid all sums to NRTC or DirecTV as
appropriate, required under the NRTC/Member Agreement such that Seller is
entitled to the Marketing Revenues. Seller has the right to receive from NRTC,
on a pro rata basis, all other net revenues received by NRTC from DirecTV in
connection with the Programming which are directly attributable to the Committed
Member Residences or the Commercial Establishments in the Locations.
(c) Seller is in full compliance in all material respects with
any and all membership, affiliation, licensing or other requirements or
arrangements as may have been established by NRTC, DirecTv, if any, pursuant to
the NRTC Agreements, or otherwise.
(d) Seller is not in breach of the NRTC Agreements, nor has
Seller failed to perform any material obligation under the NRTC Agreements.
Seller has not received notice of any such breach or non-performance at any time
of such NRTC Agreements. To the best of Seller's knowledge, no other party to
any of the NRTC Agreements, is in default thereunder or has failed to perform
any material obligation thereunder.
(e) Except as disclosed on Schedule 5.5(e) attached hereto,
none of the DBS Services distributed by Seller have been suspended at any time
since inception.
(f) Schedule 5.5(f) attached hereto (as supplemented by
applicable NRTC reports) sets forth a complete list of names and addresses of
all Customers and Subscribers of Seller, identified as Committed Member
Residence and Commercial Establishment for the five (5) year period immediately
preceding the date hereof. Schedule 5.5(f) includes the number of months such
Customer has been a Customer and whether such Customer's account is past due.
Schedule 5.5(f) will be updated not more than three (3) days prior to the
Closing Date. Seller has maintained full and complete information regarding the
location of each Customer's descrambler. As soon as practicable after the
Closing Date, Seller shall also provide to Purchaser a list of Customers and
programs in the form of NRTC's Report 30 (Average Service Retail Report) of the
NRTC Central Billing System Reports, dated as of the Closing Date.
5.6. INVENTORY. The Inventory shall be usable in the ordinary course of
business and shall comply in all respects with industry standards of quality and
marketability. The Inventory will not, as of the Closing Date, include any items
below standard quality, obsolete or sub-prime. The Inventory shall consist
solely of undamaged original units in original sealed carts, located at Seller's
principal place of business. Seller owns all of the Inventory free and clear of
any and all Liens and has full power and authority to transfer the Inventory to
Purchaser.
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5.7. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business and
none of the Accounts Receivable are subject to any counterclaim or setoff.
5.8. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
5.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9 attached hereto, since December 31, 1995, there has not been and
through the Closing Date there will not be:
(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Seller which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Seller (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
other than obligations or liabilities incurred in the ordinary course of
business and consistent with past practices;
(c) any termination or waiver of any rights of Seller of
material value to the Business or to Seller;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) the adoption of any statute, rule, regulation or order
which adversely affects the Business or the Purchased Assets;
(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
5.10. LICENSES AND PERMITS. Attached hereto in Schedule 5.10 is a list
of all federal, state, local and foreign permits, certificates, licenses,
approvals and other authorizations necessary in the conduct of the Business. All
such licenses and permits of Seller are in full force and effect, and no
violations are or have been recorded in respect thereof, and no proceeding is
pending or threatened to revoke or limit any thereof. Seller and its conduct of
the Business is in compliance with all applicable laws, statutes, ordinances,
rules, regulations and order of any federal, foreign, state or local government
and any other government department or agency, and in any judgment, decision,
decree or order of any court of governmental agency, department or authority.
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5.11. TAX MATTERS.
(a) Seller has timely filed all federal, state, local and
foreign tax returns and tax reports required to be filed with respect to the
Business with the appropriate governmental agency in all jurisdictions in which
such returns and reports are required to be filed. All such returns and reports
are true, correct and complete, and all amounts shown as owing on them have been
paid, including all interest, penalties, deficiencies and assessments heretofore
levied or assessed against Seller. Seller has duly withheld, collected and
timely paid over, or holds for such payment, to the proper governmental
authorities all taxes required to be withheld or collected by it. There is no
agreement for extension of time of assessment or payment of any taxes of Seller.
No waiver of any statute of limitations has been executed by Seller for any tax
year which remains open or unsettled. To the best knowledge, information and
belief of Seller, there is no examination or audit pending by the Internal
Revenue Service or by any state or local taxing authority with respect to the
tax matters of Seller. There is no liability for taxes or any tax deficiency or
the existence of any basis from which liability for taxes or tax deficiency,
including interest and penalties, might be asserted against Seller for any
period in excess of the applicable reserve for taxes, if any, and Seller has no
knowledge of any such liability or deficiency or the existence of any basis
therefor.
(b) All federal, state, local and foreign income, profits,
franchise, sales, use, occupation, property, excise and other taxes (including
interest and penalties), if any, payable by Seller or relating to or chargeable
against the Purchased Assets or chargeable against Seller's revenue or income
have been fully paid or are not past due and are fully disclosed and accrued on
the books and records of Seller and the proper amount of reserves exist for the
payment thereof.
5.12. DISCLOSURES. No representation or warranty made by Seller or
Owner in this Agreement, and no statement made in any Schedule, exhibit,
certificate or other writing delivered or to be delivered in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact, or omits or will omit any statement of a material fact
necessary to make the statements contained herein or therein not misleading.
5.13. LITIGATION. There are not actions, suits, proceedings, orders,
investigations or claims pending or, to the best of the Seller's and Owner's
knowledge, any threats against or affecting the Seller, the Purchased Assets or
its Business, at law or in equity, before any court, arbitration panel, tribunal
or governmental department, commission, board, bureau, agency or
instrumentality.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Seller and Owner to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser hereby represents and
warrants to Seller and Owner as follows:
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6.1. ORGANIZATION. Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Georgia,
with all requisite power to own and operate its business as it is now conducted.
6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding on the part of any
other party is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser, and constitutes, and each of the other
agreements to be executed pursuant to the terms hereof upon execution and
delivery will constitute, a legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTV and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other document related hereto by Purchaser
and the consummation by Purchaser of all of the transactions contemplated hereby
or thereby will not (with or without the giving of notice or the lapse of time
or both) (i) violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in the termination
of, accelerate the performance required by, result in the breach of, constitute
a default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Purchaser is a party; (iii) require any consent or
approval by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's certificate of
limited partnership or limited partnership agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any Schedule, exhibit, certificate or
other writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Seller and Owner shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
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(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use its best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(d) maintain its Records in accordance with prior practice,
maintain the Purchased Assets and the inventory in their present condition,
ordinary wear and tear excepted, consistent with past practice, and otherwise
use its best efforts to operate the Business as currently operated and in the
ordinary course in accordance with practices during the twelve (12) months
preceding the date of this Agreement;
(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets or inventory, except for sales or
dispositions of inventory in the ordinary course of business;
(f) use its best efforts to preserve intact its current
business organization and its relationships with its employees, suppliers,
advertisers, Customers and other Persons having dealings with it;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTV;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTV;
(i) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC Agreements, and (ii) copies of
all protests, complaints, challenges or other documents submitted to or filed
with the NRTC or DirecTV by third parties concerning the Business and, promptly
upon the filing or making thereof, copies of Seller's responses thereto; and
(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against Seller in any court, or any
action against Seller before any governmental agency, and notify Purchaser in
writing promptly upon receipt of any administrative or court order relating to
the Business. Without limiting the generality of the foregoing, neither Seller
nor Owner shall take any of the actions (over which Seller or Owner can exercise
control) listed in Section 5.9 herein.
7.2. ACCESS.
(a) Prior to the Closing, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Seller and its properties, books and records as Purchaser deems
necessary or advisable and shall have full access to the auditors
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and attorneys of Seller. Seller shall permit Purchaser and its employees, agents
and representatives, on reasonable notice, to have access to its premises,
personnel and Records. Seller shall cooperate to provide access to its
Customers, suppliers, lenders and such other parties as Purchaser may reasonably
request. Seller shall, and shall cause its officers, attorneys and accountants
to, furnish Purchaser with such financial and operating data and other
information as Purchaser from time to time shall reasonably request. No
investigation by Purchaser shall in any way affect or otherwise diminish the
representations, warranties and covenants of Seller or Owner hereunder.
(b) Purchaser will hold, and will cause its authorized
representatives to hold, in strict confidence, unless compelled to disclose by
judicial or administrative process or official request or by other requirements
of law, all documents and information concerning Seller and the Business
furnished to Purchaser in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(i) previously known by Purchaser, (ii) in the public domain through no fault of
Purchaser, or (iii) later lawfully acquired by Purchaser from other sources) and
will not release or disclose such information to any other Person, except its
auditors, attorneys, financial advisors and other consultants and advisors and
lending institutions (including banks) in connection with this Agreement, it
being understood that such Persons shall be informed by such party of the
confidential nature of such information and shall be directed by such party and
shall have agreed to treat such information as confidential. In the event that
the transactions contemplated herein are not consummated for any reason,
Purchaser will, upon request by Seller, promptly return to Seller all copies of
any Schedules, statements, documents or other written information obtained in
connection herewith, without retaining any copies or summaries thereof, and
shall maintain such confidence except to the extent such information comes into
the public domain through no fault of Purchaser.
7.3. CONSENT OF NRTC AND OTHERS. Within five (5) business days after
the date of this Agreement, Seller shall cause its counsel to prepare a request
for the consent of the NRTC to the transfer of the NRTC Agreements and such
other requests for consent that Purchaser determines may be necessary or
appropriate to consummate the transactions contemplated hereby, and deliver
drafts of same to Purchaser's counsel. After review by Purchaser's counsel, but
in any event within ten (10) business days after the date of this Agreement,
Seller, Owner and Purchaser shall join in and deliver the requests for consent,
and they will each diligently take all steps necessary or desirable to obtain
the consents. The failure of any of the parties to timely file or diligently
seek the consents, or to cooperate fully with any of the other parties with
respect thereto, shall be deemed a material breach of this Agreement.
7.4. CONSULTING AND NONCOMPETITION AGREEMENT. On or prior to the
Closing Date, the Owner shall enter into a Consulting and Noncompetition
Agreement with Purchaser substantially in the form attached hereto as Schedule
7.4, pursuant to which the Owner will agree (i) not to engage in the Business in
the Locations or within a one hundred (100) mile radius thereof for a period of
three (3) years following the Closing Date; and (ii) to provide consulting
services to Purchaser in accordance therewith (the "Consulting and
Noncompetition Agreement").
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7.5. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Seller and Purchaser shall
mutually agree in advance as to timing, form and content before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to reaching mutual agreement, except as may be
required by law. In the event that prior to the Closing Date either party is
required by law to make a statement with respect to the transactions
contemplated herein, such party shall notify the other party in writing as to
the timing, form and content of such statements. Each of Seller, Purchaser and
Owner agrees to maintain the confidentiality of this Agreement and the terms
hereof and any information exchanged by the parties in connection with the
consummation of the transaction contemplated hereby.
7.6. BEST EFFORTS. Subject to the terms and conditions herein provided,
each of Seller, Owner and Purchaser agrees to use its best efforts to take,
execute, acknowledge and deliver, or cause to be taken, executed, acknowledged
and delivered, all actions, deeds, assignments, documents, instruments,
transfers, conveyances, discharges, releases, assurances and consents, and to
do, or cause to be done, all things necessary, proper or advisable under this
Agreement and all applicable laws and regulations to consummate, confirm,
perfect, evidence and otherwise make effective the transactions contemplated by
this Agreement, including actions necessary to obtain all requisite assignments
of agreements and contracts, and to fulfill the requirements of Articles VIII
and IX hereof on or prior to the Closing Date.
7.7. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Seller and Owner will refrain, and will cause all
of their agents and employees to refrain, from taking, directly or indirectly,
any action to encourage, initiate, solicit or continue any discussions or
negotiations with, or any other offers from, any other Person concerning a
merger, sale of substantial stock or any similar transaction concerning Seller
which would affect the Business, or the sale of the Purchased Assets or any
portion thereof.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller and Owner contained in this Agreement,
and all representations and warranties set forth in any Schedule or exhibit
attached hereto, shall have been true, complete and correct when made and as of
the Closing Date, without the necessity of any material amendment or
modification, with the same force and effect as if made as of the Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Seller or Owner on or before the
Closing Date pursuant to the terms hereof shall have been duly performed or
complied with on or before the Closing Date.
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8.3. REVIEW OF SELLER. The satisfactory completion, in Purchaser's sole
discretion, of Purchaser's due diligence investigation covering the Business as
provided for in Section 7.2 herein.
8.4. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the financial condition, Business, assets, results of
operations or prospects of Seller or the Purchased Assets.
8.5. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.6. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Seller in connection with the Closing (including, without limitation,
NRTC consent as provided for in Section 7.3 herein, shall have been duly
obtained by Seller and shall be in full force and effect without conditions
which are materially adverse to Purchaser.
8.7. SUBSCRIBERS. On the Closing Date, Seller shall have at least 1,000
Subscribers.
8.8. SELLER'S CLOSING DELIVERIES. Seller and the Owner shall have
delivered to Purchaser the following at Closing:
(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) all Records or copies of the Records;
(c) a certified copy of resolutions of the Board of Directors
of Seller and Owner authorizing the execution, delivery and performance of this
Agreement;
(d) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or otherwise addressed to
Purchaser's satisfaction;
(e) a list of the Accounts Receivable from all Customers
(Reports 18A and 19A) and a list of the Unearned Revenue (Report 17) each as of
the NRTC billing period ending immediately prior to the Closing Date;
(f) the Consulting and Noncompetition Agreement;
(g) a certificate signed by Seller's president and Owner,
dated the Closing Date, to the effect that the conditions set forth in this
Article VIII have been satisfied; and
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(h) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Seller's and Owner's satisfaction of each of its obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Seller's obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Seller), on or before the Closing Date, of each of the following conditions
precedent:
9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in Section 7.3 herein, shall have been
duly obtained by Purchaser and shall be in full force and effect without
conditions which are materially adverse to Seller.
9.5. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Seller and Owner the following at Closing:
(a) the Closing Payment;
(b) the Note and the Security Agreement duly executed by
Purchaser;
(c) the Consulting and Noncompetition Agreement;
(d) a certificate signed by Purchaser's general partner, dated
the Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied; and
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(e) such other documents and instruments as may be reasonably
requested and satisfactory to Seller and its counsel in connection with
Purchaser's satisfaction of each of its obligations hereunder.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by any party to this Agreement or pursuant hereto shall
survive the Closing of the transactions hereunder. The representations and
warranties hereunder shall not be affected or diminished by any investigation at
any time by or on behalf of the party for whose benefit such representations and
warranties were made. All statements contained herein or in any Schedule,
exhibit, certificate, list or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Each of Seller and Owner, jointly
and severally, and each of their representatives, successors, heirs and assigns,
agree to indemnify, reimburse and hold Purchaser and each of its partners,
subsidiaries, affiliates, successors, assigns and agents harmless from, against,
for and in respect of any and all damages, losses, settlement payments,
obligations, liabilities, claims, demands, actions or causes of action,
judgments, encumbrances, costs and expenses (including reasonable attorneys'
fees) (collectively, the "Indemnifiable Damages") relating to, resulting from or
arising out of (i) any misrepresentation, untruth, inaccuracy, breach or
nonfulfillment of any representation, warranty, agreement or covenant of Seller
or Owner contained in or made in connection with this Agreement or in any
Schedule, exhibit, certificate or other document delivered pursuant hereto, (ii)
the failure of Seller or Owner to pay, perform or discharge promptly when due
any of their obligations, liabilities and debts except as provided under this
Agreement, (iii) any liability or obligation relating to the operation of the
Business prior to the Closing Date, (iv) any breach or default prior to the
Closing Date by Seller or Owner under any of the NRTC Agreements,(v) any state
or local sales, use, excise, personal property or similar tax liability
(including penalties and interest) of Seller, (vi) any liability or obligation
relating to the operation of the Mini-Cable Business prior to or after the
Closing Date, and (vii) any other liabilities, obligations or claims, whether
absolute or contingent, known or unknown, matured or unmatured and not expressly
assumed by Purchaser hereunder.
10.3. INDEMNIFICATION OF SELLER. Subject the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Seller and each of its
shareholders, subsidiaries, affiliates, officers and directors harmless from,
against, for and in respect of any and all Indemnifiable Damages relating to,
resulting from or arising out of (i) any misrepresentation, untruth, inaccuracy,
breach or nonfulfillment of any representation, warranty, agreement or covenant
of Purchaser contained in or made in connection with this Agreement or in any
Schedule, exhibit, certificate or other document delivered pursuant hereto, (ii)
the failure of Purchaser to pay, perform or discharge promptly when due (a) its
obligations set forth in Section 4.3 herein, or (b) the Current Liabilities,
(iii) the assertion against Seller of any liability or obligation relating
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to Purchaser's operation of the Business after the Closing Date, and (iv) any
breach or default after the Closing Date by Purchaser under the NRTC Agreements.
10.4. RIGHT TO CONTEST.
(a) If any party entitled to indemnification hereunder (the
"Indemnified Party") receives notice or has knowledge of any claim for which it
believes the other party hereto is obligated to provide indemnification pursuant
to Sections 10.2 or 10.3 herein (the "Indemnifying Party"), the Indemnified
Party shall notify the Indemnifying Party in writing of such claim within twenty
(20) days of its receipt of same (the "Indemnification Claim"). The
Indemnification Claim shall set forth a brief description of the facts giving
rise to such a claim and the amount (or reasonable estimate) of the
Indemnifiable Damages suffered or which may be suffered by the Indemnified
Party. The Indemnified Party shall, at the expense of the Indemnifying Party,
provide all information regarding the contest or defense of the claim and
cooperate fully with the Indemnifying party in the conduct of any such contest
or defense. Before being required to make any payment pursuant to Sections 10.2
or 10.3 herein, the Indemnifying Party may, at its own expense, elect to
undertake and control the defense of, and take all necessary steps properly to
contest any claim in respect thereof involving third parties or to prosecute
such claim to conclusion or settlement satisfactory to the Indemnified Party. If
the Indemnifying Party makes the foregoing election, then the Indemnified Party
shall have the right to participate, at its own expense, in all proceedings but
shall not admit any liability, settle, compromise, pay or discharge the claim
without the prior written consent of the Indemnifying Party. If the Indemnifying
Party does not make such election, it shall be obligated to pay the costs of
defending or prosecuting such claim and shall be bound by whatever result is
obtained by the Indemnified Party respecting such claim.
(b) Except as herein expressly provided, the remedies provided
in this Article X shall be cumulative and shall not preclude assertion by any
party of any other rights or the seeking of any other remedies against any other
party hereto.
10.5. RIGHT OF OFFSET. Purchaser shall have the right, at its sole
discretion, to offset, on a dollar-for-dollar basis, against any and all amounts
due Seller pursuant to the Note any amounts due to Purchaser from Seller or the
Owner pursuant to this Agreement, including, without limitation, Indemnifiable
Damages due pursuant to Section 10.2, adjustments pursuant to Section 4.3(d),
and any other amounts due from Seller pursuant to any other provision hereof
(the "Right of Offset"). Before exercising its Right of Offset, Purchaser shall
provide written notice of its intent to exercise such right.
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
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postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
To Purchaser: Digital Television Services of New York II, LP
Building 100, Suite 300
1080 Holcomb Bridge Road
Roswell, Georgia 30076
Attn: Douglas S. Holladay, Jr., President
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Seller: Falls Earth Station, Inc.
58 Camp Road
Oriskany Falls, New York 13402
Attn: Gerald R. Barnes
with a copy to: John R. Bloise, Esq.
Bloise & Bloise
283 So. Hamilton Street
Painted Post, New York 14870
11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Georgia, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
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11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns, if any, of the parties hereto. Except as
otherwise expressly provided herein, nothing expressed or implied herein is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto, any right or remedy hereunder or by reason hereof. This
Agreement may not be assigned by Purchaser (except to a party which, directly or
indirectly is controlled by, controls or is under common control with,
Purchaser) or Seller without the prior written consent of the other party.
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules
attached hereto constitute the entire agreement and understanding of the parties
in respect of the transactions contemplated hereby and supersede all prior
correspondence, conversations, agreements, arrangements, understandings and
other writings. No promises, covenants or representations of any character or
nature other than those expressly stated herein have been made to induce either
party to enter into this Agreement. This Agreement may be amended or modified
only by a written instrument signed by Purchaser and Seller.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives.
11.10. KNOWLEDGE OF SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Seller and Owner confirm that they have made or caused to be made due and
diligent inquiry as to the matters that are the subject of such representations
and warranties.
11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Seller and Purchaser, (ii) either party
upon written notice to the other party if the Closing has not occurred on or
before the Termination Date, (iii) Seller if the covenants and conditions set
forth in Articles VII and IX required to be complied with or performed by
Purchaser have not been complied with or performed by Purchaser and such
noncompliance and nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Purchaser on or before the sixtieth
(60th) day following written notice thereof from Seller; provided that neither
Seller nor Owner have defaulted in any material respect with respect to any of
their obligations hereunder, (iv) Purchaser if the covenants and conditions set
forth in Articles VII and VIII required to be complied with and performed by
Seller or Owner have not been complied with or performed by Seller and Owner and
such noncompliance and nonperformance shall not have been cured or eliminated
(or by its nature cannot be cured or
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eliminated) by Seller or Owner on or before the sixtieth (60th) day following
written notice thereof from Purchaser; provided that Purchaser shall not have
defaulted in any material respect with respect to any of its obligations
hereunder.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i) or (ii), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
(c) In the event of termination pursuant to Section 11.13(a)(iii) or
(iv), the terminating party shall be entitled to recover from the other party
hereto all damages, losses, costs and expenses (including reasonable attorneys'
fees) provided by law.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of New York II, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
----------------------------------
Its:
-----------------------------
SELLER:
Falls Earth Station, Inc.
By:
----------------------------------
Its:
-----------------------------
(SEAL)
----------------------------------
Gerald R. Barnes
23
<PAGE> 1
EXHIBIT 10.6(b)
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this
"Amendment") is made as of July 11, 1996 by and among Digital Television
Services of New York II, LP, a Georgia limited partnership ("Purchaser"), Falls
Earth Station, Inc., a New York corporation ("Seller"), and Gerald R. Barnes, a
resident of the State of New York ("Owner").
RECITALS
Purchaser, Seller and Owner entered into an Asset Purchase Agreement
dated as of June 26, 1996 (the "Asset Purchase Agreement"). Capitalized terms
used herein which are not otherwise defined shall have the meanings set forth in
the Asset Purchase Agreement. Purchaser, Seller and Owner have determined that
it is in their mutual best interest to clarify and amend the Asset Purchase
Agreement in accordance with Section 11.8 thereof.
TERMS OF AMENDMENT
Purchaser, Seller and Owner agree as follows:
1. AMENDMENT OF SCHEDULE 4.2(c). Schedule 4.2(c) shall be deleted in
its entirety and the new Schedule 4.2(c) attached hereto shall be inserted in
lieu thereof.
2. MODIFICATION. Except as modified hereby, the terms and conditions of
the Asset Purchase Agreement shall remain in full force and effect.
3. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
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<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of New York II, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
----------------------------------
Douglas S. Holladay, Jr.
SELLER:
Falls Earth Station, Inc.
By:
----------------------------------
Its:
-----------------------------
(SEAL)
----------------------------------
Gerald R. Barnes
2
<PAGE> 1
EXHIBIT 10.7(a)
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF JUNE 28, 1996
BY AND AMONG
DIGITAL TELEVISION SERVICES OF NEW MEXICO, LP
TEG DBS SERVICES, INC.
KULWINDER SINGH
AND
JADWINDER SINGH
================================================================================
<PAGE> 2
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 28th day of June, 1996, by and between Digital Television
Services of New Mexico, LP, a Georgia Limited Partnership ("Purchaser"), Teg DBS
Services, Inc. a Nevada corporation ("Seller"), Kulwinder Singh, a resident of
the State of California ("Kulwinder"), and Jadwinder Singh, a resident of the
State of California ("Jadwinder") (Kulwinder and Jadwinder are hereinafter
collectively referred to as "Owners").
RECITALS
1. Seller owns and operates an exclusive distributorship of the
National Rural Telecommunications Cooperative's DBS Services and of DirecTv,
Inc., as successor rights holder to Hughes Communications Galaxy, Inc. (the
"Business") in Taos, Sante Fe and Rio Arriba Counties, New Mexico (the
"Locations").
2. The Owners own all of the issued and outstanding stock of all
classes of Seller.
3. Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser all of Seller's rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations and certain of the assets used
in the Business, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, Seller, Owners
and Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Seller to the
NRTC as of the Closing Date relating to the Business.
"Accounts Receivable" shall mean all of the accounts receivable of
Seller as of the Closing Date for all Customers which are listed on Report 19A
(Accounts Receivable Summary) of the NRTC Central Billing Systems Reports.
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
<PAGE> 3
"Cash" shall mean all cash on hand and in Seller's bank accounts at
Huntington Bank as of the Closing Date, as determined in accordance with GAAP.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Nelson Mullins Riley
& Scarborough, L.L.P., 100 North Tryon Street, Suite 3350, Charlotte, North
Carolina, 28202 (i) at the earlier of (a) the last business day of the month in
which all of the conditions precedent set forth in Articles VIII and IX herein
have been satisfied or waived, or (b) the calendar day of such month on which
NRTC's accounting period closes, or (ii) such other date or at such other time
or place (including via mail overnight courier) as the parties may mutually
agree upon in writing. The Closing shall be as effective as of the close of
business on the Closing Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Current Assets" shall mean Cash, Accounts Receivable and Prepaid
Expenses of Seller which will be acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Seller which will be assumed by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased telecommunications services, or entered into a binding agreement to
purchase telecommunications and related services, from Seller at any time during
the five (5) year period immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTv" shall mean DirecTv, Inc., a California corporation, the
successor in interest and rights holder to Hughes Communication Galaxy, Inc.
"Escrow Agreement" shall mean the Escrow Agreement dated as of the date
hereof among the Escrow Agent, Purchaser and Seller.
"Escrow Deposit" shall mean Five Hundred Thousand Dollars ($500,000) to
be held and disbursed pursuant to the Escrow Agreement.
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, any MTE terminals and demonstration units owned
by Seller and used or useable in
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<PAGE> 4
connection with the Business, which equipment and tangible assets are listed on
Schedule 1.1 attached hereto.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement, and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated May 10, 1993 by and between the
NRTC and Direct Television of New Mexico, Inc., which was assigned to Seller
effective as of March 10, 1995, as amended from time to time, together with all
schedules and exhibits thereto, a copy of which is attached hereto as Schedule
1.2.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement dated May 10, 1993 by and between the NRTC and Direct Television of
New Mexico, Inc., which was assigned to Seller effective as of March 10, 1995,
as amended from time to time, together with all schedules and exhibits thereto,
a copy of which is attached hereto as Schedule 1.3.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.4, including any contracts and agreements with
DirecTv, copies of which are attached to such Schedule.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
"Prepaid Expenses" shall mean all prepaid property taxes, prepaid
supplies, advances, deposits, deferred charges and other prepaid expenses (other
than prepaid insurance) shown on Seller's books and records as of the Closing
Date relating to the Business which Prepaid
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<PAGE> 5
Expenses can be credited to Purchaser's account after the Closing Date, as
determined in accordance with GAAP.
"Programming" shall mean Cable Programming and any programming provided
DirecTv pursuant to the NRTC Agreements.
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
"Purchased Assets" shall mean only the (i) NRTC Agreements, (ii)
Current Assets, (iii) relationships, contracts and accounts with Customers, (iv)
Fixed Assets, (v) Records and (vi) telephone numbers used in the Business.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Seller, including, without limitation, Customer
and prospective customer lists, computer programs, tapes and electronic data
processing software, accounting journals and ledgers, accounts receivable
records, and copies of all NRTC reports, correspondence and other documents
relating to the NRTC Agreements and Other Assumed Agreements and compliance
therewith.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i) is an active subscriber subscribing to a package of basic services, (ii) on
the last day of the calendar month prior to such date, whose account is not more
than sixty (60) days past due from the date payment is due, (iii) who is not an
employee or agent of the service provider or charged a fee that is nominal
(e.g., demonstration unit) or substantially below the service provider's
published rates, and (iv) who has not given notice of intent to discontinue
service.
"Termination Date" shall mean August 31, 1996; provided, however, if
the NRTC has not given its consent contemplated in Section 7.3 hereof, then the
Termination Date shall be extended for an additional sixty (60) days.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Seller as of the
Closing Date which are listed on Report 17 (Unearned Revenue Report) of the NRTC
Central Billing System Reports.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Seller all of Seller's right, title and interest in and to the Purchased Assets,
free and clear of any and all Liens, on the Closing Date for the consideration
set forth in this Agreement. The sale, transfer, assignment and conveyance of
the Purchased Assets shall be made by the execution and delivery at Closing of
(i) an Assignment and Assumption Agreement substantially in the form attached
hereto as Schedule 2.1(a) (the "Assignment"), and (ii) a bill of sale
substantially in the form attached hereto as Schedule 2.1(b)
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<PAGE> 6
(the "Bill of Sale"), and (iii) such other recordable instruments of assignment,
transfer and conveyance as Purchaser shall reasonably request.
ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLER. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Seller with respect to the following:
(a) the NRTC Agreements to the extent the obligations therein
arise out of the provision of DBS Services to Customers and accrue on or after
the Closing Date; and
(b) all Current Liabilities as of the Closing Date.
Anything in this Agreement to the contrary notwithstanding,
except for the liabilities specifically set forth in this Section 3.1, Purchaser
shall not assume or be deemed to have assumed under this Agreement, by reason of
the transactions contemplated by this Agreement, or otherwise, any other trade
or other accounts payable, accrued expenses, debts, liabilities, obligations or
commitments of Seller of any nature whatsoever, known or unknown, and the
execution, delivery and performance of this Agreement shall not render Purchaser
liable for any such debt, liability, obligation or commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Seller are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Seller under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Seller with or
for the benefit of any employee of Seller; and
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Seller,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution, sale or provision
of any services of Seller, or (ii) any failure or alleged failure to comply with
any federal, state or local law, rule or regulation applicable to Seller or the
Business.
Purchaser agrees to promptly notify Seller of any claims which Purchaser obtains
knowledge of which arise out of or result from liabilities of Seller not assumed
by Purchaser pursuant to this Agreement.
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<PAGE> 7
ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PAYMENT OF PURCHASE PRICE. The purchase price for the Purchased
Assets (the "Purchase Price") shall be Nine Million Fifty Thousand Dollars
($9,050,000), subject to adjustment as provided in Section 4.4 herein.
4.2. ESCROW DEPOSIT. Contemporaneously with the execution of this
Agreement, Purchaser has delivered to the Escrow Agent the Escrow Deposit to be
held by the Escrow Agent pursuant to the Escrow Agreement.
4.3. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Seller as follows:
(a) The Escrow Deposit by certified or cashier's check, or by
wire transfer of immediately available funds to an account or accounts
designated in writing by Seller at least three (3) business days prior to the
Closing Date.
(b) The sum of Three Million Three Hundred Thousand Dollars
($3,300,000), subject to adjustment as provided for in Section 4.4 herein, by
certified or cashier's check, or by wire transfer of immediately available funds
to an account or accounts designated in writing by Seller (together with the
Escrow Deposit, the "Closing Payment").
(c) the sum of Five Million Two Hundred Fifty Thousand Dollars
($5,250,000) by the delivery of a Promissory Note substantially in the form
attached hereto as Schedule 4.3(c) (the "Note"), less any adjustments and
reductions as provided in Section 4.4 herein. The Note will be secured by (i)
all of the assets of Purchaser pursuant to the Security Agreement substantially
in the form attached hereto as Schedule 4.3(d) (the "Security Agreement"), and
(ii) the collateral assignment of the NRTC Agreements pursuant to the Collateral
Assignment of Marketing and Distribution Agreement substantially in the form
attached hereto as Schedule 4.3(e) (the "Collateral Assignment").
4.4. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the Current Assets of Seller and decreased by the Current
Liabilities of Seller as of the Closing Date (the "Closing Adjustment"), which
adjustment shall be subject to final adjustment as provided for in paragraph (c)
below.
(b) No later than thirty (30) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Seller shall make and deliver
to Purchaser a balance sheet reflecting the Current Assets and Current
Liabilities of Seller as of the Closing Date (the "Closing Date Balance Sheet").
For purposes of the Closing Adjustment and the Final Closing Adjustment, the
amount of Accounts Receivable of Seller to be included in the Closing Date
Balance Sheet shall include only Accounts Receivable of Subscribers as reflected
on Report 18A (Subscriber
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<PAGE> 8
Accounts Receivable Aging by Account) of the NRTC Central Billing System Reports
less Three Thousand Dollars ($3,000), as a reserve for Accounts Receivable which
are not collectible as determined in accordance with GAAP. In addition, the
Closing Date Balance Sheet and the Final Closing Adjustment shall not include as
a Current Asset any DSS(TM) subscriber equipment leased by Seller to any of its
Customers. Except as set forth in this Section 4.4(b), no other assets or
liabilities shall be included in the Closing Date Balance Sheet. Seller shall
make available to Purchaser such documentation, back-up, invoices, and books and
records of Seller as Purchaser may reasonably request.
(c) Seller and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Seller and Purchaser are unable to
reconcile such determination, Purchaser shall have fifteen (15) days from
presentment of the Closing Date Balance Sheet by Seller to notify Seller if
Purchaser wishes to have Seller's determination examined. If Purchaser elects to
have Seller's determination examined, it shall be submitted to the determination
in Charlotte, North Carolina, by the Certified Public Accounting firm of Arthur
Andersen & Co. (or any other independent Certified Public Accounting firm
mutually acceptable to Seller and Purchaser), the cost of such examination to be
paid fifty percent (50%) by Seller and fifty percent (50%) by Purchaser. The
determination by Seller shall be final and binding on the parties unless
Purchaser elects to have an examination as provided herein, in which case the
results of the examination shall be made within thirty (30) days of such
referral, and shall be final and binding on the parties (the "Final Closing
Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Seller shall pay the difference in cash to Purchaser
within five (5) days after the final determination. In the event the Final
Closing Adjustment is greater than the Closing Adjustment, Purchaser shall pay
such excess in cash to Seller within five (5) days after the final
determination. If, following any payment pursuant to this Section 4.4(d), an
error (in billing or reporting by NRTC or otherwise) is thereafter discovered
which would have affected the Final Closing Adjustment, the party in whose favor
the error was made shall immediately pay in cash the amount of such error to the
other party.
4.5. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.5 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
ARTICLE V
SELLER'S AND OWNERS' REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller and each of the Owners hereby, jointly
and severally, each represents and warrants to Purchaser as follows:
5.1. ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, with all
requisite power and authority to own
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and operate the Business as it is now conducted and to own the Purchased Assets
in the places where the Business is now conducted and where the Purchased Assets
are now owned or operated.
5.2. AUTHORITY.
(a) Seller and Owners each have full power and authority to
execute, deliver and perform this Agreement and all agreements and transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and all transactions contemplated hereby have been duly authorized by the Seller
and no other action or proceeding on the part of any other party is necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Seller and
Owners, and constitutes, and each of the other agreements to be executed
pursuant to the terms hereof upon execution and delivery will constitute, a
legal, valid and binding obligation of Seller and Owners, enforceable in
accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 5.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any document related hereto by Seller and
Owners and the consummation by Seller and Owners of all of the transactions
contemplated hereby or thereby will not (with or without the giving of notice or
the lapse of time or both) (i) violate or require any consent or approval under
any applicable provision of any judgement, order, writ, injunction, decree,
rule, regulation or law; (ii) require any consent under, conflict with, result
in termination of, accelerate the performance required by, result in a breach
of, constitute a default under or otherwise violate the terms of any agreements,
instruments or other obligations to which Seller or Owners are a party or by
which they or any of the Purchased Assets may be bound or affected; (iii)
require any consent or approval by, notice to or registration with any
governmental authority or any other Person; (iv) conflict with or violate any
provision of Seller's organization documents; or (v) result in the creation of a
Lien upon any of the Purchased Assets howsoever arising.
5.3. TITLE TO THE PURCHASED ASSETS.
(a) Seller has good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) attached hereto.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Seller was conducting the Business in the
ordinary course prior to the Closing Date.
5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.1 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Seller in the past, and no
currently needed repairs are
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reasonably likely to cost, either singularly or in the aggregate with respect to
all Fixed Assets, in excess of Five Thousand Dollars ($5,000).
5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Attached hereto as Schedules 1.2, 1.3 and 1.4, are true
and complete copies of each of the NRTC/Member Agreement, the NRTC/Retail
Agreement, and the Other Assumed Agreements, if any, respectively, together with
all amendments, schedules and exhibits thereto.
(b) Seller has paid all sums to NRTC or DirecTv as
appropriate, required under the NRTC/Member Agreement such that Seller is
entitled to the Marketing Revenues. Seller has the right to receive from NRTC,
on a pro rata basis, all other net revenues received by NRTC from DirecTv in
connection with the Programming which are directly attributable to the Committed
Member Residences or the Commercial Establishments in the Locations.
(c) Seller is in full compliance in all material respects with
any and all membership, affiliation, licensing or other requirements or
arrangements as may have been established by NRTC, DirecTv, if any, pursuant to
the NRTC Agreements, or otherwise.
(d) Seller is not in breach of the NRTC Agreements, nor has
Seller failed to perform any material obligation under the NRTC Agreements.
Seller has not received notice of any such breach or non-performance at any time
of such NRTC Agreements. To the best of Seller's knowledge, no other party to
any of the NRTC Agreements, is in default thereunder or has failed to perform
any material obligation thereunder.
(e) Except as disclosed on Schedule 5.5(e) attached hereto,
none of the DBS Services distributed by Seller have been suspended at any time
since inception.
(f) Schedule 5.5(f) attached hereto (as supplemented by
applicable NRTC reports) sets forth a complete list of names and addresses of
all Customers and Subscribers of Seller, identified as Committed Member
Residence and Commercial Establishment for the five (5) year period immediately
preceding the date hereof. Schedule 5.5(f) includes the number of months such
Customer has been a Customer and whether such Customer's account is past due.
Schedule 5.5(f) will be updated not more than three (3) days prior to the
Closing Date. Seller has maintained full and complete information regarding the
location of each Customer's descrambler. As soon as practicable after the
Closing Date, Seller shall also provide to Purchaser a list of Customers and
programs in the form of NRTC's Report 30 (Average Service Retail Report) of the
NRTC Central Billing System Reports, dated as of the Closing Date.
5.6. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business and
none of the Accounts Receivable are subject to any counterclaim or setoff.
5.7. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
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5.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.8 attached hereto, since December 31, 1995, there has not been and
through the Closing Date there will not be:
(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Seller which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Seller (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
other than obligations or liabilities incurred in the ordinary course of
business and consistent with past practices;
(c) any termination or waiver of any rights of Seller of
material value to the Business or to Seller;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) to the best of Seller's and Owners' knowledge, the
adoption of any statute, rule, regulation or order which adversely affects the
Business or the Purchased Assets;
(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
5.9. LICENSES AND PERMITS. Attached hereto in Schedule 5.9 is a list of
all federal, state, local and foreign permits, certificates, licenses, approvals
and other authorizations necessary in the conduct of the Business. All such
licenses and permits of Seller are in full force and effect, and no violations
are or have been recorded in respect thereof, and no proceeding is pending or
threatened to revoke or limit any thereof. Seller and its conduct of the
Business is in compliance with all applicable laws, statutes, ordinances, rules,
regulations and order of any federal, foreign, state or local government and any
other government department or agency, and in any judgment, decision, decree or
order of any court of governmental agency, department or authority.
5.10. TAX MATTERS.
(a) Seller has timely filed all federal, state, local and
foreign tax returns and tax reports required to be filed with respect to the
Business with the appropriate governmental agency in all jurisdictions in which
such returns and reports are required to be filed. All such returns and reports
are true, correct and complete, and all amounts shown as owing on them have been
paid, including all interest, penalties, deficiencies and assessments heretofore
levied or assessed against Seller. Seller has duly withheld, collected and
timely paid over, or holds for such payment, to the proper governmental
authorities all taxes required to be withheld or collected by it. There is no
agreement for extension of time of assessment or payment of any
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taxes of Seller. No waiver of any statute of limitations has been executed by
Seller for any tax year which remains open or unsettled. To the best knowledge,
information and belief of Seller, there is no examination or audit pending by
the Internal Revenue Service or by any state or local taxing authority with
respect to the tax matters of Seller. There is no liability for taxes or any tax
deficiency or the existence of any basis from which liability for taxes or tax
deficiency, including interest and penalties, might be asserted against Seller
for any period in excess of the applicable reserve for taxes, if any, and Seller
has no knowledge of any such liability or deficiency or the existence of any
basis therefor.
(b) All federal, state, local and foreign income, profits,
franchise, sales, use, occupation, property, excise and other taxes (including
interest and penalties), if any, payable by Seller or relating to or chargeable
against the Purchased Assets or chargeable against Seller's revenue or income
have been fully paid or are not past due and are fully disclosed and accrued on
the books and records of Seller and the proper amount of reserves exist for the
payment thereof.
5.11. DISCLOSURES. No representation or warranty made by Seller or
Owners in this Agreement, and no statement made in any Schedule, exhibit,
certificate or other writing delivered or to be delivered in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact, or omits or will omit any statement of a material fact
necessary to make the statements contained herein or therein not misleading.
5.12. LITIGATION. There are not actions, suits, proceedings, orders,
investigations or claims pending or, to the best of the Seller's and Owners'
knowledge, any threats against or affecting the Seller, the Purchased Assets or
its Business, at law or in equity, before any court, arbitration panel, tribunal
or governmental department, commission, board, bureau, agency or
instrumentality.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Seller and Owners to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser hereby represents and
warrants to Seller and Owners as follows:
6.1. ORGANIZATION. Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Georgia,
with all requisite power to own and operate its business as it is now conducted.
6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding on the part of any
other party is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and
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delivered by Purchaser, and constitutes, and each of the other agreements to be
executed pursuant to the terms hereof upon execution and delivery will
constitute, a legal, valid and binding obligation of Purchaser, enforceable in
accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other document related hereto by Purchaser
and the consummation by Purchaser of all of the transactions contemplated hereby
or thereby will not (with or without the giving of notice or the lapse of time
or both) (i) violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in the termination
of, accelerate the performance required by, result in the breach of, constitute
a default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Purchaser is a party; (iii) require any consent or
approval by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's certificate of
limited partnership or limited partnership agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any Schedule, exhibit, certificate or
other writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Seller and Owners shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use its best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(d) maintain its Records in accordance with prior practice,
maintain the Purchased Assets in their present condition, ordinary wear and tear
excepted, consistent with past practice, and otherwise use its best efforts to
operate the Business as currently operated and in the ordinary course in
accordance with practices during the twelve (12) months preceding the date of
this Agreement;
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(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets;
(f) use their best efforts to preserve intact the current
business organization and relationships with employees, suppliers, advertisers,
Customers and other Persons having dealings with Seller;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTv;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTv;
(i) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC Agreements, and (ii) copies of
all protests, complaints, challenges or other documents submitted to or filed
with the NRTC or DirecTv by third parties concerning the Business and, promptly
upon the filing or making thereof, copies of Seller's responses thereto; and
(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against Seller in any court, or any
action against Seller before any governmental agency, and notify Purchaser in
writing promptly upon receipt of any administrative or court order relating to
the Business. Without limiting the generality of the foregoing, neither Seller
nor Owners shall take any of the actions (over which Seller or Owners can
exercise control) listed in Section 5.9 herein.
7.2. ACCESS.
(a) Prior to the Closing, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Seller and its properties, books and records as Purchaser deems
necessary or advisable and shall have full access to the auditors and attorneys
of Seller. Seller shall permit Purchaser and its employees, agents and
representatives, on reasonable notice, to have access to its premises, personnel
and Records. Seller shall cooperate to provide access to its Customers,
suppliers, lenders and such other parties as Purchaser may reasonably request.
Seller shall, and shall cause its officers, attorneys and accountants to,
furnish Purchaser with such financial and operating data and other information
as Purchaser from time to time shall reasonably request, including, but not
limited to, Seller's balance sheets for the Business as of December 31, 1995 and
May 31, 1996 (the "Teg Balance Sheets"). No investigation by Purchaser shall in
any way affect or otherwise diminish the representations, warranties and
covenants of Seller or Owners hereunder.
(b) Purchaser will hold, and will cause its authorized
representatives to hold, in strict confidence, unless compelled to disclose by
judicial or administrative process or official request or by other requirements
of law, all documents and information concerning Seller and the Business
furnished to Purchaser in connection with the transactions contemplated by this
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Agreement (except to the extent that such information can be shown to have been
(i) previously known by Purchaser, (ii) in the public domain through no fault of
Purchaser, or (iii) later lawfully acquired by Purchaser from other sources) and
will not release or disclose such information to any other Person, except its
auditors, attorneys, financial advisors and other consultants and advisors and
lending institutions (including banks) in connection with this Agreement, it
being understood that such Persons shall be informed by such party of the
confidential nature of such information and shall be directed by such party and
shall have agreed to treat such information as confidential. In the event that
the transactions contemplated herein are not consummated for any reason,
Purchaser will, upon request by Seller, promptly return to Seller all copies of
any Schedules, statements, documents or other written information obtained in
connection herewith, without retaining any copies or summaries thereof, and
shall maintain such confidence except to the extent such information comes into
the public domain through no fault of Purchaser.
7.3. CONSENT OF NRTC AND OTHERS. Within five (5) business days after
the date of this Agreement, Seller shall cause its counsel to prepare a request
for the consent of the NRTC to the transfer of the NRTC Agreements and such
other requests for consent that Purchaser determines may be necessary or
appropriate to consummate the transactions contemplated hereby, and deliver
drafts of same to Purchaser's counsel. After review by Purchaser's counsel, but
in any event within ten (10) business days after the date of this Agreement,
Seller, Owners and Purchaser shall join in and deliver the requests for consent,
and they will each diligently take all steps necessary or desirable to obtain
the consents. The failure of any of the parties to timely file or diligently
seek the consents, or to cooperate fully with any of the other parties with
respect thereto, shall be deemed a material breach of this Agreement.
7.4. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Seller and Purchaser shall
mutually agree in advance as to timing, form and content before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to reaching mutual agreement, except as may be
required by law. In the event that prior to the Closing Date either party is
required by law to make a statement with respect to the transactions
contemplated herein, such party shall notify the other party in writing as to
the timing, form and content of such statements. Each of Seller, Purchaser and
Owners agrees to maintain the confidentiality of this Agreement and the terms
hereof and any information exchanged by the parties in connection with the
consummation of the transaction contemplated hereby.
7.5. BEST EFFORTS. Subject to the terms and conditions herein provided,
each of Seller, Owners and Purchaser agrees to use its best efforts to take,
execute, acknowledge and deliver, or cause to be taken, executed, acknowledged
and delivered, all actions, deeds, assignments, documents, instruments,
transfers, conveyances, discharges, releases, assurances and consents, and to
do, or cause to be done, all things necessary, proper or advisable under this
Agreement and all applicable laws and regulations to consummate, confirm,
perfect, evidence and otherwise make effective the transactions contemplated by
this Agreement, including actions necessary to obtain all requisite assignments
of agreements and contracts, and to fulfill the requirements of Articles VIII
and IX hereof on or prior to the Closing Date.
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7.6. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Seller and Owners will refrain, and will cause
all of their agents and employees to refrain, from taking, directly or
indirectly, any action to encourage, initiate, solicit or continue any
discussions or negotiations with, or any other offers from, any other Person
concerning a merger, sale of substantial stock or any similar transaction
concerning Seller which would affect the Business, or the sale of the Purchased
Assets or any portion thereof.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller and Owners contained in this Agreement,
and all representations and warranties set forth in any Schedule or exhibit
attached hereto, shall have been true, complete and correct when made and as of
the Closing Date, without the necessity of any material amendment or
modification, with the same force and effect as if made as of the Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Seller or Owners on or before the
Closing Date pursuant to the terms hereof shall have been duly performed or
complied with on or before the Closing Date.
8.3. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the financial condition, Business, assets, results of
operations or prospects of Seller or the Purchased Assets.
8.4. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.5. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Seller in connection with the Closing (including, without limitation,
NRTC consent as provided for in Section 7.3 herein, shall have been duly
obtained by Seller and shall be in full force and effect without conditions
which are materially adverse to Purchaser.
8.6. SUBSCRIBERS. On the Closing Date, Seller shall have at least 2,200
Subscribers.
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8.7. SELLER'S CLOSING DELIVERIES. Seller and the Owners shall have
delivered to Purchaser the following at Closing:
(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) all Records or copies of the Records;
(c) a certified copy of resolutions of the Board of Directors
of Seller and shareholders authorizing the execution, delivery and performance
of this Agreement;
(d) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or otherwise addressed to
Purchaser's satisfaction;
(e) a list of the Accounts Receivable from all Customers
(Reports 18A and 19A) and a list of the Unearned Revenue (Report 17) each as of
the NRTC billing period ending immediately prior to the Closing Date;
(f) a certificate signed by Seller's president and Owners,
dated the Closing Date, to the effect that the conditions set forth in this
Article VIII have been satisfied; and
(g) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Seller's and Owners' satisfaction of each of its obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Seller's obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Seller), on or before the Closing Date, of each of the following conditions
precedent:
9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain
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substantial damages in respect thereof, or involving a claim, the consummation
of which would result in the violation of any law, decree or regulation of any
governmental authority having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in Section 7.3 herein) shall have been
duly obtained by Purchaser and shall be in full force and effect without
conditions which are materially adverse to Seller.
9.5. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Seller and Owners the following at Closing:
(a) the Closing Payment;
(b) the Note and the Security Agreement duly executed by
Purchaser;
(c) the Collateral Assignment duly executed by each of
Purchaser, NRTC and DirecTv;
(d) a certificate signed by Purchaser's general partner, dated
the Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied; and
(e) such other documents and instruments as may be reasonably
requested and satisfactory to Seller and its counsel in connection with
Purchaser's satisfaction of each of its obligations hereunder.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by any party to this Agreement or pursuant hereto shall
survive the Closing of the transactions hereunder. The representations and
warranties hereunder shall not be affected or diminished by any investigation at
any time by or on behalf of the party for whose benefit such representations and
warranties were made. All statements contained herein or in any Schedule,
exhibit, certificate, list or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Seller and each of the Owners,
jointly and severally, and each of their representatives, successors, heirs and
assigns, agree to indemnify, reimburse and hold Purchaser and each of its
partners, subsidiaries, affiliates, successors, assigns and agents harmless
from, against, for and in respect of any and all damages, losses, settlement
payments, obligations, liabilities, claims, demands, actions or causes of
action, judgments, encumbrances, costs and expenses (including reasonable
attorneys' fees) (collectively, the "Indemnifiable Damages") relating to,
resulting from or arising out of (i) any misrepresentation,
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untruth, inaccuracy, breach or nonfulfillment of any representation, warranty,
agreement or covenant of Seller or Owners contained in or made in connection
with this Agreement or in any Schedule, exhibit, certificate or other document
delivered pursuant hereto, (ii) the failure of Seller or Owners to pay, perform
or discharge promptly when due any of their obligations, liabilities and debts
except as provided under this Agreement, (iii) any liability or obligation
relating to the operation of the Business prior to the Closing Date, (iv) any
breach or default prior to the Closing Date by Seller or Owners under any of the
NRTC Agreements,(v) any state or local sales, use, excise, personal property or
similar tax liability (including penalties and interest) of Seller, and (vi) any
other liabilities, obligations or claims, whether absolute or contingent, known
or unknown, matured or unmatured and not expressly assumed by Purchaser
hereunder.
10.3. INDEMNIFICATION OF SELLER. Subject the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Seller and each of its
shareholders, subsidiaries, affiliates, officers and directors harmless from,
against, for and in respect of any and all Indemnifiable Damages relating to,
resulting from or arising out of (i) any misrepresentation, untruth, inaccuracy,
breach or nonfulfillment of any representation, warranty, agreement or covenant
of Purchaser contained in or made in connection with this Agreement or in any
Schedule, exhibit, certificate or other document delivered pursuant hereto, (ii)
the failure of Purchaser to pay, perform or discharge promptly when due (a) its
obligations set forth in Section 4.3 herein, or (b) the Current Liabilities,
(iii) the assertion against Seller of any liability or obligation relating to
Purchaser's operation of the Business after the Closing Date, and (iv) any
breach or default after the Closing Date by Purchaser under the NRTC Agreements.
10.4. RIGHT TO CONSENT.
(a) If any party entitled to indemnification hereunder (the
"Indemnified Party") receives notice or has knowledge of any claim for which it
believes the other party hereto is obligated to provide indemnification pursuant
to Sections 10.2 or 10.3 herein (the "Indemnifying Party"), the Indemnified
Party shall notify the Indemnifying Party in writing of such claim within twenty
(20) days of its receipt of same (the "Indemnification Claim"). The
Indemnification Claim shall set forth a brief description of the facts giving
rise to such a claim and the amount (or reasonable estimate) of the
Indemnifiable Damages suffered or which may be suffered by the Indemnified
Party. The Indemnified Party shall, at the expense of the Indemnifying Party,
provide all information regarding the contest or defense of the claim and
cooperate fully with the Indemnifying Party in the conduct of any such contest
or defense. Before being required to make any payment pursuant to Sections 10.2
or 10.3 herein, the Indemnifying Party may, at its own expense, elect to
undertake and control the defense of, and take all necessary steps properly to
contest any claim in respect thereof involving third parties or to prosecute
such claim to conclusion or settlement satisfactory to the Indemnified Party. If
the Indemnifying Party makes the foregoing election, then the Indemnified Party
shall have the right to participate, at its own expense, in all proceedings but
shall not admit any liability, settle, compromise, pay or discharge the claim
without the prior written consent of the Indemnifying Party. If the Indemnifying
Party does not make such election, it shall be obligated to pay the costs of
defending or prosecuting such claim and shall be bound by whatever result is
obtained by the Indemnified Party respecting such claim.
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(b) Except as herein expressly provided, the remedies provided
in this Article X shall be cumulative and shall not preclude assertion by any
party of any other rights or the seeking of any other remedies against any other
party hereto.
10.5. RIGHT OF OFFSET. Purchaser shall have the right, at its sole
discretion, to offset, on a dollar-for-dollar basis, against any and all amounts
due Seller pursuant to the Note any amounts due to Purchaser from Seller or the
Owners pursuant to this Agreement, including, without limitation, Indemnifiable
Damages due pursuant to Section 10.2 and any other amounts due from Seller
pursuant to any other provision hereof (the "Right of Offset"). Before
exercising its Right of Offset, Purchaser shall provide written notice of its
intent to exercise such right.
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
To Purchaser: Digital Television Services of
New Mexico, LP
Building 100, Suite 300
1080 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Seller: Teg DBS Services, Inc.
46725 Fremont Boulevard
Fremont, California 94538
Attn: Kulwinder Singh
with a copy to: Bruce Friedman, Esq.
Epstein & Friedman
50 Fremont Street, Suite #1900
San Francisco, California 94105
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11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Georgia, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns, if any, of the parties hereto. Except as
otherwise expressly provided herein, nothing expressed or implied herein is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto, any right or remedy hereunder or by reason hereof. This
Agreement may not be assigned by Purchaser (except to a party which, directly or
indirectly is controlled by, controls or is under common control with,
Purchaser) or Seller without the prior written consent of the other party.
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules
attached hereto constitute the entire agreement and understanding of the parties
in respect of the transactions contemplated hereby and supersede all prior
correspondence, conversations, agreements, arrangements, understandings and
other writings. No promises, covenants or representations of any character or
nature other than those expressly stated herein have been made to induce either
party to enter into this Agreement. This Agreement may be amended or modified
only by a written instrument signed by Purchaser and Seller.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives.
11.10. KNOWLEDGE OF SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Seller and Owners confirm that
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they have made or caused to be made due and diligent inquiry as to the matters
that are the subject of such representations and warranties.
11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Seller and Purchaser, (ii) either party
upon written notice to the other party if the Closing has not occurred on or
before the Termination Date, (iii) Seller if the covenants and conditions set
forth in Articles VII and IX required to be complied with or performed by
Purchaser have not been complied with or performed by Purchaser and such
noncompliance and nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Purchaser on or before the sixtieth
(60th) day following written notice thereof from Seller; provided that neither
Seller nor Owners have defaulted in any material respect with respect to any of
their obligations hereunder, (iv) Purchaser if the covenants and conditions set
forth in Articles VII and VIII required to be complied with and performed by
Seller or Owners have not been complied with or performed by Seller and Owners
and such noncompliance and nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) by Seller or Owners
on or before the sixtieth (60th) day following written notice thereof from
Purchaser; provided that Purchaser shall not have defaulted in any material
respect with respect to any of its obligations hereunder, or (v) Purchaser if
within six (6) hours of delivery by Seller of the Teg Balance Sheets, Purchaser
notifies Seller that Purchaser is not fully satisfied, in its sole discretion,
with its due diligence investigation as provided for in Section 7.2 herein.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i), (ii) or (v), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
(c) In the event of termination pursuant to Section 11.13(a)(iii) or
(iv), the terminating party shall be entitled to recover from the other party
hereto all damages, losses, costs and expenses (including reasonable attorneys'
fees) provided by law.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of New Mexico, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
-------------------------------
Its:
--------------------------
SELLER:
Teg DBS Services, Inc.
By:
-------------------------------
Its:
--------------------------
(SEAL)
----------------------------------
Kulwinder Singh
(SEAL)
----------------------------------
Jadwinder Singh
22
<PAGE> 1
EXHIBIT 10.7(b)
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this
"Amendment") is made as of July 11, 1996 by and among Digital Television
Services of New Mexico, LP, a Georgia limited partnership ("Purchaser"), Teg DBS
Services, Inc., a Nevada corporation ("Seller"), Kulwinder Singh, a resident of
the State of California ("Kulwinder"), and Jadwinder Singh, a resident of the
State of California ("Jadwinder")(Kulwinder and Jadwinder are hereinafter
collectively referred to as "Owners").
RECITALS
Purchaser, Seller and Owners entered into an Asset Purchase Agreement
dated as of June 28, 1996 (the "Asset Purchase Agreement"). Capitalized terms
used herein which are not otherwise defined shall have the meanings set forth in
the Asset Purchase Agreement. Purchaser, Seller and Owners have determined that
it is in their mutual best interest to clarify and amend the Asset Purchase
Agreement in accordance with Section 11.8 thereof.
TERMS OF AMENDMENT
Purchaser, Seller and Owners agree as follows:
1. AMENDMENT OF LIST OF SCHEDULES. The List of Schedules forming a part
of the Table of Contents shall be amended by deleting the following: "Schedule
4.3(e) Collateral Assignment".
2. AMENDMENT OF SECTION 4.3(c). Section 4.3(c) shall be deleted in its
entirety and the following new Section 4.3(c) shall be inserted in lieu thereof:
"(c) the sum of Five Million Two Hundred Fifty Thousand
Dollars ($,5,250,000) by the delivery of a Promissory Note substantially in the
form attached hereto as Schedule 4.3(c) (the "Note"), less any adjustments and
reductions as provided in Section 4.4 herein. The Note will be secured by all of
the assets of Purchaser pursuant to the Security Agreement substantially in the
form attached hereto as Schedule 4.3(d) (the "Security Agreement")."
3. AMENDMENT OF SECTION 9.5(c). Section 9.5(c) shall be deleted in its
entirety and the following new Section 9.5(c) shall be inserted in lieu thereof:
"(c) the Letter Agreement from the NRTC and DirecTv to Seller
substantially in the form attached hereto as Schedule 9.5(c)."
4. AMENDMENT OF SCHEDULE 4.3(d). Schedule 4.3(d) shall be deleted in
its entirety and the Schedule 4.3(d) attached hereto shall be inserted in lieu
thereof.
<PAGE> 2
5. MODIFICATION. Except as modified hereby, the terms and conditions of
the Asset Purchase Agreement shall remain in full force and effect.
6. GOVERNING LAW. This Amendment shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Georgia,
without regard to the choice of law provisions thereof.
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
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<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
PURCHASER:
Digital Television Services of New Mexico, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
-----------------------------------
Douglas S. Holladay, Jr., President
SELLER:
Teg DBS Services, Inc.
By:
-----------------------------------
Its:
------------------------------
(SEAL)
-----------------------------------
Kulwinder Singh
(SEAL)
-----------------------------------
Jadwinder Singh
3
<PAGE> 1
EXHIBIT 10.8(a)
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of this 28th day of June, 1996, by and between Digital Television Services of
New York I, LP, a Georgia limited partnership ("Purchaser") and Northeast Cable
Services, Inc., a New York corporation ("Seller").
RECITALS
A. Seller owns and operates an exclusive distributorship of the
National Rural Telecommunications Cooperative's DBS Services and of DirecTv,
Inc., the successor rights holder to Hughes Communications Galaxy, Inc. (the
"Business") in the "Locations" (hereinafter defined).
B. Seller desires to transfer and assign to Purchaser, and Purchaser
desires to acquire and accept from Seller, all of Seller's rights under the
NRTC/Member Agreement and the NRTC/Retail Agreement relating to the Locations
and other "Assets" (hereinafter defined), upon the terms, and subject to the
conditions, set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Seller and Purchaser hereby agree
as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
"Cable Programming" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Closing" and "Closing Date" shall have the meanings set forth
in Section 2.3 herein.
"Commercial Establishment" shall have the meaning ascribed to
such term in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed
to such term in the NRTC/Member Agreement.
"Customer" shall mean any customer of the Business (including
a Subscriber).
"DBS Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"DirecTv" means DirecTv, Inc., a California corporation.
<PAGE> 2
"HCG DirecTv" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"Hughes" shall mean Hughes Communications Galaxy, Inc.
"Lien" shall mean with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim or restriction of any kind in respect of such property or asset. For
purposes of this Agreement, any restriction or limitation with respect to a
security or other ownership interest (including any restriction on the right to
vote, sell or otherwise dispose of such security or ownership interest) shall
constitute a "Lien" thereon. For the purposes of this Agreement, a Person shall
be deemed to own subject to a Lien any property or asset which it has acquired
or holds subject to the interest of a vendor or lessor under any conditional
sale relating to such property or asset.
"Locations" shall have the meaning set forth in Paragraph S.1
of Schedule 1.
"Non-Select Services" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications
Cooperative, a District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the
NRTC/Retail Agreement, and any Other Assumed Agreements identified as NRTC
Agreements in Paragraph S.4 of Schedule 1.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement
for Marketing and Distribution of DBS Services between the NRTC and Seller
identified in Paragraph S.2 of Schedule 1.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Retail
product Agreement identified in Paragraph S.3 of Schedule 1.
"Other Assumed Agreements" shall mean the contracts and
agreements, if any, set forth in Paragraph S.4 of Schedule 1.
"Person" shall mean an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization
including a government or political subdivision or agency or instrumentality
thereof.
"Programming" shall mean Cable Programming and HCG DirecTv.
"Subscriber" as of any date shall mean a Customer who, at a
minimum, is subscribing to a package of basic services and: (1) on the last day
of the calendar month prior to such date, whose account is not more than sixty
(60) days past due from the date payment is due; (2) who is not an employee or
agent of the service provider or charged a fee that is nominal
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<PAGE> 3
(e.g., demonstration unit) or substantially below the service provider's
published rates; and (3) who has not given notice of intent to discontinue
service.
SECTION 2. PURCHASE AND SALE; CLOSING.
2.1 PURCHASE AND SALE OF ASSETS; ASSUMPTION OF CERTAIN
LIABILITIES.
(a) Subject to the provisions of this Agreement, Seller
agrees to transfer and assign to Purchaser, and Purchaser agrees to acquire and
accept from Seller, as of the "Closing Date" (hereinafter defined), free and
clear of any and all Liens, all: (i) NRTC Agreements, (ii) relationships,
contracts, and accounts with Customers, (iii) other tangible assets used or
useful in the provision of DBS Services, including, without limitation, any MTE
terminals and demonstration units; (iv) files, books and records relating to
the provision of DBS Services by Seller, including, without limitation,
Customer and prospective customer lists, computer programs, tapes and
electronic data processing software, accounting journals and ledgers, accounts
receivable records, copies of NRTC reports and correspondence and other
documents relating to the NRTC Agreements and compliance therewith
(collectively, "Records"); (v) exclusive rights to the telephone numbers used
in the Business; and (vi) cash in Seller's account at Huntington Bank, accounts
receivable from Customers, maintenance and security deposits, prepaid expenses,
supplies and other current assets (excluding inventory) (collectively, the
"Assets").
(b) Upon the assignment of the Assets, Purchaser shall
assume (i) Seller's obligations to be performed after 12:01 A.M. on the date
following the Closing Date under and as set forth in the NRTC Agreements (but
not obligations required to have been performed by Seller prior to such time)
to the extent that such obligations arise out of the provision of DBS Services
to Customers on or after such time, (ii) accounts payable to the NRTC, and
(iii) Seller's liabilities associated with unearned revenue, advance payments
and Customer credit balances to the extent such liabilities are taken into
account in the price adjustments described in Section 2.4 herein. Except as
expressly set forth in this Section 2.1(b), Purchaser shall not assume or be
deemed to have assumed under this Agreement, by reason of the transactions
contemplated by this Agreement, or otherwise, any debts, liabilities,
obligations or commitments of Seller of any nature whatsoever, known or
unknown, and the execution, delivery and performance of this Agreement shall
not render Purchaser liable for any such debt, liability, obligation or
commitment.
(c) For three (3) years following the Closing, Seller
shall have access to the Records relating to the periods prior to the Closing
Date upon written notice to Purchaser.
2.2 PURCHASE PRICE. The Purchase Price for the Assets pursuant
to this Agreement (the "Purchase Price") shall be Three Million Four Hundred
Thousand and No/100 Dollars ($3,400,000.00), plus the assumption of liabilities
described in Section 2.1(b) herein, subject to adjustment as provided in Section
2.4 herein, to be paid as follows:
(a) The sum of One Million Two Hundred Thousand and No/100
Dollars ($1,200,000.00), subject to adjustment as described in Section 2.4(a)
herein, on the
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<PAGE> 4
Closing Date by certified or cashier's check, or by wire transfer of
immediately available funds to an account or accounts designated in writing by
Seller (the "Closing Payment").
(b) The sum of Two Million Two Hundred Thousand and No/100
Dollars ($2,200,000.00) on the Closing Date by the delivery of a promissory
note substantially in the form attached hereto as SCHEDULE 2.2(b) (the "Note"),
less any adjustments and reductions as provided in Section 2.4 herein and the
Right of Setoff as provided in Section 5.5 hereof.
(c) Purchaser shall use its best efforts to obtain a
collateral assignment of the NRTC Agreements, in the form attached hereto as
SCHEDULE 2.2(c), as security for the Note (the "Collateral Assignment").
2.3 THE CLOSING. Subject to the satisfaction of the conditions
set forth herein, the closing of the assignments and transfers provided for in
this Agreement (the "Closing") shall be held at the offices of the Purchaser at
10:00 A.M. (i) at Purchaser's election, on (a) the last business day of the
month in which all of the conditions precedent set forth in Section 4 herein
have been satisfied or waived, or (b) on the calendar day of such month on which
NRTC's accounting period closes, or (ii) such other place, time or date as the
parties may agree upon in writing (the "Closing Date"). Either party may
terminate this Agreement by written notice to the other party if the Closing has
not occurred by the Termination Date set forth in Paragraph S.5 of Schedule 1;
provided, however, the Termination Date shall be automatically extended for an
additional ninety (90) days if the consent of the NRTC to the transfer of the
NRTC Agreements to Purchaser has not been obtained.
2.4 PRORATIONS AND CONSIDERATION ADJUSTMENTS; ALLOCATION OF
PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the current assets of Seller relating to DBS Services
and decreased by the current liabilities of Seller relating to DBS Services,
each as determined in accordance with Paragraph (c) below (the "Closing
Adjustment"), which adjustment shall be subject to final adjustment as provided
in Paragraph (e) below.
(b) All prepaid expenses and unearned revenue in
connection with the NRTC Agreements shall be prorated among Seller and
Purchaser as of 12:01 A.M. on the day following the Closing Date. Such
prorations shall include, without limitation, all Customer programming
prepayments. Expenses, costs and liabilities incurred shall be allocated to the
time of occurrence of such programs without regard to the date of payment
therefor.
(c) (i) Promptly after the Closing, Seller shall prepare a
Schedule of current assets and current liabilities of Seller relating to the
DBS Services as of the Closing Date (the "Closing Date Accounting"). The
Closing Date Accounting shall be prepared on a basis consistent with the "Pro
Forma Accounting" attached hereto as SCHEDULE 2.4(c).
(ii) The accounting data in the Closing Date
Accounting shall be derived from NRTC Central Billing System Reports,
including, but not limited to, Report 18A (Subscriber Accounts Receivable),
Report 19A (Accounts Receivable Summary), Report
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<PAGE> 5
17 (Unearned Revenue Report), and the NRTC Wholesale Invoice. The Closing Date
Accounting shall include: (A) cash in the Seller's account at Huntington Bank,
(B) accounts receivable from Customers, (C) accounts payable to Customers, (D)
accounts payable to NRTC, and (E) any unearned revenue, advance payments and
credit balances associated with Customer accounts. Except as set forth in this
Paragraph (c)(ii), no other assets or liabilities shall be included in the
Closing Date Accounting. Accounts receivable shall be included at the full face
amount, less an allowance for uncollectible accounts based upon an aging
analysis and consistent with past practices and experience.
(d) No later than thirty (30) days after the Closing Date,
Seller shall deliver to Purchaser a copy of the Closing Date Accounting
together with the Seller's determination of the Closing Adjustment pursuant to
the Closing Date Accounting. The Closing Date Accounting and the determination
of the Closing Adjustment shall be subject to review by Purchaser and its
auditors at Purchaser's expense. Such review by Purchaser shall be completed
within fifteen (15) business days after delivery of the Closing Date Accounting
to Purchaser. In the event of any disagreement between Seller and Purchaser
concerning the amount of the Closing Adjustment which has not been resolved
within sixty (60) days after the Closing Date, unless such date shall have been
extended by mutual written agreement of the parties, either party may submit
such disputed claims to the determination in Charlotte, North Carolina, by the
certified public accounting firm of Deloitte & Touche LLP, whose final
determination shall be made within thirty (30) days of such referral, and shall
be final and binding upon the parties. The fees and expenses of such
independent accountant shall be borne by Seller and Purchaser equally. The
determination of the Closing Adjustment pursuant to this Paragraph (d) shall be
referred to as the "Final Closing Adjustment".
(e) If, after the Final Closing Adjustment, Seller owes
any amount to Purchaser, then the Seller, at the Seller's option, shall (i) pay
the difference to the Purchaser in cash, within five (5) days after the
determination of the Final Closing Adjustment, or (ii) permit Purchaser to
reduce the next following payment(s) due under the Note by such amount on a
dollar-for-dollar basis. If, after the Final Closing Adjustment, Purchaser owes
any amount to Seller, then Purchaser shall pay the difference to Seller by
increasing the next following payment(s) due under the Note by such amount.
(f) If, following any final payment of a consideration
adjustment pursuant to this Section 2.4, an error (in billing or reporting by
NRTC or otherwise) is thereafter discovered which would have affected such
final payment, the parties shall agree in good faith on the amount of such
adjustment, and the next payment made pursuant to the Note shall be increased
or decreased accordingly.
(g) The Purchase Price shall be allocated by the
Purchaser and Seller as set forth on Schedule 2.4(g) to be delivered at
Closing, and the parties shall make all federal, state and local tax filings
consistent therewith.
2.5 CONSENT OF NRTC AND OTHERS. Within five (5) business days
after the date of this Agreement, Seller shall cause its counsel to prepare a
request for the consent of the NRTC to the transfer of the NRTC Agreements, the
Collateral Assignment and such other requests for consent that Purchaser or
Seller determines may be necessary or appropriate to
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<PAGE> 6
consummate the transactions contemplated hereby, and deliver drafts of same to
Purchaser's counsel. After review by Purchaser's counsel, but in any event
within ten (10) business days after submission to Purchaser's counsel, Seller
and Purchaser shall join in the delivery of the consents, and they will each
diligently take all steps necessary or desirable to obtain the consents. The
failure of either party to timely file or diligently seek the consents, or to
cooperate fully with the other party with respect thereto, shall be deemed a
material breach of this Agreement.
2.6 FURTHER ASSURANCES. From and after the Closing, Purchaser
and Seller shall do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered, all such further acts, deeds, assignments,
documents, instruments, transfers, conveyances, discharges, releases, assurances
and consents as Purchaser or Seller may, from time to time, reasonably request
to confirm, perfect and evidence the transfers, assignments and transactions
contemplated by this Agreement.
2.7 NONCOMPETITION AGREEMENTS. James J. Stephen and Paul
Stephen (the "Principals") shall each enter into a Noncompetition Agreement with
Purchaser on the Closing Date, substantially in the form attached hereto as
SCHEDULE 2.7, whereby each of the Principals will agree not to engage in the
Business in the Locations and in Madison and Oneida Counties, New York for a
period of three (3) years (the "Noncompetition Agreements").
SECTION 3. REPRESENTATIONS AND WARRANTIES.
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER. To induce the
Purchaser to enter into this Agreement and to consummate the transactions
contemplated hereby, the Seller hereby represents and warrants to the Purchaser
as follows:
(a) DUE AUTHORIZATION; BINDING EFFECT; NO CONFLICTS.
(i) Seller is a corporation, duly organized, validly existing and in good
standing under the laws of the State of New York and has the requisite power to
carry on the Business and to consummate the transactions contemplated hereby;
(ii) all actions necessary for the authorization, execution, delivery and
performance by Seller of this Agreement, and the transactions contemplated
hereby, have been taken; (iii) this Agreement is a legal, valid and binding
obligation of Seller, enforceable in accordance with its terms; and (iv)
neither the execution and delivery of this Agreement, nor the consummation by
the Seller of the transactions contemplated hereby, or the fulfillment by the
Seller of the terms hereof, will (A) conflict with or result in a breach of any
provision of the Seller's organizational documents or any agreement or
understanding to which Seller is a party, (B) require the consent of any third
party other than NRTC, Hughes and the parties identified on SCHEDULE 3.1(a),
which consents shall be obtained prior to Closing, or (C) violate or conflict
with any judgment, order, writ, injunction, decree, statute, rule or regulation
applicable to the Seller.
(b) NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(i) Attached hereto as SCHEDULE 3.1(b)(i), is a true
and complete copy of the NRTC/Member Agreement together with all amendments,
schedules and exhibits thereto.
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(ii) Attached hereto as SCHEDULE 3.1(b)(ii) is a
true and complete copy of the NRTC/Retail Agreement, together with all
amendments, schedules and exhibits thereto.
(iii) Attached hereto as SCHEDULE 3.1(b)(iii) are
true and complete copies of the Other Assumed Agreements, if any, together with
all amendments, schedules and exhibits thereto.
(iv) The Seller has paid all sums to NRTC or Hughes,
as appropriate, required under the NRTC/Member Agreement such that the Seller
is entitled to the Marketing Revenues. The Seller has the right to receive from
NRTC, on a pro rata basis, all other net revenues received by NRTC from Hughes
in connection with the Programming which are directly attributable to the
Committed Member Residences or the Commercial Establishments in the Locations.
(v) The Seller is in full compliance in all material
respects with any and all membership, affiliation, licensing or other
requirements or arrangements as may have been established by NRTC, Hughes or
DirecTv, if any, pursuant to the NRTC/Member Agreement, the DirecTv Agreement,
or otherwise.
(vi) The Seller is not in breach in any material
respect of the NRTC/Member Agreement, the NRTC/Retail Agreement or any of the
Other Assumed Agreements (if any), nor has the Seller failed to perform any
material obligation under the NRTC/Member Agreement, the NRTC/Retail Agreement
or any Other Assumed Agreement. The Seller has not received notice of any such
breach or non-performance at any time. To the best of Seller's knowledge, no
other party to the NRTC/Member Agreement, the NRTC/Retail Agreement or any
Other Assumed Agreement is in default thereunder or has failed to perform any
material obligation thereunder.
(vii) Except as disclosed on SCHEDULE 3.1(b)(vii),
none of the DBS Services distributed by the Seller has been suspended at any
time since inception.
(viii) SCHEDULE 3.1(b)(viii) (as supplemented by
applicable NRTC reports) sets forth all Customers, identified as Committed
Member Residence and Commercial Establishment, including the number of months
such Customer has been a Customer, whether such Customer's account is past due,
the amount of the receivable, and the aging of amounts due thereunder. SCHEDULE
3.1(b)(viii) will be updated not more than three (3) days prior to the Closing
Date. The accounts receivable will be fully and completely collectible by
Purchaser in the ordinary course of business within one hundred and twenty
(120) days of the Closing Date without resort to legal proceedings. As soon as
practicable after the Closing Date, Seller shall also provide to Purchaser a
list of Customers and programs in the form of NRTC's Report 30 (Average Service
Retail Report), dated as of the Closing Date.
(c) TRUE AT CLOSING. The representations and warranties of
Seller set forth in this Section 3.1 are and will be true both on the date of
this Agreement and on and as of the Closing.
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(d) DISCLOSURE BY SELLER. No representation or warranty
made by Seller in this Agreement and no statement made in any certificate,
Exhibit or Schedule or other document furnished or to be furnished in
connection with the transactions herein contemplated, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make such representation or warranty or any such
statement not misleading to a prospective purchaser of assets of the Seller who
is seeking full information with respect to the Seller.
3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. To induce
Seller to enter into this Agreement and consummate the transactions contemplated
hereby, the Purchaser hereby represents and warrants to the Seller as follows:
(a) DUE AUTHORIZATION; BINDING EFFECTS; NO CONFLICTS.
(i) Purchaser is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Georgia and has the requisite
power to carry on its business and to consummate the actions contemplated
hereby; (ii) all actions necessary for the authorization, execution, delivery
and performance by Purchaser of this Agreement and the actions contemplated
hereby, have been taken; (iii) this Agreement is a legal, valid and binding
obligation of Purchaser, enforceable in accordance with its terms; and (iv)
neither the execution and delivery of this Agreement, nor the consummation by
the Purchaser of the transactions contemplated hereby, or the fulfillment by
the Purchaser of the terms hereof, will (A) conflict with or result in a breach
of any provision of the Purchaser's organizational documents or any agreement
or understanding to which Purchaser is a party, (B) require the consent of any
third party unless such consent shall be obtained prior to Closing, or (C)
violate or conflict with any judgment, order, writ, injunction, decree,
statute, rule or regulation applicable to the Purchaser.
(b) DUE AUTHORIZATION. (i) Columbia DBS Management, LLC
("Columbia") is the sole general partner of the Purchaser; (ii) Columbia is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Georgia and has the requisite power to carry on
its business and to consummate the actions contemplated hereby; and (iii) all
actions necessary for the authorization, execution, delivery and performance by
Columbia of this Agreement and the actions contemplated hereby, have been
taken.
(c) TRUE AT CLOSING. The representations and warranties of
Purchaser set forth in this Section 3.2 are and will be true both on the date
of this Agreement and on and as of the Closing.
(d) DISCLOSURE BY PURCHASER. No representation or warranty
made by Purchaser in this Agreement and no statement made in any certificate,
Exhibit or Schedule or other document furnished or to be furnished in
connection with the transactions herein contemplated, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make such representation or warranty or any such
statement not misleading.
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SECTION 4. CONDITIONS TO CLOSING.
4.1 CONSENT. The obligations of Seller and Purchaser to
consummate the transactions contemplated by this Agreement are subject to
satisfaction at the time of Closing of the condition that NRTC and Hughes shall
have issued all necessary authorizations, consents and approvals in connection
with the transactions contemplated by this Agreement, without conditions which
are materially adverse to either Purchaser or Seller.
4.2 CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser's
obligation to consummate the transactions contemplated by this Agreement is
subject to:
(a) The satisfactory completion, in Purchaser's sole
discretion, of Purchaser's due diligence investigation concerning the Business
within thirty (30) days of Purchaser's receipt of, or access to, Seller's
Records.
(b) Satisfaction (or waiver by Purchaser) on or before the
Closing Date of each of the following conditions:
(1) Each of the representations and warranties of
Seller contained in this Agreement shall have been true and
correct in all material respects when made and as of the
Closing Date.
(2) Seller shall have performed and complied with, in
all material respects, all agreements, covenants, conditions
and obligations contained in this Agreement and required to be
performed or complied with by Seller on or before the Closing
Date.
(3) All authorizations and approvals of or consents
of, or filings with, any governmental authority or other
Person required to be obtained or made by Seller in connection
with the Closing (including, without limitation, any consents
required under any Other Assumed Agreements) shall have been
obtained or made and shall be in full force and effect.
(4) Seller shall have at least 2,945 Customers.
(c) Receipt by the Purchaser, at the Closing of
(1) Such bills of sale, assignments and other
instruments of transfer required to effectively transfer and
assign good and marketable title to the Assets to Purchaser in
accordance therewith.
(2) Certified copies of resolutions duly adopted by
the Board of Directors and stockholders of Seller approving
this Agreement and the transactions contemplated hereby.
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(3) All Records or copies of the Records pursuant to
Section 2.1(a) herein.
(4) Noncompetition Agreements executed and delivered
by the Principals.
(5) A certificate signed by the Seller's president,
dated the Closing Date, to the effect that the conditions set
forth in Paragraph (b) of this Section 4.2 have been
satisfied.
(6) Such other documents and instruments as may be
reasonably requested and satisfactory to Purchaser and its
counsel in connection with the Seller's satisfaction of each
of its obligations hereunder.
(7) Updated Schedule 3.1(b)(viii).
4.3 CONDITIONS TO OBLIGATIONS OF SELLER. Seller's obligation
to consummate the transaction contemplated by this Agreement is subject to:
(a) Satisfaction (or waiver by Seller) on or before the
Closing Date of each of the following conditions:
(1) Each of the representations and warranties of
Purchaser contained in this Agreement shall have been true and
correct when made and as of the Closing Date.
(2) Purchaser shall have performed and complied with,
in all material respects, all agreements, covenants,
conditions and obligations contained in this Agreement and
required to be performed or complied with by Purchaser on or
before the Closing Date.
(3) All authorizations and approvals of or consents
of, or filings with, any governmental authority or other
Person required to be obtained or made by Purchaser in
connection with the Closing shall have been obtained or made
and shall be in full force and effect.
(b) Receipt by the Seller, at the Closing, of
(1) The Closing Payment and the Note described in
Section 2.2 herein executed and delivered by the Purchaser.
(2) A certificate signed by Columbia, evidencing the
approval by Purchaser of this Agreement and the transactions
contemplated hereby.
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<PAGE> 11
(3) Collateral Assignment executed and delivered by
Purchaser and consented to by the NRTC and DirecTv.
(4) Noncompetition Agreements executed and delivered
by the Purchaser.
(5) A certificate signed by Columbia, dated the
Closing Date, to the effect that the conditions set forth in
Paragraph (a) of this Section 4.3 have been satisfied.
(6) Such other documents and instruments as may be
reasonably requested and satisfactory to Seller and its
counsel in connection with the Purchaser's satisfaction of
each of its obligations hereunder.
SECTION 5. INDEMNIFICATION.
5.1 RIGHT TO INDEMNIFICATION.
(a) Seller shall indemnify, reimburse, and hold harmless
Purchaser from and against all claims, losses, damages, costs (including,
without limitation, court costs and reasonable attorneys' fees), expenses and
liabilities (collectively, the "Indemnifiable Damages") suffered, incurred, or
sustained by Purchaser on account of (i) any misrepresentation, breach of
warranty or nonfulfillment of any term, covenant or agreement on the part of
Seller under this Agreement, or in any certificate, Schedule or other document
delivered pursuant hereto, (ii) the failure of Seller to pay and perform
promptly when due all of its obligations, liabilities and debts as provided
under this Agreement, (iii) the operation of the Business prior to the Closing
Date, (iv) any breach or default prior to the Closing by Seller under the
NRTC/Member Agreement, the NRTC/Retail Agreement or any of the Other Assumed
Agreements, (v) any liability, obligation or claim with respect to the Business
arising prior to the Closing (other than liabilities specifically assumed by
Purchaser under this Agreement and the liabilities referred to in (vi) below),
and (vi) any state or local sales, use, excise, personal property or similar
tax liability (including penalties and interest) of the Seller.
(b) Purchaser shall indemnify, reimburse, and hold
harmless Seller from and against all Indemnifiable Damages suffered, incurred,
or sustained by Seller on account of (i) any misrepresentation, breach of
warranty or nonfulfillment of any term, covenant or agreement on the part of
Purchaser under this Agreement, or in any certificate, Schedule or other
document delivered pursuant hereto, (ii) the failure of Purchaser to pay and
perform promptly when due all of its obligations, liabilities, and debts as
provided under this Agreement, (iii) the operation of the Business after the
Closing Date, and (iv) any breach or default after the Closing by Purchaser
under the NRTC/Member Agreement, the NRTC/Retail Agreement or any Other Assumed
Agreement; provided, however, that Seller shall in no event be entitled to
indemnification hereunder with respect to matters arising under contracts,
commitments or agreements of Seller not specifically assumed by Purchaser under
this Agreement.
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<PAGE> 12
5.2 RIGHT TO CONTEST. If the Seller or Purchaser, as the case
may be (the "Indemnified Party"), receives notice or has knowledge of any claim
for which it believes the other party hereto is obligated to provide
indemnification pursuant to Section 5.1 herein (the "Indemnifying Party"), the
Indemnified Party shall notify the Indemnifying Party in writing of such claim
within twenty (20) days of its receipt of same (the "Indemnification Claim").
The Indemnification Claim shall set forth a brief description of the facts
giving rise to such claim and the amount (or reasonable estimate) of the
Indemnifiable Damages suffered, or which may be suffered by the Indemnified
Party. The Indemnified Party shall, at the expense of the Indemnifying Party,
provide all information regarding the contest or defense of the claim and
cooperate fully with the Indemnifying Party in the conduct of any such contest
or defense. Before being required to make any payment pursuant to Section 5.1
herein, the Indemnifying Party may, at its own expense, elect to undertake and
control the defense of, and take all necessary steps properly to contest any
claim in respect thereof involving third parties or to prosecute such claim to
conclusion or settlement satisfactory to the Indemnified Party. If the
Indemnifying Party makes the foregoing election, then the Indemnified Party
shall have the right to participate, at its own expense, in all proceedings but
shall not admit any liability, settle, compromise, pay or discharge the claim
without the prior written consent of the Indemnifying Party. If the Indemnifying
Party does not make such election, it shall be obligated to pay the costs of
defending or prosecuting such claim and shall be bound by whatever result is
obtained by the Indemnified Party respecting such claim.
5.3 LIMITATION OF CLAIMS. The indemnification obligations of
the Seller under Section 5.1 (a)(i) through (v) above shall expire and terminate
on the third (3rd) anniversary of the Closing Date; and the indemnification
obligations of the Seller under Section 5(a)(vi) above shall expire and
terminate on the fifth (5th) anniversary of the Closing Date, unless in each
case, prior to such termination, the Purchaser shall have provided written
notice to the Seller of an Indemnification Claim as provided in Section 5.2
above. If the Purchaser provides such Indemnification Claim prior to the
expiration of the applicable periods, the obligations of the Seller with respect
to the asserted right to indemnification under Section 5.1(a) above shall
continue until the appropriate amount of indemnification, if any, is determined,
paid and satisfied in full. The indemnification obligations of Purchaser under
Section 5.1(b) shall expire and terminate on the third (3rd) anniversary of the
Closing Date; unless prior to such termination, the Seller shall have provided
written notice to the Purchaser of an Indemnification Claim as provided in
Section 5.2 above. If the Seller provides such Indemnification Claim prior to
the expiration of the applicable period, the obligations of the Purchaser with
respect to the asserted right to indemnification under Section 5.1(b) above
shall continue until the appropriate amount of indemnification, if any, is
determined, paid and satisfied in full.
5.4 THRESHOLD FOR INDEMNIFICATION; CEILING FOR
INDEMNIFICATION.
(a) THRESHOLD. The Seller shall not have any liability
under Section 5.1(a) hereof, unless and until, the aggregate amount of
Indemnifiable Damages attributable to the Seller exceeds Three Thousand Four
Hundred Dollars ($3,400), in which case the Seller shall be liable for
indemnification hereunder for the entire amount of the Indemnifiable Damages,
including the Three Thousand Four Hundred Dollars ($3,400).
12
<PAGE> 13
(b) CEILING. The Seller shall not have any liability under
Section 5.1(a)(i) through (v) hereof for Indemnifiable Damages in excess of
Three Million Four Hundred Thousand Dollars ($3,400,000).
5.5 RIGHT OF OFFSET; COLLECTION OF INDEMNIFIABLE DAMAGES.
Purchaser shall have the right to offset against the amounts owing to the Seller
pursuant to the Note for (i) any Indemnifiable Damages due Purchaser pursuant to
Section 5.1(a) hereof, and (ii) the adjustments provided in Section 2.4 hereof
(the "Right of Offset"). Before exercising its Right of Offset, Purchaser shall
provide written notice of its intent to exercise such right. Purchaser agrees
that any Indemnifiable Damages due Purchaser pursuant to Section 5.1(a) hereof
shall be satisfied (i) first, through a reduction of amounts payable to Seller
pursuant to the Note through the exercise of Purchaser's Right of Offset, and
(ii) thereafter, directly from the Seller.
SECTION 6. MISCELLANEOUS.
6.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Unless performance
of the following obligations is waived by Purchaser (in its sole discretion) in
advance and in writing, Seller shall:
(a) not modify, amend, alter or terminate the NRTC/Member
Agreement, the NRTC/Retail Agreement or any Other Assumed Agreement, or waive
any default or breach thereunder except as may be coordinated with Purchaser;
(b) comply in all material respects with the NRTC/Member
Agreement, the NRTC/Retail Agreement and any Other Assumed Agreements, use its
best efforts to cure any material default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(c) maintain its books and records in accordance with
prior practice, maintain all of its property and assets in their present
condition, ordinary wear and tear excepted, maintain technical materials,
supplies, inventory and spare parts consistent with past practice, and
otherwise use its best efforts to operate the business in the ordinary course
in accordance with practices during the twelve (12) months preceding the date
of this Agreement;
(d) use its best efforts to keep its business organization
intact and maintain good relationships with its key employees, suppliers,
advertisers and others having business relations with it;
(e) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC, Hughes and DirecTv;
(f) provide to Purchaser, concurrently with filing,
sending or receipt thereof, copies of all reports to and other filings and
correspondence with the NRTC, Hughes and DirecTv;
13
<PAGE> 14
(g) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension, or limitation
of the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under any NRTC Agreements, and (ii) copies of all
protests, complaints, challenges or other documents submitted to or filed with
the NRTC, Hughes or DirectTv by third parties concerning the business and,
promptly upon the filing or making thereof, copies of Seller's responses
thereto; and
(h) notify Purchaser in writing immediately upon
learning of the institution or threat of any action against Seller in any
court, or any action against Seller before any governmental agency, and notify
Purchaser in writing promptly upon receipt of any administrative or court order
relating to the Business.
6.2 LAW GOVERNING. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the choice of law provisions thereof.
6.3 NOTICE. All notices, requests, demands, or other
communications under this Agreement shall be in writing. Notice shall be
sufficiently given for all purposes as follows:
(a) PERSONAL DELIVERY. When personally delivered to the
recipient, notice is effective on delivery.
(b) CERTIFIED MAIL. When mailed certified mail, postage
paid, return receipt requested, notice is effective on receipt, if delivery is
confirmed by a return receipt.
(c) OVERNIGHT DELIVERY. When delivered by Federal Express,
Airborne, United Parcel Service, or DHL WorldWide Express, charges prepaid or
charged to the sender's account, notice is effective on delivery, if delivery
is confirmed by the delivery service.
(d) TELEX OR FAX TRANSMISSION. When sent by telex or fax
to the last telex or fax number of the recipient known to the party giving
notice, notice is effective on receipt of a confirmed transmission; provided
that (a) a duplicate copy of the notice is promptly given by first-class or
certified mail or by overnight delivery, or (b) the receiving party delivers a
written confirmation of receipt. Any notice given by telex or fax shall be
deemed received on the next business day if it is received by 5:00 p.m.
(recipient's time) or on a non-business day.
Addresses for purpose of giving notice are:
Digital Television Services of Northeast Cable Services, Inc.
New York I, LP 6523 Transit Road
Building 100, Suite 300 Lockport, New York 14049
1080 Holcomb Bridge Road Attn: James J. Stephen
Roswell, GA 30076
Attn: Douglas S. Holladay, Jr.,
President
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<PAGE> 15
with a copy to: with a copy to:
Nelson Mullins Riley & Albrecht Maguire Heffern &
Scarborough Gregg, P.C.
NationsBank Corporate Center 2100 Main Place Tower
100 North Tryon Street, Suite 3350 Buffalo, New York 14202
Charlotte, North Carolina 28202 Attn: Arthur A. Russ, Jr., Esq.
Attn: C. Mark Kelly, Esq.
Any correctly addressed notice that is refused, unclaimed, or
undeliverable because of an act or omission of the party to be notified shall be
deemed effective as of the first day that said notice was refused, unclaimed, or
deemed undeliverable by the postal authorities, messenger, or overnight delivery
service.
Any party may change its address or telex or fax number by giving the
other party notice of the change in any manner permitted in this Agreement.
6.4 ASSIGNMENT; BINDING EFFECT. This Agreement may not be
assigned by Purchaser (except to a party which, directly or indirectly, is
controlled by, controls or is under common control with, Purchaser) or by Seller
prior to the Closing without the prior written consent of the other party. This
Agreement shall be binding upon, and shall inure to the benefit of the parties
hereto and their successors and permitted assigns, if any.
6.5 AMENDMENT; WAIVER. This Agreement may be amended only by a
written instrument signed by Purchaser and Seller. No provisions of this
Agreement may be waived except by an instrument in writing signed by the party
sought to be bound. No failure or delay by any party in exercising any right or
remedy hereunder shall operate as a waiver thereof, and a waiver of a particular
right or remedy on one occasion shall not be deemed a waiver of any other right
or remedy or a wavier on any subsequent occasion.
6.6 ENTIRE AGREEMENT. This Agreement, together with the
Schedules attached hereto, sets forth the entire understanding between the
parties relating to the subject matter hereof, any and all prior correspondence,
conversations and memoranda or other writings being merged herein and replaced.
No promises, covenants, or representations of any character or nature other than
those expressly stated herein have been made to induce either party to enter
into this Agreement.
6.7 CONFIDENTIALITY; INITIAL NOTICE TO PUBLIC. Seller and
Purchaser shall mutually agree in advance on the manner in which the public is
first informed of the execution of this Agreement. Each of the parties hereto
agree to maintain the confidentiality of this Agreement and the terms thereof
and any information exchanged by the parties in connection with the consummation
of the transactions contemplated hereby prior to Closing, and neither party
shall make any disclosure thereof to any third party without the prior consent
of the other party, except as may be required by law.
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<PAGE> 16
6.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in two or more counterparts, each of which will be deemed an original, and all
of which together shall constitute one and the same Agreement.
6.9 FACSIMILE SIGNATURES. Facsimile signatures shall be
considered original signatures for purposes of execution and enforcement of the
rights delineated in this Agreement.
6.10 SCHEDULES. The Schedules referred to in this Agreement
are attached hereto, made a part hereof and incorporated herein by this
reference.
6.11 SURVIVAL OF REPRESENTATIVES AND WARRANTIES. Subject to
the provisions of Section 5 hereof, each and every representation and warranty
contained in this Agreement, shall survive the Closing but shall expire, and be
terminated and extinguished on the third (3rd) anniversary of the Closing Date.
[SIGNATURES BEGIN ON NEXT PAGE]
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<PAGE> 17
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
PURCHASER:
Digital Television Services of New York I, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
--------------------------------
Title:
--------------------------------
SELLER:
Northeast Cable Services, Inc.
By:
--------------------------------
Its: President
By:
--------------------------------
Title:
--------------------------------
17
<PAGE> 18
LIST OF SCHEDULES
Schedule 1 Schedule of Information
Schedule 2.2(b) Promissory Note
Schedule 2.2(c) Collateral Assignment
Schedule 2.4(c) Pro Forma Accounting
Schedule 2.4(g) Purchase Price Allocation
Schedule 2.7 Noncompetition Agreements
Schedule 3.1(a) Consents
Schedule 3.1(b)(i) NRTC/Member Agreement
Schedule 3.1(b)(ii) NRTC/Retail Agreement
Schedule 3.1(b)(iii) Other Assumed Agreements
Schedule 3.1(b)(vii) DBS Service Interruptions
Schedule 3.1(b)(viii) Customers
[Schedules have been omitted and will be furnished upon request]
<PAGE> 1
EXHIBIT 10.8(b)
FIRST AMENDMENT
TO
PURCHASE AGREEMENT
This FIRST AMENDMENT TO PURCHASE AGREEMENT (this "Amendment") is made
as of August 28, 1996 by and between Digital Television Services of New York I,
LP, a Georgia limited partnership ("Purchaser"), and Northeast Cable Services,
Inc., a New York corporation ("Seller").
RECITALS
Purchaser and Seller entered into an Asset Purchase Agreement dated as
of June 28, 1996 (the "Asset Purchase Agreement"). Capitalized terms used herein
which are not otherwise defined shall have the meanings set forth in the Asset
Purchase Agreement. Purchaser and Seller have determined that it is in their
mutual best interest to clarify and amend the Asset Purchase Agreement in
accordance with Section 6.5 thereof.
TERMS OF AMENDMENT
Purchaser and Seller agree as follows:
1. AMENDMENT OF SECTION 2.2. Section 2.2 shall be deleted in its
entirety and the following new Section 2.2 shall be inserted in lieu thereof:
"2.2 PURCHASE PRICE. The Purchase Price for the Assets
pursuant to this Agreement (the "Purchase Price") shall be Three Million One
Hundred Thousand and No/100 Dollars ($3,100,000.00), plus the assumption of
liabilities described in Section 2.1(b) herein, subject to adjustment as
provided in Section 2.4 herein, to be paid as follows:
(a) The sum of Nine Hundred Thousand and No/100 Dollars
($900,000.00), subject to adjustment as described in Section 2.4(a) herein, on
the Closing Date by certified or cashier's check, or by wire transfer of
immediately available funds to an account or accounts designated in writing by
Seller (the "Closing Payment").
(b) The sum of Two Million Two Hundred Thousand and
No/100 Dollars ($2,200,000.00) on the Closing Date by the delivery of a
promissory note substantially in the form attached hereto as SCHEDULE 2.2(b)
(the "Note"), less any adjustments and reductions as provided in Section 2.4
herein and the Right of Setoff as provided in Section 5.5 hereof.
(c) Purchaser shall use its best efforts to obtain a
collateral assignment of the NRTC Agreements, in the form attached hereto as
SCHEDULE 2.2(c), as security for the Note (the "Collateral Assignment")."
<PAGE> 2
2. AMENDMENT OF SCHEDULE 2.2(c). Schedule 2.2(c) shall be deleted in
its entirety and the Schedule 2.2(c) attached hereto shall be inserted in lieu
thereof.
3. AMENDMENT OF SCHEDULE 2.7. Schedule 2.7 shall be deleted in its
entirety and the Schedule 2.7 attached hereto shall be inserted in lieu thereof.
4. MODIFICATION. Except as modified hereby, the terms and conditions of
the Asset Purchase Agreement shall remain in full force and effect.
5. LAW GOVERNING. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the choice
of law provisions thereof.
6. EXECUTION IN COUNTERPARTS. This Amendment may be executed in two or
more counterparts, each of which will be deemed an original, and all of which
together shall constitute one and the same Amendment.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first set forth above.
PURCHASER:
Digital Television Services of New York I, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
-----------------------------
Title:
-----------------------------
SELLER:
Northeast Cable Services, Inc.
By:
-----------------------------
Its: President
By:
-----------------------------
Title:
-----------------------------
2
<PAGE> 1
EXHIBIT 10.9(a)
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF OCTOBER 5, 1996
BY AND AMONG
DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA I, LP,
PEE DEE ELECTRICOM, INC.
AND
PEE DEE ELECTRIC COOPERATIVE, INC.
================================================================================
<PAGE> 2
LIST OF SCHEDULES
Schedule 1.1 Fixed Assets
Schedule 1.2 NRTC/Member Agreement
Schedule 1.3 NRTC/Retail Agreement
Schedule 1.4 Other Assumed Agreements
Schedule 2.1(a) Assignment and Assumption Agreement
Schedule 2.1(b) Bill of Sale
Schedule 4.2(c) Promissory Note
Schedule 4.2(d) Security Agreement
Schedule 4.2(e) Collateral Assignment
Schedule 4.4 Allocation of Purchase Price
Schedule 5.2(c) Consent of Sellers
Schedule 5.3(a) Liens
Schedule 5.4 Fixed Assets Needing Repairs
Schedule 5.5(e) Suspended DBS Services
Schedule 5.5(f) Customers and Suppliers
Schedule 5.9 Changes or Events
Schedule 5.10 Licenses and Permits
Schedule 6.2(b) Consent of Purchaser
[Schedules have been omitted and will be furnished upon request]
<PAGE> 3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 5th day of October, 1996, by and among Digital Television
Services of South Carolina I, LP, a Georgia limited partnership ("Purchaser"),
Pee Dee Electricom, Inc., a South Carolina corporation ("Electricom"), and Pee
Dee Electric Cooperative, Inc., a South Carolina cooperative association ("Pee
Dee") (Pee Dee and Electricom are hereinafter collectively referred to as
"Sellers").
RECITALS
1. Pee Dee entered into a NRTC/Member Agreement with the NRTC pursuant
to which it operates through its wholly-owned subsidiary, Electricom, the
National Rural Telecommunications Cooperative's System No. 0001 (the "System")
for the exclusive distribution of DBS Services offered by DirecTv, Inc.
("DirecTv") (the "Business") in the geographical areas covered by Chesterfield,
Darlington, Dillon, Florence, Lee, Marion and Marlboro Counties, South Carolina
(the "Locations").
2. Purchaser desires to acquire from Sellers, and Sellers desire to
sell to Purchaser all of Sellers' rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations, any residual rights of Sellers
as members or affiliates of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements and certain of the assets used in
the Business, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, each of the
Sellers and Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Sellers to the
NRTC as of the Closing Date relating to the Business; including, without
limitation, accounts payable to the NRTC with respect to wholesale bills,
equipment and other services.
"Accounts Receivable" shall mean all of the accounts receivable of
Sellers as of the Closing Date for all Customers which are listed on Report 19A
(Accounts Receivable Summary) of the NRTC Central Billing Systems Reports.
<PAGE> 4
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"Cash" shall mean all cash in Electricom's bank accounts at Huntington
Bank as of the Closing Date, as determined in accordance with GAAP.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Nelson Mullins Riley
& Scarborough, L.L.P., 600 West Palmetto Street, Suite 200, Florence, South
Carolina, 29501 (i) at Purchaser's election, on (a) the last business day of the
month in which all of the conditions precedent set forth in Articles VIII and IX
herein have been satisfied or waived, or (b) the calendar day of such month on
which NRTC's accounting period closes, or (ii) such other date or at such other
time or place (including via mail overnight courier or facsimile transmission)
as the parties may mutually agree upon in writing. The Closing shall be as
effective as of the close of business on the Closing Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Closing Payment" shall mean the payments due Sellers pursuant to
Sections 4.2(a) and (b) hereof.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Current Assets" shall mean Cash, Accounts Receivable, Inventory and
Prepaid Expenses of Sellers which will be acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Sellers which will be assumed by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased DBS Services, or entered into a binding agreement to purchase DBS
Services, and related services, from Sellers at any time during the five (5)
year period immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTv" shall mean DirecTv, Inc., a California corporation which is a
subsidiary of HCG.
"Excluded Assets" shall mean the PDSC Stock, Patronage Capital and the
TVRO Assets.
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, any MTE terminals and demonstration units owned
by Sellers and used or useable
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<PAGE> 5
in connection with the Business, which equipment and tangible assets are listed
on Schedule 1.1 attached hereto.
"Franchise" shall mean any residual rights of Sellers as members or
affiliates of the NRTC to distribute DBS Services in the Locations after the
termination of the NRTC Agreements.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"HCG" shall mean Hughes Communications Galaxy, Inc.
"HCG Agreement" shall mean the agreement and all amendments which the
NRTC has entered into with HCG in which the NRTC has obtained the rights to
distribute through its members and affiliates certain DBS Services to rural
America.
"Inventory" shall mean any DSS(TM) subscriber equipment of Sellers as
of the Closing Date, which Inventory shall be valued at the lower of each item's
original cost or fair market value.
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
"Management Agreement" shall mean a Management Agreement mutually
acceptable to Purchaser and Electricom which provides for Electricom to perform
certain managerial functions for Purchaser during the three (3) months
immediately following the Closing Date.
"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated July 24, 1992 by and between
the NRTC and Pee Dee, as amended as of March 22, 1994, together with all
schedules and exhibits thereto, a copy of which is attached hereto as Schedule
1.2.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement dated August 3, 1993 by and between the NRTC and Electricom, as
amended from
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<PAGE> 6
time to time, together with all schedules and exhibits thereto, a copy of which
is attached hereto as Schedule 1.3.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.4, including any contracts and agreements with
DirecTv, copies of which are attached to such Schedule.
"Patronage Capital" shall mean the amount of patronage capital credited
to the Sellers' accounts at the NRTC for the period through the Closing Date
pursuant to Article XII of the NRTC Bylaws, as amended.
"PDSC" shall mean Pee Dee Service Corporation, a South Carolina
corporation which is a wholly owned subsidiary of Electricom.
"PDSC Stock" shall mean the eighty (80) shares of stock of PDSC, par
value of $25 per share, which is owned by Electricom.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
"Prepaid Expenses" shall mean all prepaid property taxes, prepaid
supplies, advances, deposits, deferred charges and other prepaid expenses (other
than prepaid insurance) shown on Sellers' books and records as of the Closing
Date relating to the Business which Prepaid Expenses can be credited to
Purchaser's account after the Closing Date, as determined in accordance with
GAAP.
"Programming" shall mean Cable Programming and any programming provided
by DirecTv pursuant to the NRTC Agreements.
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
"Purchased Assets" shall mean the (i) NRTC Agreements, (ii) Franchise,
(iii) Current Assets, (iv) contracts and accounts with Customers, (v) Fixed
Assets, (vi) Records, and (vii) all other assets of Sellers, whether tangible or
intangible, used in connection with the Business, excepting only the Excluded
Assets.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Sellers, including, without limitation, Customer
and prospective customer lists, computer programs, tapes and electronic data
processing software, accounting journals and ledgers, accounts receivable
records, and copies of all NRTC reports, correspondence and other documents
relating to the NRTC Agreements and Other Assumed Agreements and compliance
therewith.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i) is an active subscriber subscribing to a package of basic services, (ii) on
the last day of the calendar month prior to such date, whose account is not more
than sixty (60) days past due from the date payment is due, (iii) who is not an
employee or agent of the service provider or charged a fee
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that is nominal (e.g., demonstration unit) or substantially below the service
provider's published rates, and (iv) who has not given notice of intent to
discontinue service.
"Termination Date" shall mean January 30, 1997.
"TVRO Assets" shall mean all assets of Electricom which relate to the
provision of C-band programming and equipment services through low-power C-band
satellite dishes.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Sellers as of the
Closing Date which are listed on Report 17 (Unearned Revenue Report) of the NRTC
Central Billing System Reports.
"1995 Memorandum" shall mean the 1995 Revised Equipment Baseline
Program Restructuring Memorandum of Understanding dated July 13, 1995 between
Pee Dee and the NRTC and all related correspondence and agreements between Pee
Dee and the NRTC related to the subject matter thereof.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Sellers shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Sellers all of Sellers' right, title and interest in and to the Purchased
Assets, free and clear of any and all Liens, on the Closing Date for the
consideration set forth in this Agreement. The sale, transfer, assignment and
conveyance of the Purchased Assets shall be made by the execution and delivery
at Closing of (i) an Assignment and Assumption Agreement substantially in the
form attached hereto as Schedule 2.1(a) (the "Assignment") and (ii) a bill of
sale substantially in the form attached hereto as Schedule 2.1(b) (the "Bill of
Sale").
ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLERS. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Sellers with respect to the following:
(a) the NRTC Agreements to the extent the obligations therein
arise out of the provision of DBS Services to Customers and accrue on or after
the Closing Date; and
(b) all Current Liabilities as of the Closing Date.
Anything in this Agreement to the contrary notwithstanding,
except for the liabilities specifically set forth in this Section 3.1, Purchaser
shall not assume or be deemed to have assumed under this Agreement, by reason of
the transactions contemplated by this Agreement, or otherwise, any other trade
or other accounts payable, accrued expenses, debts, liabilities, obligations or
commitments of Sellers of any nature whatsoever, known or unknown,
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and the execution, delivery and performance of this Agreement shall not render
Purchaser liable for any such debt, liability, obligation or commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Sellers are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Sellers under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Sellers with or
for the benefit of any employee of either of the Sellers;
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Sellers,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution, sale or provision
of any services of Sellers, or (ii) any failure or alleged failure to comply
with any federal, state or local law, rule or regulation applicable to either of
the Sellers or the Business; and
C. any liabilities or obligations of any kind arising out of
the 1995 Memorandum.
Purchaser agrees to promptly notify Sellers of any claims which Purchaser
obtains knowledge of which arise out of or result from liabilities of Sellers
not assumed by Purchaser pursuant to this Agreement.
ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be Nine Million Three Hundred Thousand Dollars
($9,300,000), subject to adjustment as provided in Section 4.3 herein.
4.2. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Sellers as follows:
(a) The sum of One Million Seven Hundred Fifty-Seven Thousand
Four Hundred Thirty-Eight Dollars ($1,757,438), subject to adjustment as
provided for in Section 4.3(a) hereof, by certified or cashier's check, or by
wire transfer of immediately available funds to an account or accounts designed
in writing by Pee Dee.
(b) The sum of Two Million One Hundred Forty-Two Thousand Five
Hundred Sixty-Two Dollars ($2,142,562), subject to adjustment as provided for in
Section 4.3 herein, by certified or cashier's check, or by wire transfer of
immediately available funds to an account or accounts designated in writing by
Electricom.
(c) the sum of Five Million Four Hundred Thousand Dollars
($5,400,000) by the delivery of a Promissory Note substantially in the form
attached hereto as Schedule 4.2(c)
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(the "Note"), less any adjustments and reductions as provided in Section 4.3
herein. The Note will be secured by all of the assets of Purchaser pursuant to
the Security Agreement substantially in the form attached hereto as Schedule
4.2(d) (the "Security Agreement").
(d) Purchaser shall use its best efforts to obtain a
collateral assignment of the NRTC Agreements, in the form attached hereto as
Schedule 4.2(e) as security for the Note (the "Collateral Assignment").
4.3. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be (i) increased by (a) the
parties' good faith estimate of the Current Assets of Sellers and (b) $233.75
for each new Subscriber acquired by Sellers during the period from November 1,
1996 through the Closing Date and (ii) decreased by the parties' good faith
estimate of the Current Liabilities of Sellers as of the Closing Date (the
"Closing Adjustment"), which adjustment shall be subject to final adjustment as
provided for in paragraph (c) below. The Closing Adjustment shall not reflect
any deduction for the Bad Debt Reserve, as defined below.
(b) No later than ninety (90) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Sellers shall make and deliver
to Purchaser a balance sheet reflecting the Current Assets and Current
Liabilities of Sellers as of the Closing Date (the "Closing Date Balance
Sheet"), prepared on a basis consistent with this Agreement. For purposes of the
Closing Adjustment and the Final Closing Adjustment, the amount of Accounts
Receivable of Sellers to be included in the Closing Date Balance Sheet shall
include only Accounts Receivable of Subscribers as reflected on Report 18A
(Subscriber Accounts Receivable Aging by Account) of the NRTC Central Billing
System Reports less a reserve for Accounts Receivable which are not collectible
as determined in accordance with GAAP (the "Bad Debt Reserve"). In addition, the
Closing Date Balance Sheet and the Final Closing Adjustment shall not include as
a Current Asset any DSS(TM) subscriber equipment leased by Sellers to any of
their Customers. Sellers shall make available to Purchaser their Records so
Purchaser may verify the original cost of the Inventory. Except as set forth in
this Section 4.3(b), no other assets or liabilities shall be included in the
Closing Date Balance Sheet. Sellers shall make available to Purchaser such
documentation, back-up, invoices, and books and records of Sellers as Purchaser
may reasonably request.
(c) Sellers and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Sellers and Purchaser are unable to
reconcile such determination, Purchaser shall have fifteen (15) days from
presentment of the Closing Date Balance Sheet by Sellers to notify Sellers if
Purchaser wishes to have Sellers' determination examined. If Purchaser elects to
have Sellers' determination examined, it shall be submitted to the determination
in Charlotte, North Carolina, by the Certified Public Accounting firm of Arthur
Andersen & Co. (or any other independent Certified Public Accounting firm
mutually acceptable to Sellers and Purchaser), the cost of such examination to
be paid fifty percent (50%) by Sellers and fifty percent (50%) by Purchaser;
provided the fees of such firm shall not exceed $10,000. The results of such
examination shall be made available to Sellers and Purchaser. The determination
by Sellers shall be final and binding on the parties unless Purchaser elects to
have an examination as provided herein, in
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which case the results of the examination shall be made within thirty (30) days
of such referral, and shall be final and binding on the parties (the "Final
Closing Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Electricom shall pay (i) the difference in cash to
Purchaser within five (5) days after the final determination; or (ii) in the
event of nonpayment, Purchaser may exercise its Right of Offset pursuant to
Section 10.5 hereof. In the event the Final Closing Adjustment is greater than
the Closing Adjustment, Purchaser shall pay such excess in cash to Electricom
within five (5) days after the final determination. If, following any payment
pursuant to this Section 4.3(d), an error (in billing or reporting by NRTC or
otherwise) is thereafter discovered which would have affected the Final Closing
Adjustment, the party in whose favor the error was made shall immediately pay in
cash the amount of such error to the other party.
(e) The parties hereto acknowledge and agree that Sellers
shall be entitled to all commissions due from USSB, Home Shopping Network,
DirecTv and others for periods prior to the Closing Date (the "Commissions"). In
the event Purchaser receives a check for such Commissions or a credit for such
amounts, Purchaser agrees to remit to Sellers such Commissions. Notwithstanding
anything contained herein to the contrary, Sellers shall not be entitled to any
Commissions payable with regard to periods after the Closing Date; it being
acknowledged and agreed that such Commissions are a part of the Purchased Assets
to be acquired by Purchaser pursuant to this Agreement.
4.4. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.4 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
ARTICLE V
SELLERS' REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, each of the Sellers, jointly and severally,
represents and warrants to Purchaser as follows:
5.1. ORGANIZATION. Each of the Sellers is a corporation duly organized,
validly existing and in good standing under the laws of the State of South
Carolina, with all requisite power and authority to own and operate the Business
as it is now conducted and to own the Purchased Assets in the places where the
Business is now conducted and where the Purchased Assets are now owned or
operated.
5.2. AUTHORITY.
(a) Electricom has full power and authority to execute,
deliver and perform this Agreement and all agreements and transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and all transactions contemplated hereby have been duly authorized by Electricom
and no other action or proceeding on the part of any other party is necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
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This Agreement has been duly and validly executed and delivered by Electricom,
and constitutes, and each of the other agreements to be executed by Electricom
pursuant to the terms hereof will constitute upon execution and delivery, a
legal, valid and binding obligation of Electricom enforceable in accordance with
its terms.
(b) As of the Closing Date, Pee Dee will have full power and
authority to execute, deliver and perform this Agreement and all agreements and
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby will be duly authorized
by Pee Dee and no other action or proceeding on the part of any other party will
be necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Pee Dee, and constitutes, and each of the other agreements to be
executed by Pee Dee pursuant to the terms hereof will constitute upon execution
and delivery, a legal, valid and binding obligation of Pee Dee enforceable in
accordance with its terms.
(c) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 5.2(c) attached hereto, the execution, delivery and
performance of this Agreement or any document related hereto by Sellers and the
consummation by Sellers of all of the transactions contemplated hereby or
thereby will not (with or without the giving of notice or the lapse of time or
both) (i) violate or require any consent or approval under any applicable
provision of any judgement, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in termination of,
accelerate the performance required by, result in a breach of, constitute a
default under or otherwise violate the terms of any agreements, instruments or
other obligations to which either of the Sellers is a party or by which they or
any of the Purchased Assets may be bound or affected; (iii) require any consent
or approval by, notice to or registration with any governmental authority or any
other Person; (iv) conflict with or violate any provision of either of the
Seller's organization documents; or (v) result in the creation of a Lien upon
any of the Purchased Assets howsoever arising.
5.3. TITLE TO THE PURCHASED ASSETS.
(a) Sellers have good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) attached hereto.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Sellers were conducting the Business in the
ordinary course prior to the Closing Date.
5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.1 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Sellers in the past, and no
currently needed repairs are reasonably likely to cost, either singularly or in
the aggregate with respect to all Fixed Assets, in excess of Five Thousand
Dollars ($5,000).
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5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Attached hereto as Schedules 1.2, 1.3 and 1.4, are true
and complete copies of each of the NRTC/Member Agreement, the NRTC/Retail
Agreement, and the Other Assumed Agreements, if any, respectively, together with
all amendments, schedules and exhibits thereto.
(b) Sellers have paid all sums to NRTC or DirecTv as
appropriate, required under the NRTC/Member Agreement such that Sellers are
entitled to the Marketing Revenues. Sellers have the right to receive from NRTC,
on a pro rata basis, all other net revenues received by NRTC from DirecTv in
connection with the Programming which are directly attributable to the Committed
Member Residences or the Commercial Establishments in the Locations.
(c) Each of the Sellers is in full compliance in all material
respects with any and all membership, affiliation, licensing or other
requirements or arrangements as may have been established by NRTC, DirecTv, if
any, pursuant to the NRTC Agreements, or otherwise.
(d) Neither of the Sellers is in breach of the NRTC
Agreements, nor have either of the Sellers failed to perform any material
obligation under the NRTC Agreements. Neither of the Sellers have received
notice of any such breach or non-performance at any time of such NRTC
Agreements. To the best of Sellers' knowledge, no other party to any of the NRTC
Agreements, is in default thereunder or has failed to perform any material
obligation thereunder.
(e) Except as disclosed on Schedule 5.5(e) attached hereto,
none of the DBS Services distributed by Sellers have been suspended at any time
since inception.
(f) Schedule 5.5(f) attached hereto (as supplemented by
applicable NRTC reports) sets forth a complete list of names and addresses of
all Customers and Subscribers of Sellers, identified as Committed Member
Residence and Commercial Establishment for the five (5) year period immediately
preceding the date hereof. Schedule 5.5(f) includes the number of months such
Customer has been a Customer and whether such Customer's account is past due.
Schedule 5.5(f) will be updated not more than three (3) days prior to the
Closing Date, if available. Sellers have maintained full and complete
information regarding the location of each Customer's descrambler.
5.6. INVENTORY. The Inventory shall be usable in the ordinary course of
business and shall comply in all respects with industry standards of quality and
marketability. The Inventory will not, as of the Closing Date, include any items
below standard quality or obsolete. The Inventory shall consist solely of
undamaged, original units in original, sealed cartons, located at either
Seller's principal place of business. Sellers own all of the Inventory free and
clear of any and all Liens and has full power and authority to transfer the
Inventory to Purchaser.
5.7. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business and
none of the Accounts Receivable are subject to any counterclaim or setoff.
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5.8. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
5.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9 attached hereto, since December 31, 1995, to the best of Sellers'
knowledge, there has not been and through the Closing Date there will not be:
(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Sellers which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Sellers (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
other than obligations or liabilities incurred in the ordinary course of
business and consistent with past practices;
(c) any termination or waiver of any rights of Sellers of
material value to the Business or to Sellers;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) the adoption of any statute, rule, regulation or order
which adversely affects the Business or the Purchased Assets;
(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
5.10. LICENSES AND PERMITS. Attached hereto in Schedule 5.10 is a list
of all federal, state, local and foreign permits, certificates, licenses,
approvals and other authorizations necessary in the conduct of the Business. All
such licenses and permits of Sellers are in full force and effect, and no
violations are or have been recorded in respect thereof, and no proceeding is
pending or threatened to revoke or limit any thereof. Each of the Sellers and
the conduct of the Business is in compliance with all applicable laws, statutes,
ordinances, rules, regulations and order of any federal, foreign, state or local
government and any other government department or agency, and in any judgment,
decision, decree or order of any court of governmental agency, department or
authority.
5.11. TAX MATTERS.
(a) Each of the Sellers has timely filed all federal, state,
local and foreign tax returns and tax reports required to be filed with respect
to the Business with the appropriate governmental agency in all jurisdictions in
which such returns and reports are required to be filed. All such returns and
reports are true, correct and complete, and all amounts shown as owing on them
have been paid, including all interest, penalties, deficiencies and assessments
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heretofore levied or assessed against either of the Sellers. Each of the Sellers
has duly withheld, collected and timely paid over, or holds for such payment, to
the proper governmental authorities all taxes required to be withheld or
collected by it. There is no agreement for extension of time of assessment or
payment of any taxes of Sellers. No waiver of any statute of limitations has
been executed by Sellers for any tax year which remains open or unsettled. To
the best knowledge, information and belief of Sellers, there is no examination
or audit pending by the Internal Revenue Service or by any state or local taxing
authority with respect to the tax matters of Sellers. There is no liability for
taxes or any tax deficiency or the existence of any basis from which liability
for taxes or tax deficiency, including interest and penalties, might be asserted
against either of the Sellers for any period in excess of the applicable reserve
for taxes, if any, and neither of the Sellers has any knowledge of any such
liability or deficiency or the existence of any basis therefor.
(b) All federal, state, local and foreign income, profits,
franchise, sales, use, occupation, property, excise and other taxes (including
interest and penalties), if any, payable by Sellers or relating to or chargeable
against the Purchased Assets or chargeable against Sellers' revenue or income
have been fully paid or are not past due and are fully disclosed and accrued on
the books and records of Sellers and the proper amount of reserves exist for the
payment thereof.
5.12. DISCLOSURES. No representation or warranty made by Sellers, or
either of them, in this Agreement, and no statement made in any Schedule,
exhibit, certificate or other writing delivered or to be delivered in connection
with the transactions contemplated hereby contains or will contain any untrue
statement of a material fact, or omits or will omit any statement of a material
fact necessary to make the statements contained herein or therein not
misleading.
5.13. LITIGATION. There are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of Sellers' knowledge, any
threats against or affecting Sellers, the Purchased Assets or the Business, at
law or in equity, before any court, arbitration panel, tribunal or governmental
department, commission, board, bureau, agency or instrumentality.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Sellers to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents and warrants to Sellers
as follows:
6.1. ORGANIZATION. Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Georgia,
with all requisite power to own and operate its business as it is now conducted.
As of the Closing Date, Purchaser shall have the right to transact business as a
foreign limited partnership in the State of South Carolina.
6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding
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on the part of any other party is necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser, and constitutes, and each of
the other agreements to be executed pursuant to the terms hereof upon execution
and delivery will constitute, a legal, valid and binding obligation of
Purchaser, enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other document related hereto by Purchaser
and the consummation by Purchaser of all of the transactions contemplated hereby
or thereby will not (with or without the giving of notice or the lapse of time
or both) (i) violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in the termination
of, accelerate the performance required by, result in the breach of, constitute
a default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Purchaser is a party; (iii) require any consent or
approval by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's certificate of
limited partnership or limited partnership agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any Schedule, exhibit, certificate or
other writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Sellers shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use their best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(d) maintain their Records in accordance with prior practice,
maintain the Purchased Assets and the inventory in their present condition,
ordinary wear and tear excepted, consistent with past practice, and otherwise
use their best efforts to operate the Business as currently operated and in the
ordinary course in accordance with practices during the twelve (12) months
preceding the date of this Agreement;
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(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets or inventory, except for sales or
dispositions of inventory in the ordinary course of business;
(f) use their best efforts to preserve intact the current
business organization and relationships with employees, suppliers, advertisers,
Customers and other Persons having dealings with Sellers with respect to the
Business;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTv;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTv;
(i) provide to Purchaser, promptly upon receipt thereof by
Sellers, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC Agreements, and (ii) copies of
all protests, complaints, challenges or other documents submitted to or filed
with the NRTC or DirecTv by third parties concerning the Business and, promptly
upon the filing or making thereof, copies of Sellers' responses thereto; and
(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against either of the Sellers in any
court, or any action against either of the Sellers before any governmental
agency, and notify Purchaser in writing promptly upon receipt of any
administrative or court order relating to the Business. Without limiting the
generality of the foregoing, neither of the Sellers shall take any of the
actions (over which Sellers can exercise control) listed in Section 5.9 herein.
7.2. ACCESS.
(a) Prior to the Closing, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Sellers, their Records and the Business as Purchaser deems
necessary or advisable and shall have full access to the auditors and attorneys
of Sellers. Sellers shall permit Purchaser and its employees, agents and
representatives, on reasonable notice, to have access to their premises,
personnel and Records relating solely to the Business. Sellers shall cooperate
to provide access to their Customers, suppliers, lenders and such other parties
as Purchaser may reasonably request. Sellers shall, and shall cause their
officers, attorneys and accountants to, furnish Purchaser with such financial
and operating data and other information as Purchaser from time to time shall
reasonably request, including, but not limited to, Sellers' balance sheets for
the Business as of December 31, 1995 and June 30, 1996. No investigation by
Purchaser shall in any way affect or otherwise diminish the representations,
warranties and covenants of Sellers hereunder.
(b) Purchaser will hold, and will cause its authorized
representatives (including its investors and lending institutions) to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or official request or by other requirements of law, all documents and
information concerning Sellers and the Business furnished to Purchaser in
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connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
Purchaser, (ii) in the public domain through no fault of Purchaser, or (iii)
later lawfully acquired by Purchaser from other sources) and will not release or
disclose such information to any other Person, except its auditors, attorneys,
financial advisors and other consultants and advisors and lending institutions
(including banks) in connection with this Agreement, it being understood that
such Persons shall be informed by such party of the confidential nature of such
information and shall be directed by such party and shall have agreed to treat
such information as confidential. In the event that the transactions
contemplated herein are not consummated for any reason, Purchaser will promptly
return to Sellers all copies of any Schedules, statements, documents or other
written information obtained in connection herewith, without retaining any
copies or summaries thereof, and shall maintain such confidence except to the
extent such information comes into the public domain through no fault of
Purchaser.
7.3. CONSENT OF PEE DEE. Pee Dee shall use its best efforts to obtain
as soon as practicable after the date hereof the approval of the Board of
Directors of Pee Dee with respect to the transactions contemplated hereby.
7.4. CONSENT OF NRTC, DIRECTV AND OTHERS. Within five (5) business days
after the date of this Agreement, Purchaser shall cause its counsel to prepare
and deliver to Sellers' counsel (i) a request for the consent of the NRTC and
DirecTv to the transfer of the NRTC Agreements, (ii) a request for the consent
of the NRTC and DirecTv to the Collateral Assignment, (iii) a request of the
NRTC to provide to the members and affiliates of the NRTC who are providing DBS
Services under agreements with the NRTC a written summary of the HCG Agreement
(the "HCG Agreement Summary"), (iv) a request of the NRTC to confirm that, in
the event the NRTC exercises its right to acquire DBS Services from successor
satellites launched by HCG, (a) those NRTC members and affiliates who at the
time of such exercise are providing DBS Services pursuant to agreements then in
effect with the NRTC would be afforded the right to continue to provide DBS
Services to the specific residences listed or the specific geographic areas
described in such members' or such affiliates' agreement as then in effect
immediately prior to the expiration thereof in accordance with its terms, and
(b) such right will be afforded on a non-discriminatory basis as between such
members and affiliates, and (v) such other requests for consent that Purchaser
determines may be necessary or appropriate to consummate the transactions
contemplated hereby. After review by Sellers' counsel, but in any event within
ten (10) business days after the date of this Agreement, Sellers and Purchaser
shall join in and deliver the requests for such consents, and they will each
diligently take all steps necessary or desirable to obtain such consents. The
failure of any of the parties to timely file or diligently seek the consents, or
to cooperate fully with any of the other parties with respect thereto, shall be
deemed a material breach of this Agreement. Purchaser acknowledges and agrees
that Sellers cannot ensure or otherwise guarantee that the NRTC will provide the
HCG Agreement Summary referred to in clause (iii) above or the confirmation of
the NRTC referred to in clause (iv) above.
7.5. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Sellers and Purchaser shall
mutually agree in advance as to timing, form and content before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to reaching mutual agreement, except as may be
required by law. In the event that prior to the Closing Date either party is
required
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by law to make a statement with respect to the transactions contemplated herein,
such party shall notify the other party in writing as to the timing, form and
content of such statements. Sellers and Purchaser agree to maintain the
confidentiality of this Agreement and the terms hereof and any information
exchanged by the parties in connection with the consummation of the transaction
contemplated hereby.
7.6. BEST EFFORTS. Subject to the terms and conditions herein provided,
Sellers and Purchaser agree to use their best efforts to take, execute,
acknowledge and deliver, or cause to be taken, executed, acknowledged and
delivered, all actions, deeds, assignments, documents, instruments, transfers,
conveyances, discharges, releases, assurances and consents, and to do, or cause
to be done, all things necessary, proper or advisable under this Agreement and
all applicable laws and regulations to consummate, confirm, perfect, evidence
and otherwise make effective the transactions contemplated by this Agreement,
including actions necessary to obtain all requisite assignments of agreements
and contracts, and to fulfill the requirements of Articles VIII and IX hereof on
or prior to the Closing Date.
7.7. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Sellers will refrain, and will cause all of their
agents and employees to refrain, from taking, directly or indirectly, any action
to encourage, initiate, solicit or continue any discussions or negotiations
with, or any other offers from, any other Person concerning a merger, sale of
substantial stock or any similar transaction concerning Sellers which would
affect the Business, or the sale of the Purchased Assets or any portion thereof.
7.8. MANAGEMENT AGREEMENT. Purchaser and Sellers will negotiate in good
faith to agree upon the Management Agreement.
7.9. RECORDS. Purchaser shall make available to Sellers, such
documentation, back-up, invoices, NRTC reports and other books and records
relating to the Business during the ninety (90) day period after the Closing
Date and thereafter as Sellers may reasonably request.
7.10 RATES. Purchaser covenants and agrees that it shall not increase
prices to Subscribers existing as of the Closing Date with respect to DirecTv
programming packages (i.e. Total Choice, Economy Choice and Choice) during the
six (6) month period following the Closing Date unless such increase is
necessary to maintain Purchaser's gross margin of at least 52% on these
packages.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Sellers, or either of them, contained in this
Agreement, and all representations and warranties set forth in any Schedule or
exhibit attached hereto, shall have been true, complete
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and correct when made and as of the Closing Date, without the necessity of any
material amendment or modification, with the same force and effect as if made as
of the Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Sellers, or either of them, on or
before the Closing Date pursuant to the terms hereof shall have been duly
performed or complied with on or before the Closing Date.
8.3. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the financial condition, Business, assets, results of
operations or prospects of Sellers or the Purchased Assets.
8.4. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.5. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Sellers in connection with the Closing including, without limitation,
NRTC and DirecTv consent as provided for in Section 7.4 herein, shall have been
duly obtained by Sellers and shall be in full force and effect without
conditions which are materially adverse to Purchaser.
8.6. SUBSCRIBERS. On the Closing Date, Sellers shall have at least
3,568 Subscribers.
8.7. REVIEW OF SELLERS. Purchaser shall have completed its due
diligence investigation covering (i) the Business as provided for in Section 7.2
herein, (ii) the terms and provisions of the HCG Agreement as reflected in the
HCG Agreement Summary, and (iii) the rights Purchaser will be afforded to
provide DBS Services to the Locations after the expiration of the NRTC/Member
Agreement, and no fact or circumstance shall have come to the attention of
Purchaser as a result of such investigation which in the exercise of Purchaser's
reasonable judgement materially and adversely affects the business, prospects or
financial condition of the Business, including the prospects of the Business
after the expiration of the NRTC Agreements.
8.8. CLOSING OF SANTEE ELECTRIC COOPERATIVE, INC. ACQUISITION. An
affiliate of Purchaser shall have purchased from Santee Electric Cooperative,
Inc. NRTC System No. 0409.
8.9. MANAGEMENT AGREEMENT. Purchaser and Sellers shall have entered
into the Management Agreement.
8.10. SELLERS' CLOSING DELIVERIES. Sellers shall have delivered to
Purchaser the following at Closing:
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(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) all Records or copies of the Records which Purchaser may
reasonably request.
(c) a certified copy of Resolutions of the Board of Directors
of each of the Sellers and each of the Seller's shareholders authorizing the
execution, delivery and performance of this Agreement;
(d) a certificate of good standing of each of the Sellers from
the Secretary of State of South Carolina;
(e) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or otherwise addressed to
Purchaser's satisfaction;
(f) a list of the Accounts Receivable from all Customers
(Reports 18A and 19A) and a list of the Unearned Revenue (Report 17) each as of
the NRTC billing period ending immediately prior to the Closing Date;
(g) a certificate signed by each of the Seller's presidents,
dated the Closing Date, to the effect that the conditions set forth in this
Article VIII have been satisfied;
(h) an opinion of Thomas E. Smith, Jr., counsel to Sellers, in
form and substance reasonably acceptable to Purchaser;
(i) a certificate signed by each of the Seller's presidents,
dated the Closing Date, regarding the transfer of each of the Seller's accounts
at Huntington Bank;
(j) the Management Agreement executed by Sellers; and
(k) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Sellers' satisfaction of each of their obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
Sellers' obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Sellers), on or before the Closing Date, of each of the following conditions
precedent:
9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when
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made and as of the Closing Date, without the necessity of any material amendment
or modification, with the same force and effect as if made as of the Closing
Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in Section 7.4 herein) shall have been
duly obtained by Purchaser and shall be in full force and effect without
conditions which are materially adverse to Sellers.
9.5 MANAGEMENT AGREEMENT. Purchaser and Sellers shall have entered into
the Management Agreement.
9.6. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Sellers the following at Closing:
(a) the Closing Payment;
(b) the Note and the Security Agreement duly executed by
Purchaser;
(c) the Collateral Assignment executed and delivered by
Purchaser and consented to by the NRTC and DirecTv;
(d) a certified copy of Resolutions of the general partner of
Purchaser authorizing the execution, delivery and performance of this Agreement;
(e) a certificate signed by Purchaser's general partner, dated
the Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied;
(f) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Purchaser, in form and substance reasonably acceptable to Sellers;
(g) a certificate signed by Purchaser's general partner, dated
the Closing Date, regarding the transfer of each of the Seller's accounts at
Huntington Bank;
(h) the Management Agreement executed by Purchaser; and
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(i) such other documents and instruments as may be reasonably
requested and satisfactory to Sellers and its counsel in connection with
Purchaser's satisfaction of each of its obligations hereunder.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by any party to this Agreement or pursuant hereto shall
survive the Closing of the transactions hereunder. The representations and
warranties hereunder shall not be affected or diminished by any investigation at
any time by or on behalf of the party for whose benefit such representations and
warranties were made. All statements contained herein or in any Schedule,
exhibit, certificate, list or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Each of the Sellers, jointly and
severally, and its representatives, successors, heirs and assigns shall
indemnify, reimburse and hold Purchaser and each of its partners, subsidiaries,
affiliates, successors, assigns and agents harmless from, against, for and in
respect of any and all damages, losses, settlement payments, obligations,
liabilities, claims, demands, actions or causes of action, judgments,
encumbrances, costs and expenses (including reasonable attorneys' fees)
(collectively, the "Indemnifiable Damages") relating to, resulting from or
arising out of (i) any misrepresentation, untruth, inaccuracy, breach or
nonfulfillment of any representation, warranty, agreement or covenant of either
of the Sellers contained in or made in connection with this Agreement or in any
Schedule, exhibit, certificate or other document delivered pursuant hereto, (ii)
the failure of either of the Sellers to pay, perform or discharge promptly when
due any of their obligations, liabilities and debts except as provided under
this Agreement, (iii) any liability or obligation relating to the operation of
the Business prior to the Closing Date, (iv) any breach or default prior to the
Closing Date by either of the Sellers under any of the NRTC Agreements, (v) any
state or local sales, use, excise, personal property or similar tax liability
(including penalties and interest) of either of the Sellers, (vi) the 1995
Memorandum, and (vii) any other liabilities, obligations or claims, whether
absolute or contingent, known or unknown, matured or unmatured and not expressly
assumed by Purchaser hereunder.
10.3. INDEMNIFICATION OF SELLERS. Subject the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Sellers and each of
their shareholders, subsidiaries, affiliates, officers and directors harmless
from, against, for and in respect of any and all Indemnifiable Damages relating
to, resulting from or arising out of (i) any misrepresentation, untruth,
inaccuracy, breach or nonfulfillment of any representation, warranty, agreement
or covenant of Purchaser contained in or made in connection with this Agreement
or in any Schedule, exhibit, certificate or other document delivered pursuant
hereto, (ii) the failure of Purchaser to pay, perform or discharge promptly when
due (a) its obligations set forth in Section 4.2 herein, or (b) the Current
Liabilities, (iii) the assertion against Sellers of any liability or obligation
relating to Purchaser's operation of the Business after the Closing Date, and
(iv) any breach or default after the Closing Date by Purchaser under the NRTC
Agreements.
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10.4. RIGHT TO CONTEST.
(a) If any party entitled to indemnification hereunder (the
"Indemnified Party") receives notice or has knowledge of any claim for which it
believes the other party hereto is obligated to provide indemnification pursuant
to Sections 10.2 or 10.3 herein (the "Indemnifying Party"), the Indemnified
Party shall notify the Indemnifying Party in writing of such claim within twenty
(20) days of its receipt of same (the "Indemnification Claim"). The
Indemnification Claim shall set forth a brief description of the facts giving
rise to such a claim and the amount (or reasonable estimate) of the
Indemnifiable Damages suffered or which may be suffered by the Indemnified
Party. The Indemnified Party shall, at the expense of the Indemnifying Party,
provide all information regarding the contest or defense of the claim and
cooperate fully with the Indemnifying Party in the conduct of any such contest
or defense. Before being required to make any payment pursuant to Sections 10.2
or 10.3 herein, the Indemnifying Party may, at its own expense, elect to
undertake and control the defense of, and take all necessary steps properly to
contest any claim in respect thereof involving third parties or to prosecute
such claim to conclusion or settlement satisfactory to the Indemnified Party. If
the Indemnifying Party makes the foregoing election, then the Indemnified Party
shall have the right to participate, at its own expense, in all proceedings but
shall not admit any liability, settle, compromise, pay or discharge the claim
without the prior written consent of the Indemnifying Party. If the Indemnifying
Party does not make such election, it shall be obligated to pay the costs of
defending or prosecuting such claim and shall be bound by whatever result is
obtained by the Indemnified Party respecting such claim.
(b) Except as herein expressly provided, the remedies provided
in this Article X shall be cumulative and shall not preclude assertion by any
party of any other rights or the seeking of any other remedies against any other
party hereto.
10.5. PURCHASER'S RIGHT OF OFFSET. Purchaser shall have the right, at
its sole discretion, to offset, on a dollar-for-dollar basis, against any and
all amounts due Electricom pursuant to the Note any amounts due to Purchaser
from Sellers pursuant to this Agreement, including, without limitation,
Indemnifiable Damages due pursuant to Section 10.2, adjustments pursuant to
Section 4.3(d) and any other amounts due from either of the Sellers pursuant to
any other provision hereof (the "Right of Offset"). Before exercising its Right
of Offset, Purchaser shall provide written notice of its intent to exercise such
right.
10.6. SELLERS' RIGHT OF OFFSET. Sellers shall have the right, at their
sole discretion, to offset, on a dollar-for-dollar basis, against any and all
amounts due Purchaser pursuant to the transactions contemplated by this
Agreement any amounts due to Sellers from Purchaser pursuant to this Agreement,
including, without limitation, Indemnifiable Damages due pursuant to Section
10.3, adjustments pursuant to Section 4.3(d) and any other amounts due from
Purchaser pursuant to any other provision hereof. Before exercising such right
of offset, Sellers shall provide written notice of their intent to exercise such
right.
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ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
To Purchaser: Digital Television Services of
South Carolina I, LP
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Sellers: Pee Dee Electricom, Inc.
Post Office Box 491, McIver Road
Darlington, South Carolina 29532
Attn: Robert W. Williams, Jr.
Pee Dee Electric Cooperative, Inc.
Post Office Box 491, McIver Road
Darlington, South Carolina 29532
Attn: Robert W. Williams, Jr.
with a copy to: Thomas E. Smith, Jr., Esq.
512 South Walnut Street
Post Office Box 308
Pamplico, South Carolina 29583
11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
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11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
South Carolina, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns, if any, of the parties hereto. Except as
otherwise expressly provided herein, nothing expressed or implied herein is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto, any right or remedy hereunder or by reason hereof. This
Agreement may not be assigned by Purchaser (except to a party which, directly or
indirectly is controlled by, controls or is under common control with,
Purchaser) or Sellers without the prior written consent of the other party.
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules
attached hereto constitute the entire agreement and understanding of the parties
in respect of the transactions contemplated hereby and supersede all prior
correspondence, conversations, agreements, arrangements, understandings and
other writings. No promises, covenants or representations of any character or
nature other than those expressly stated herein have been made to induce either
party to enter into this Agreement. This Agreement may be amended or modified
only by a written instrument signed by Purchaser and Sellers.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives. Purchaser shall pay up to Five Hundred Dollars ($500) of any
transfer fee due the NRTC in connection with the transfer of the NRTC Agreements
and any out of pocket fees and expenses of the NRTC due in connection therewith.
11.10. KNOWLEDGE OF SELLERS. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Sellers confirm that they have made or caused to be made due and diligent
inquiry as to the matters that are the subject of such representations and
warranties.
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11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Sellers, (ii) either party upon written
notice to the other party if the Closing has not occurred on or before the
Termination Date, (iii) Sellers if the covenants and conditions set forth in
Articles VII and IX required to be complied with or performed by Purchaser have
not been complied with or performed by Purchaser and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the sixtieth (60th) day
following written notice thereof from Sellers; provided that Sellers have not
defaulted in any material respect with respect to any of its obligations
hereunder, (iv) Purchaser if the covenants and conditions set forth in Articles
VII and VIII (other than Section 8.7) required to be complied with and performed
by Sellers have not been complied with or performed by Sellers and such
noncompliance and nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Sellers on or before the sixtieth
(60th) day following written notice thereof from Purchaser; provided that
Purchaser shall not have defaulted in any material respect with respect to any
of its obligations hereunder, or (v) Purchaser if the conditions set forth in
Section 8.7 required to be complied with and performed by Sellers have not been
complied with or performed by Sellers on or prior to December 31, 1996; provided
that Purchaser shall not have defaulted in any material respect with respect to
any of its obligations hereunder.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i) or (ii), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
(c) In the event of termination pursuant to Section 11.13(a)(iii),
Sellers shall be entitled to recover from Purchaser all damages, losses, costs
and expenses (including reasonable attorneys' fees) provided by law.
(d) In the event of termination pursuant to Section 11.13(a)(iv),
Purchaser shall be entitled to recover from Sellers all damages, losses, costs
and expenses (including reasonable attorneys' fees) provided by law.
(e) In the event of termination pursuant to Section 11.13(a)(v),
Purchaser recognizes that Sellers would be damaged, the extent to which is
extremely difficult and impractical to ascertain. The parties, therefore, agree
that if this Agreement is terminated pursuant to Section 11.13(a)(v), Sellers
shall be entitled to the sum equal to Sellers' actual costs and expenses
(including attorneys' fees) incurred in connection with the transactions
contemplated by this Agreement, but in no event shall such sum exceed $100,000.
The parties agree that this sum
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shall constitute liquidated damages and shall be in lieu of any and all other
relief to which Sellers might otherwise be entitled due to Purchaser's failure
to consummate, or Purchaser's default under, this Agreement.
11.14. POWER OF ATTORNEY. Each of the Sellers hereby irrevocably
appoints Purchaser, and all agents, officers, and employees designated by
Purchaser, as its true and lawful attorney-in-fact and duly authorized agent for
the period from and after the Closing Date to:
(i) open each of the Seller's mail and endorse and collect any
checks, notes, drafts or any other items payable to either of the
Sellers from Subscribers or otherwise issued in connection with the
Business, and deposit same to the account of Purchaser in any
depository institution;
(ii) sign receipts and other papers necessary for the
collection of any and all amounts due from Subscribers;
(iii) notify Subscribers that the accounts have been assigned
to Purchaser; and
(iv) direct such Subscribers to make all payments due from
them directly to Purchaser.
Purchaser shall furnish Sellers with a copy of any notice issued pursuant to
Sections 11.14(iii) or (iv) above and each of the Sellers hereby agrees that any
such notice shall be sent on Sellers' stationary, in which event Sellers shall
co-sign such notice with Purchaser, all at Purchaser's sole cost and expense.
SELLERS DO HEREBY RATIFY AND CONFIRM ALL THINGS DONE BY PURCHASER
WITHIN THE SCOPE OF THE AUTHORITY HEREIN GIVEN AS FULLY AND TO THE
SAME EXTENT AS IF DONE BY SELLERS PERSONALLY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of South Carolina I, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
---------------------------------------
Douglas S. Holladay, Jr., President and
Manager
ELECTRICOM:
Pee Dee Electricom, Inc.
By:
---------------------------------------
Robert W. Williams, Jr., President
PEE DEE:
Pee Dee Electric Cooperative, Inc.
By:
---------------------------------------
Robert W. Williams, Jr., Executive Vice
President and General Manager
26
<PAGE> 1
EXHIBIT 10.9(b)
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is
made as of November 4, 1996 by and among Digital Television Services of South
Carolina I, LP, a Georgia limited partnership ("Purchaser"), Pee Dee Electricom,
Inc., a South Carolina corporation ("Electricom") and Pee Dee Electric
Cooperative, Inc., a South Carolina cooperative association ("Pee Dee") (Pee Dee
and Electricom are hereinafter collectively referred to as "Sellers").
RECITALS
Purchaser and Sellers entered into an Asset Purchase Agreement dated as
of October 5, 1996 (the "Agreement"). Capitalized terms used herein which are
not otherwise defined shall have the meaning set forth in the Agreement.
Purchaser and Sellers have determined that it is in their mutual best interest
to amend the Agreement in accordance with Section 11.8 thereof.
TERMS OF AMENDMENT
Purchaser and Sellers agree as follows:
1. AMENDMENT TO SECTION 4.3(a). Section 4.3(a) shall be deleted in its
entirety and the following new Section 4.3(a) shall be inserted in lieu thereof:
"(a) The Closing Payment shall be (i) increased by (a) the parties'
good faith estimate of the Current Assets of Sellers, (b) $233.75 for each new
Subscriber acquired by Sellers during the period from November 1, 1996 through
the Closing Date and (c) $51,150 in connection with the obligations of Sellers
to NRTC pursuant to the 1995 Memorandum and (ii) decreased by the parties' good
faith estimate of the Current Liabilities of Sellers as of the Closing Date (the
"Closing Adjustment"), which adjustment shall be subject to final adjustment as
provided for in paragraph (c) below. The Closing Adjustment shall not reflect
any deduction for the Bad Debt Reserve, as defined below."
2. AMENDMENT TO SECTION 7.4. Section 7.4 shall be deleted in its
entirety and the following new Section 7.4 shall be inserted in lieu thereof:
"7.4. CONSENT OF NRTC, DIRECTV AND OTHERS. Sellers and Purchaser shall
join in and deliver the requests for the consent of the NRTC and DirecTv to the
transfer of the NRTC Agreements, and such other requests for consent that
Purchaser reasonably determines may be necessary or appropriate to consummate
the transactions contemplated hereby, and they will each diligently take all
steps necessary or desirable to obtain such consents. The failure of either of
the parties to timely file or diligently seek the consents, or to cooperate
fully with the other party with respect thereto, shall be deemed a material
breach of this Agreement."
<PAGE> 2
3. AMENDMENT TO SECTION 8.7. Section 8.7 shall be deleted in its
entirety and the following new Section 8.7 shall be inserted in lieu thereof:
"8.7. SETTLEMENT OF 1995 MEMORANDUM DISPUTE. All disputes between
Sellers and NRTC with respect to the 1995 Memorandum shall have been resolved to
the reasonable satisfaction of Purchaser."
4. AMENDMENT TO SECTION 11.13.
(i) Section 11.13(a) shall be deleted in its entirety and the following
new Section 11.13(a) shall be inserted in lieu thereof:
"(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Sellers, (ii) either party upon written
notice to the other party if the Closing has not occurred on or before the
Termination Date, (iii) Sellers if the covenants and conditions set forth in
Articles VII and IX required to be complied with or performed by Purchaser have
not been complied with or performed by Purchaser and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the sixtieth (60th) day
following written notice thereof from Sellers; provided that Sellers have not
defaulted in any material respect with respect to any of its obligations
hereunder, or (iv) Purchaser if the covenants and conditions set forth in
Articles VII and VIII required to be complied with and performed by Sellers have
not been complied with or performed by Sellers and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Sellers on or before the sixtieth (60th) day
following written notice thereof from Purchaser; provided that Purchaser shall
not have defaulted in any material respect with respect to any of its
obligations hereunder."
(ii) Section 11.13(e) shall be deleted in its entirety.
5. AMENDMENT OF SCHEDULE 4.2(e). Schedule 4.2(e) shall be deleted in
its entirety and the Schedule 4.2(e) attached hereto shall be inserted in lieu
thereof.
6. MODIFICATION. Except as modified hereby, the terms and conditions of
the Agreement shall remain in full force and effect.
7. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of South Carolina, without regard to the
choice of law provisions thereof.
8. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one in the same Amendment.
2
<PAGE> 3
IN WITNESS WHEREOF, Purchaser and Sellers have executed this Amendment
as of this date first set forth above.
PURCHASER:
Digital Television Services of South Carolina I, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
-----------------------------------
Douglas S. Holladay, Jr., President
and Manager
SELLERS:
ELECTRICOM:
Pee Dee Electricom, Inc.
By:
-----------------------------------
Robert W. Williams, Jr., President
PEE DEE:
Pee Dee Electric Cooperative, Inc.
By:
-----------------------------------
Robert W. Williams, Jr., Executive Vice
President and General Manager
3
<PAGE> 1
EXHIBIT 10.9(c)
SECOND AMENDMENT
TO
ASSET PURCHASE AGREEMENT
This SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT (this
"Amendment") is made as of November 25, 1996 by and among Digital Television
Services of South Carolina I, LP, a Georgia limited partnership ("Purchaser"),
Pee Dee Electricom, Inc., a South Carolina corporation ("Electricom") and Pee
Dee Electric Cooperative, Inc., a South Carolina cooperative association ("Pee
Dee") (Pee Dee and Electricom are hereinafter collectively referred to as
"Sellers").
RECITALS
Purchaser and Sellers entered into an Asset Purchase Agreement dated as
of October 5, 1996, as amended as of November 4, 1996 (as amended, the
"Agreement"). Capitalized terms used herein which are not otherwise defined
shall have the meaning set forth in the Agreement. Purchaser and Sellers have
determined that it is in their mutual best interest to amend the Agreement in
accordance with Section 11.8 thereof.
TERMS OF AMENDMENT
Purchaser and Sellers agree as follows:
1. AMENDMENT TO SECTION 4.2. Section 4.2 shall be deleted in its
entirety and the following new Section 4.2 shall be inserted in lieu thereof:
"4.2. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Sellers as follows:
(a) The sum of One Million Three Hundred Forty-Five Thousand
Dollars ($1,345,000), subject to adjustment as provided for in Section 4.3(a)
hereof, by certified or cashier's check, or by wire transfer of immediately
available funds to an account or accounts designed in writing by Sellers.
(b) The sum of Seven Million Nine Hundred Fifty-Five Thousand
Dollars ($7,955,000) by the delivery of a Promissory Note substantially in the
form attached hereto as Schedule 4.2(c) (the "Note"), less any adjustments and
reductions as provided in Section 4.3 herein. The Note will be secured by a
letter of credit pursuant to the Security Agreement substantially in the form
attached hereto as Schedule 4.2(d) (the "Security Agreement")."
2. AMENDMENT TO SECTION 9.6. Section 9.6 shall be deleted in its
entirety and the following new Section 9.6 shall be inserted in lieu thereof:
"9.6. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Sellers the following at Closing:
<PAGE> 2
(a) the Closing Payment;
(b) the Note and the Security Agreement duly executed by
Purchaser;
(c) the letter of credit contemplated by the Security
Agreement;
(d) a certified copy of Resolutions of the general partner of
Purchaser authorizing the execution, delivery and performance of this Agreement;
(e) a certificate signed by Purchaser's general partner, dated
the Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied;
(f) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Purchaser, in form and substance reasonably acceptable to Sellers;
(g) a certificate signed by Purchaser's general partner, dated
the Closing Date, regarding the transfer of each of the Seller's accounts at
Huntington Bank;
(h) the Management Agreement executed by Purchaser; and
(i) such other documents and instruments as may be reasonably
requested and satisfactory to Sellers and its counsel in connection with
Purchaser's satisfaction of each of its obligations hereunder."
3. AMENDMENT OF SCHEDULE 4.2(c). Schedule 4.2(c) shall be deleted in
its entirety and the Schedule 4.2(c) attached hereto shall be inserted in lieu
thereof.
4. AMENDMENT OF SCHEDULE 4.2(d). Schedule 4.2(d) shall be deleted in
its entirety and the Schedule 4.2(d) attached hereto shall be inserted in lieu
thereof.
5. MODIFICATION. Except as modified hereby, the terms and conditions of
the Agreement shall remain in full force and effect.
6. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of South Carolina, without regard to the
choice of law provisions thereof.
7. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one in the same Amendment.
2
<PAGE> 3
IN WITNESS WHEREOF, Purchaser and Sellers have executed this Amendment
as of this date first set forth above.
PURCHASER:
Digital Television Services of South Carolina I, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
------------------------------------
Douglas S. Holladay, Jr., President
and Manager
SELLERS:
ELECTRICOM:
Pee Dee Electricom, Inc.
By:
------------------------------------
Robert W. Williams, Jr., President
PEE DEE:
Pee Dee Electric Cooperative, Inc.
By:
------------------------------------
Robert W. Williams, Jr., Executive Vice
President and General Manager
3
<PAGE> 1
EXHIBIT 10.10(a)
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF OCTOBER 5, 1996
BY AND AMONG
DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA II, LP,
SANTEE SATELLITE SYSTEMS, INC.
AND
SANTEE ELECTRIC COOPERATIVE, INC.
================================================================================
<PAGE> 2
LIST OF SCHEDULES
Schedule 1.1 Fixed Assets
Schedule 1.2 NRTC/Member Agreement
Schedule 1.3 NRTC/Retail Agreement
Schedule 1.4 Other Assumed Agreements
Schedule 2.1(a) Assignment and Assumption Agreement
Schedule 2.1(b) Bill of Sale
Schedule 4.2(b) Promissory Note
Schedule 4.2(c) Security Agreement
Schedule 4.2(d) Collateral Assignment
Schedule 4.4 Allocation of Purchase Price
Schedule 5.2(b) Consent of Sellers
Schedule 5.3(a) Liens
Schedule 5.4 Fixed Assets Needing Repairs
Schedule 5.5(e) Suspended DBS Services
Schedule 5.5(f) Customers and Suppliers
Schedule 5.9 Changes or Events
Schedule 5.10 Licenses and Permits
Schedule 5.14 Subscribers Who Have Purchased On Time
Schedule 6.2(b) Consent of Purchaser
[Schedules have been omitted and will be furnished upon request]
<PAGE> 3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 5th day of October, 1996, by and among Digital Television
Services of South Carolina II, LP, a Georgia limited partnership ("Purchaser"),
Santee Satellite Systems, Inc., a South Carolina corporation ("Satellite") and
Santee Electric Cooperative, Inc., a South Carolina cooperative association
("Santee") (Satellite and Santee are hereinafter collectively referred to as
"Sellers").
RECITALS
1. Satellite entered into a NRTC/Member Agreement with the NRTC
pursuant to which it operates the National Rural Telecommunications
Cooperative's System No. 0409 (the "System") for the exclusive distribution of
DBS Services offered by DirecTv, Inc. ("DirecTv") (the "Business") in the
geographical areas covered by Clarendon, Georgetown and Williamsburg Counties,
South Carolina (the "Locations").
2. Purchaser desires to acquire from Sellers, and Sellers desire to
sell to Purchaser all of Sellers' rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations, any residual rights of Sellers
as members or affiliates of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements and certain of the assets used in
the Business, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, each of the
Sellers and Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Sellers to the
NRTC as of the Closing Date relating to the Business; including, without
limitation, accounts payable to the NRTC with respect to wholesale bills,
equipment and other services.
"Accounts Receivable" shall mean all of the accounts receivable of
Sellers as of the Closing Date for all Customers which are listed on Report 19A
(Accounts Receivable Summary) of the NRTC Central Billing Systems Reports.
<PAGE> 4
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"Cash" shall mean all cash in Satellite's bank accounts at Huntington
Bank as of the Closing Date, as determined in accordance with GAAP.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Nelson Mullins Riley
& Scarborough, L.L.P., 600 West Palmetto Street, Suite 200, Florence, South
Carolina, 29501 (i) at Purchaser's election, on (a) the last business day of the
month in which all of the conditions precedent set forth in Articles VIII and IX
herein have been satisfied or waived, or (b) the calendar day of such month on
which NRTC's accounting period closes, or (ii) such other date or at such other
time or place (including via mail overnight courier or facsimile transmission)
as the parties may mutually agree upon in writing. The Closing shall be as
effective as of the close of business on the Closing Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Current Assets" shall mean Cash, Accounts Receivable, Inventory and
Prepaid Expenses of Sellers which will be acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Sellers which will be assumed by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased DBS Services, or entered into a binding agreement to purchase DBS
Services and related services, from Sellers at any time during the five (5) year
period immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTv" shall mean DirecTv, Inc., a California corporation which is a
subsidiary of HCG.
"Excluded Assets" shall mean the Patronage Capital.
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, any MTE terminals, demonstration units and
DSS(TM) equipment leased or sold on time to Subscribers owned by Sellers and
used or useable in connection with the Business, which equipment and tangible
assets are listed on Schedule 1.1 attached hereto.
2
<PAGE> 5
"Franchise" shall mean any residual rights of Sellers as members or
affiliates of the NRTC to distribute DBS Services in the Locations after the
termination of the NRTC Agreements.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"HCG" shall mean Hughes Communications Galaxy, Inc.
"HCG Agreement" shall mean the agreement and all amendments which the
NRTC has entered into with HCG in which the NRTC has obtained the rights to
distribute through its members and affiliates certain DBS Services to rural
America.
"Inventory" shall mean any DSS(TM) subscriber equipment of Sellers as
of the Closing Date, which Inventory shall be valued at the lower of each item's
original cost or fair market value.
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated November 10, 1992 by and
between the NRTC and Satellite, as amended from time to time, together with all
schedules and exhibits thereto, a copy of which is attached hereto as Schedule
1.2.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement dated October 4, 1993 by and between the NRTC and Satellite, as
amended from time to time, together with all schedules and exhibits thereto, a
copy of which is attached hereto as Schedule 1.3.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.4, including any contracts and agreements with
DirecTv, copies of which are attached to such Schedule.
3
<PAGE> 6
"Patronage Capital" shall mean the amount of patronage capital credited
to the Sellers' accounts at the NRTC for the period through the Closing Date
pursuant to Article XII of the NRTC Bylaws, as amended.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
"Prepaid Expenses" shall mean all prepaid property taxes, prepaid
supplies, advances, deposits, deferred charges and other prepaid expenses (other
than prepaid insurance) shown on Sellers' books and records as of the Closing
Date relating to the Business which Prepaid Expenses can be credited to
Purchaser's account after the Closing Date, as determined in accordance with
GAAP.
"Programming" shall mean Cable Programming and any programming provided
by DirecTv pursuant to the NRTC Agreements.
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
"Purchased Assets" shall mean the (i) NRTC Agreements, (ii) the
Franchise, (iii) Current Assets, (iv) contracts and accounts with Customers, (v)
Fixed Assets, (vi) Records, and (vii) all other assets of Sellers, whether
tangible or intangible, used in connection with the Business, excepting only the
Excluded Assets.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Sellers, including, without limitation, Customer
and prospective customer lists, computer programs, tapes and electronic data
processing software, accounting journals and ledgers, accounts receivable
records, and copies of all NRTC reports, correspondence and other documents
relating to the NRTC Agreements and Other Assumed Agreements and compliance
therewith.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i) is an active subscriber subscribing to a package of basic services, (ii) on
the last day of the calendar month prior to such date, whose account is not more
than sixty (60) days past due from the date payment is due, (iii) who is not an
employee or agent of the service provider or charged a fee that is nominal
(e.g., demonstration unit) or substantially below the service provider's
published rates, and (iv) who has not given notice of intent to discontinue
service.
"Termination Date" shall mean January 30, 1997.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Sellers as of the
Closing Date which are listed on Report 17 (Unearned Revenue Report) of the NRTC
Central Billing System Reports.
4
<PAGE> 7
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Sellers shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Sellers all of Sellers' right, title and interest in and to the Purchased
Assets, free and clear of any and all Liens, on the Closing Date for the
consideration set forth in this Agreement. The sale, transfer, assignment and
conveyance of the Purchased Assets shall be made by the execution and delivery
at Closing of (i) an Assignment and Assumption Agreement substantially in the
form attached hereto as Schedule 2.1(a) (the "Assignment"), and (ii) a bill of
sale substantially in the form attached hereto as Schedule 2.1(b) (the "Bill of
Sale").
ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLERS. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Sellers with respect to the following:
(a) the NRTC Agreements to the extent the obligations therein
arise out of the provision of DBS Services to Customers and accrue on or after
the Closing Date; and
(b) all Current Liabilities as of the Closing Date.
Anything in this Agreement to the contrary notwithstanding,
except for the liabilities specifically set forth in this Section 3.1, Purchaser
shall not assume or be deemed to have assumed under this Agreement, by reason of
the transactions contemplated by this Agreement, or otherwise, any other trade
or other accounts payable, accrued expenses, debts, liabilities, obligations or
commitments of Sellers of any nature whatsoever, known or unknown, and the
execution, delivery and performance of this Agreement shall not render Purchaser
liable for any such debt, liability, obligation or commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Sellers are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Sellers under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Sellers with or
for the benefit of any employee of either of the Sellers; and
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Sellers,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution, sale or provision
of any services of Sellers, or (ii) any failure or alleged failure to comply
with any federal, state or local law, rule or regulation applicable to either of
the Sellers or the Business.
5
<PAGE> 8
Purchaser agrees to promptly notify Sellers of any claims which Purchaser
obtains knowledge of which arise out of or result from liabilities of Sellers
not assumed by Purchaser pursuant to this Agreement.
ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be Three Million Four Hundred Thousand Dollars
($3,400,000), subject to adjustment as provided in Section 4.3 herein.
4.2. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Satellite, as agent for Sellers, as follows:
(a) The sum of One Million Two Hundred Thousand Dollars
($1,200,000), subject to adjustment as provided for in Section 4.3 herein, by
certified or cashier's check, or by wire transfer of immediately available funds
to an account or accounts designated in writing by Satellite (the "Closing
Payment").
(b) The sum of Two Million Two Hundred Thousand Dollars
($2,200,000) by the delivery of a Promissory Note substantially in the form
attached hereto as Schedule 4.2(b) (the "Note"), less any adjustments and
reductions as provided in Section 4.3 herein. The Note will be secured by all of
the assets of Purchaser pursuant to the Security Agreement substantially in the
form attached hereto as Schedule 4.2(c) (the "Security Agreement").
(c) Purchaser shall use its best efforts to obtain a
collateral assignment of the NRTC Agreements, in the form attached hereto as
Schedule 4.2(d) as security for the Note (the "Collateral Assignment").
4.3. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be (i) increased by (a) the
parties' good faith estimate of the Current Assets of Sellers, (b) fifty percent
(50%) of Sellers' cost of all DSS(TM) equipment sold on time to Subscribers
through September 30, 1996, including actual installation costs associated
therewith, (c) Fifty Dollars ($50.00) for each Subscriber who has purchased
DSS(TM) equipment on time from Sellers through September 30, 1996; and (d)
$233.75 for each new Subscriber acquired by Sellers during the period from
November 1, 1996 through the Closing Date; and (ii) decreased by the parties'
good faith estimate of the Current Liabilities of Sellers as of the Closing Date
(the "Closing Adjustment"), which adjustment shall be subject to final
adjustment as provided for in paragraph (c) below. The Closing Adjustment shall
not reflect any deduction for the Bad Debt Reserve, as defined below.
(b) No later than ninety (90) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Sellers shall make and deliver
to Purchaser a balance sheet reflecting the Current Assets and Current
Liabilities of Sellers as of the Closing Date (the "Closing Date Balance
Sheet"), prepared on a basis consistent with this Agreement. For purposes of the
6
<PAGE> 9
Closing Adjustment and the Final Closing Adjustment, the amount of Accounts
Receivable of Sellers to be included in the Closing Date Balance Sheet shall
include only Accounts Receivable of Subscribers as reflected on Report 18A
(Subscriber Accounts Receivable Aging by Account) of the NRTC Central Billing
System Reports less a reserve for Accounts Receivable which are not collectible
as determined in accordance with GAAP (the "Bad Debt Reserve"). In addition, the
Closing Date Balance Sheet and the Final Closing Adjustment shall not include as
a Current Asset any DSS(TM) subscriber equipment leased or sold on time by
Sellers to any of their Customers. Sellers shall make available to Purchaser
their Records so Purchaser may verify the original cost of the Inventory. Except
as set forth in this Section 4.3(b), no other assets or liabilities shall be
included in the Closing Date Balance Sheet. Sellers shall make available to
Purchaser such documentation, back-up, invoices, and books and records of
Sellers as Purchaser may reasonably request.
(c) Sellers and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Sellers and Purchaser are unable to
reconcile such determination, Purchaser shall have fifteen (15) days from
presentment of the Closing Date Balance Sheet by Sellers to notify Sellers if
Purchaser wishes to have Sellers' determination examined. If Purchaser elects to
have Sellers' determination examined, it shall be submitted to the determination
in Charlotte, North Carolina, by the Certified Public Accounting firm of Arthur
Andersen & Co. (or any other independent Certified Public Accounting firm
mutually acceptable to Sellers and Purchaser), the cost of such examination to
be paid fifty percent (50%) by Sellers and fifty percent (50%) by Purchaser;
provided the fees of such firm shall not exceed $10,000. The results of such
examination shall be made available to Sellers and Purchaser. The determination
by Sellers shall be final and binding on the parties unless Purchaser elects to
have an examination as provided herein, in which case the results of the
examination shall be made within thirty (30) days of such referral, and shall be
final and binding on the parties (the "Final Closing Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Satellite shall pay (i) the difference in cash to
Purchaser within five (5) days after the final determination; or (ii) in the
event of nonpayment, Purchaser may exercise its Right of Offset pursuant to
Section 10.5 hereof. In the event the Final Closing Adjustment is greater than
the Closing Adjustment, Purchaser shall pay such excess in cash to Satellite
within five (5) days after the final determination. If, following any payment
pursuant to this Section 4.3(d), an error (in billing or reporting by NRTC or
otherwise) is thereafter discovered which would have affected the Final Closing
Adjustment, the party in whose favor the error was made shall immediately pay in
cash the amount of such error to the other party.
(e) The parties hereto acknowledge and agree that Sellers
shall be entitled to all commissions due from USSB, Home Shopping Network,
DirecTv and others for periods prior to the Closing Date (the "Commissions"). In
the event Purchaser receives a check for such Commissions or a credit for such
amounts, Purchaser agrees to remit to Sellers such Commissions. Notwithstanding
anything contained herein to the contrary, Sellers shall not be entitled to any
Commissions payable with regard to periods after the Closing Date; it being
acknowledged and agreed that such Commissions are a part of the Purchased Assets
to be acquired by Purchaser pursuant to this Agreement.
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4.4. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.4 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
ARTICLE V
SELLERS' REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, each of the Sellers, jointly and severally,
represents and warrants to Purchaser as follows:
5.1. ORGANIZATION. Each of the Sellers is a corporation duly organized,
validly existing and in good standing under the laws of the State of South
Carolina, with all requisite power and authority to own and operate the Business
as it is now conducted and to own the Purchased Assets in the places where the
Business is now conducted and where the Purchased Assets are now owned or
operated.
5.2. AUTHORITY.
(a) Each of the Sellers has full power and authority to
execute, deliver and perform this Agreement and all agreements and transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and all transactions contemplated hereby have been duly authorized by Sellers
and no other action or proceeding on the part of any other party is necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Sellers, and
constitutes, and each of the other agreements to be executed by Sellers pursuant
to the terms hereof will constitute upon execution and delivery, a legal, valid
and binding obligation of Sellers enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 5.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any document related hereto by Sellers and the
consummation by Sellers of all of the transactions contemplated hereby or
thereby will not (with or without the giving of notice or the lapse of time or
both) (i) violate or require any consent or approval under any applicable
provision of any judgement, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in termination of,
accelerate the performance required by, result in a breach of, constitute a
default under or otherwise violate the terms of any agreements, instruments or
other obligations to which either of the Sellers is a party or by which they or
any of the Purchased Assets may be bound or affected; (iii) require any consent
or approval by, notice to or registration with any governmental authority or any
other Person; (iv) conflict with or violate any provision of either of the
Seller's organization documents; or (v) result in the creation of a Lien upon
any of the Purchased Assets howsoever arising.
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5.3. TITLE TO THE PURCHASED ASSETS.
(a) Sellers have good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) attached hereto.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Sellers were conducting the Business in the
ordinary course prior to the Closing Date.
5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.1 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Sellers in the past, and no
currently needed repairs are reasonably likely to cost, either singularly or in
the aggregate with respect to all Fixed Assets, in excess of Five Thousand
Dollars ($5,000).
5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Attached hereto as Schedules 1.2, 1.3 and 1.4, are true
and complete copies of each of the NRTC/Member Agreement, the NRTC/Retail
Agreement, and the Other Assumed Agreements, if any, respectively, together with
all amendments, schedules and exhibits thereto.
(b) Sellers have paid all sums to NRTC or DirecTv as
appropriate, required under the NRTC/Member Agreement such that Sellers are
entitled to the Marketing Revenues. Sellers have the right to receive from NRTC,
on a pro rata basis, all other net revenues received by NRTC from DirecTv in
connection with the Programming which are directly attributable to the Committed
Member Residences or the Commercial Establishments in the Locations.
(c) Each of the Sellers is in full compliance in all material
respects with any and all membership, affiliation, licensing or other
requirements or arrangements as may have been established by NRTC, DirecTv, if
any, pursuant to the NRTC Agreements, or otherwise.
(d) Neither of the Sellers is in breach of the NRTC
Agreements, nor have either of the Sellers failed to perform any material
obligation under the NRTC Agreements. Neither of the Sellers have received
notice of any such breach or non-performance at any time of such NRTC
Agreements. To the best of Sellers' knowledge, no other party to any of the NRTC
Agreements, is in default thereunder or has failed to perform any material
obligation thereunder.
(e) Except as disclosed on Schedule 5.5(e) attached hereto,
none of the DBS Services distributed by Sellers have been suspended at any time
since inception.
(f) Schedule 5.5(f) attached hereto (as supplemented by
applicable NRTC reports) sets forth a complete list of names and addresses of
all Customers and Subscribers of
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Sellers, identified as Committed Member Residence and Commercial Establishment
for the five (5) year period immediately preceding the date hereof. Schedule
5.5(f) includes the number of months such Customer has been a Customer and
whether such Customer's account is past due. Schedule 5.5(f) will be updated not
more than three (3) days prior to the Closing Date, if available. Sellers have
maintained full and complete information regarding the location of each
Customer's descrambler.
5.6. INVENTORY. The Inventory shall be usable in the ordinary course of
business and shall comply in all respects with industry standards of quality and
marketability. The Inventory will not, as of the Closing Date, include any items
below standard quality or obsolete. The Inventory shall consist solely of
undamaged, original units in original, sealed cartons, located at either
Seller's principal place of business. Sellers own all of the Inventory free and
clear of any and all Liens and has full power and authority to transfer the
Inventory to Purchaser.
5.7. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business and
none of the Accounts Receivable are subject to any counterclaim or setoff.
5.8. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
5.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9 attached hereto, since December 31, 1995, to the best of Sellers'
knowledge, there has not been and through the Closing Date there will not be:
(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Sellers which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Sellers (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
other than obligations or liabilities incurred in the ordinary course of
business and consistent with past practices;
(c) any termination or waiver of any rights of Sellers of
material value to the Business or to Sellers;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) the adoption of any statute, rule, regulation or order
which adversely affects the Business or the Purchased Assets;
(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
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5.10. LICENSES AND PERMITS. Attached hereto in Schedule 5.10 is a list
of all federal, state, local and foreign permits, certificates, licenses,
approvals and other authorizations necessary in the conduct of the Business. All
such licenses and permits of Sellers are in full force and effect, and no
violations are or have been recorded in respect thereof, and no proceeding is
pending or threatened to revoke or limit any thereof. Each of the Sellers and
the conduct of the Business is in compliance with all applicable laws, statutes,
ordinances, rules, regulations and order of any federal, foreign, state or local
government and any other government department or agency, and in any judgment,
decision, decree or order of any court of governmental agency, department or
authority.
5.11. TAX MATTERS.
(a) Each of the Sellers has timely filed all federal, state,
local and foreign tax returns and tax reports required to be filed with respect
to the Business with the appropriate governmental agency in all jurisdictions in
which such returns and reports are required to be filed. All such returns and
reports are true, correct and complete, and all amounts shown as owing on them
have been paid, including all interest, penalties, deficiencies and assessments
heretofore levied or assessed against either of the Sellers. Each of the Sellers
has duly withheld, collected and timely paid over, or holds for such payment, to
the proper governmental authorities all taxes required to be withheld or
collected by it. There is no agreement for extension of time of assessment or
payment of any taxes of Sellers. No waiver of any statute of limitations has
been executed by Sellers for any tax year which remains open or unsettled. To
the best knowledge, information and belief of Sellers, there is no examination
or audit pending by the Internal Revenue Service or by any state or local taxing
authority with respect to the tax matters of Sellers. There is no liability for
taxes or any tax deficiency or the existence of any basis from which liability
for taxes or tax deficiency, including interest and penalties, might be asserted
against either of the Sellers for any period in excess of the applicable reserve
for taxes, if any, and neither of the Sellers has any knowledge of any such
liability or deficiency or the existence of any basis therefor.
(b) All federal, state, local and foreign income, profits,
franchise, sales, use, occupation, property, excise and other taxes (including
interest and penalties), if any, payable by Sellers or relating to or chargeable
against the Purchased Assets or chargeable against Sellers' revenue or income
have been fully paid or are not past due and are fully disclosed and accrued on
the books and records of Sellers and the proper amount of reserves exist for the
payment thereof.
5.12. DISCLOSURES. No representation or warranty made by Sellers, or
either of them, in this Agreement, and no statement made in any Schedule,
exhibit, certificate or other writing delivered or to be delivered in connection
with the transactions contemplated hereby contains or will contain any untrue
statement of a material fact, or omits or will omit any statement of a material
fact necessary to make the statements contained herein or therein not
misleading.
5.13. LITIGATION. There are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of Sellers' knowledge, any
threats against or affecting Sellers, the Purchased Assets or the Business, at
law or in equity, before any court, arbitration panel, tribunal or governmental
department, commission, board, bureau, agency or instrumentality.
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5.14 SUBSCRIBERS. Attached hereto on Schedule 5.14 is a true, accurate
and complete list as of the date hereof of all Subscribers who have purchased
DSS(TM) equipment on time from Sellers and Sellers' actual cost of DSS(TM)
equipment sold on time to such Subscribers.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Sellers to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents and warrants to Sellers
as follows:
6.1. ORGANIZATION. Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Georgia,
with all requisite power to own and operate its business as it is now conducted.
As of the Closing Date, Purchaser shall have the right to transact business as a
foreign limited partnership in the State of South Carolina.
6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding on the part of any
other party is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser, and constitutes, and each of the other
agreements to be executed pursuant to the terms hereof upon execution and
delivery will constitute, a legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other document related hereto by Purchaser
and the consummation by Purchaser of all of the transactions contemplated hereby
or thereby will not (with or without the giving of notice or the lapse of time
or both) (i) violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in the termination
of, accelerate the performance required by, result in the breach of, constitute
a default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Purchaser is a party; (iii) require any consent or
approval by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's certificate of
limited partnership or limited partnership agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any Schedule, exhibit, certificate or
other writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
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ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Sellers shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use their best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(d) maintain their Records in accordance with prior practice,
maintain the Purchased Assets and the inventory in their present condition,
ordinary wear and tear excepted, consistent with past practice, and otherwise
use their best efforts to operate the Business as currently operated and in the
ordinary course in accordance with practices during the twelve (12) months
preceding the date of this Agreement;
(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets or inventory, except for sales or
dispositions of inventory in the ordinary course of business;
(f) use their best efforts to preserve intact the current
business organization and relationships with employees, suppliers, advertisers,
Customers and other Persons having dealings with Sellers with respect to the
Business;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTv;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTv;
(i) provide to Purchaser, promptly upon receipt thereof by
Sellers, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC Agreements, and (ii) copies of
all protests, complaints, challenges or other documents submitted to or filed
with the NRTC or DirecTv by third parties concerning the Business and, promptly
upon the filing or making thereof, copies of Sellers' responses thereto; and
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(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against either of the Sellers in any
court, or any action against either of the Sellers before any governmental
agency, and notify Purchaser in writing promptly upon receipt of any
administrative or court order relating to the Business. Without limiting the
generality of the foregoing, neither of the Sellers shall take any of the
actions (over which Sellers can exercise control) listed in Section 5.9 herein.
7.2. ACCESS.
(a) Prior to the Closing, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Sellers, their Records and the Business as Purchaser deems
necessary or advisable and shall have full access to the auditors and attorneys
of Sellers. Sellers shall permit Purchaser and its employees, agents and
representatives, on reasonable notice, to have access to their premises,
personnel and Records relating solely to the Business. Sellers shall cooperate
to provide access to their Customers, suppliers, lenders and such other parties
as Purchaser may reasonably request. Sellers shall, and shall cause their
officers, attorneys and accountants to, furnish Purchaser with such financial
and operating data and other information as Purchaser from time to time shall
reasonably request, including, but not limited to, Sellers' balance sheets for
the Business as of December 31, 1995 and June 30, 1996. No investigation by
Purchaser shall in any way affect or otherwise diminish the representations,
warranties and covenants of Sellers hereunder.
(b) Purchaser will hold, and will cause its authorized
representatives (including investors and lending institutions) to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or official request or by other requirements of law, all documents and
information concerning Sellers and the Business furnished to Purchaser in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
Purchaser, (ii) in the public domain through no fault of Purchaser, or (iii)
later lawfully acquired by Purchaser from other sources) and will not release or
disclose such information to any other Person, except its auditors, attorneys,
financial advisors and other consultants and advisors and lending institutions
(including banks) in connection with this Agreement, it being understood that
such Persons shall be informed by such party of the confidential nature of such
information and shall be directed by such party and shall have agreed to treat
such information as confidential. In the event that the transactions
contemplated herein are not consummated for any reason, Purchaser will promptly
return to Sellers all copies of any Schedules, statements, documents or other
written information obtained in connection herewith, without retaining any
copies or summaries thereof, and shall maintain such confidence except to the
extent such information comes into the public domain through no fault of
Purchaser.
7.3. CONSENT OF NRTC, DIRECTV AND OTHERS. Within five (5) business days
after the date of this Agreement, Purchaser shall cause its counsel to prepare
and deliver to Sellers' counsel (i) a request for the consent of the NRTC and
DirecTv to the transfer of the NRTC Agreements, (ii) a request for the consent
of the NRTC and DirecTv to the Collateral Assignment, (iii) a request of the
NRTC to provide to the members and affiliates of the NRTC who are providing DBS
Services under agreements with the NRTC a written summary of the HCG Agreement
(the "HCG Agreement Summary"), (iv) a request of the NRTC to confirm that, in
the event the NRTC exercises its right to acquire DBS Services from successor
satellites
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launched by HCG, (a) those NRTC members and affiliates who at the time of such
exercise are providing DBS Services pursuant to agreements then in effect with
the NRTC would be afforded the right to continue to provide DBS Services to the
specific residences listed or the specific geographic areas described in such
members' or such affiliates' agreement as then in effect immediately prior to
the expiration thereof in accordance with its terms, and (b) such right will be
afforded on a non-discriminatory basis as between such members and affiliates,
and (v) such other requests for consent that Purchaser determines may be
necessary or appropriate to consummate the transactions contemplated hereby.
After review by Sellers' counsel, but in any event within ten (10) business days
after the date of this Agreement, Sellers and Purchaser shall join in and
deliver the requests for such consents, and they will each diligently take all
steps necessary or desirable to obtain such consents. The failure of any of the
parties to timely file or diligently seek the consents, or to cooperate fully
with any of the other parties with respect thereto, shall be deemed a material
breach of this Agreement. Purchaser acknowledges and agrees that Sellers cannot
ensure or otherwise guarantee that the NRTC will provide the HCG Agreement
Summary referred to in clause (iii) above or the confirmation of the NRTC
referred to in clause (iv) above.
7.4. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Sellers and Purchaser shall
mutually agree in advance as to timing, form and content before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to reaching mutual agreement, except as may be
required by law. In the event that prior to the Closing Date either party is
required by law to make a statement with respect to the transactions
contemplated herein, such party shall notify the other party in writing as to
the timing, form and content of such statements. Sellers and Purchaser agree to
maintain the confidentiality of this Agreement and the terms hereof and any
information exchanged by the parties in connection with the consummation of the
transaction contemplated hereby.
7.5. BEST EFFORTS. Subject to the terms and conditions herein provided,
Sellers and Purchaser agree to use their best efforts to take, execute,
acknowledge and deliver, or cause to be taken, executed, acknowledged and
delivered, all actions, deeds, assignments, documents, instruments, transfers,
conveyances, discharges, releases, assurances and consents, and to do, or cause
to be done, all things necessary, proper or advisable under this Agreement and
all applicable laws and regulations to consummate, confirm, perfect, evidence
and otherwise make effective the transactions contemplated by this Agreement,
including actions necessary to obtain all requisite assignments of agreements
and contracts, and to fulfill the requirements of Articles VIII and IX hereof on
or prior to the Closing Date.
7.6. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Sellers will refrain, and will cause all of their
agents and employees to refrain, from taking, directly or indirectly, any action
to encourage, initiate, solicit or continue any discussions or negotiations
with, or any other offers from, any other Person concerning a merger, sale of
substantial stock or any similar transaction concerning Sellers which would
affect the Business, or the sale of the Purchased Assets or any portion thereof.
7.7. RECORDS. Purchaser shall make available to Sellers such
documentation, back- up, invoices, NRTC reports and other books and records
relating to the Business during the ninety (90) day period after the Closing
Date and thereafter as Sellers may reasonably request.
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7.8 RATES. Purchaser covenants and agrees that it shall not increase
prices to Subscribers existing as of the Closing Date with respect to DirecTv
programming packages (i.e. Total Choice, Economy Choice and Choice) during the
six (6) month period following the Closing Date unless such increase is
necessary to maintain Purchaser's gross margin of at least 52% on these
packages.
7.9 DSS(TM) EQUIPMENT LEASES. Purchaser covenants and agrees after the
Closing Date to offer each Subscriber who has purchased DSS(TM) equipment on
time from Sellers at any time on or prior to September 30, 1996, the right to
purchase such equipment for One Hundred Dollars ($100).
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Sellers, or either of them, contained in this
Agreement, and all representations and warranties set forth in any Schedule or
exhibit attached hereto, shall have been true, complete and correct when made
and as of the Closing Date, without the necessity of any material amendment or
modification, with the same force and effect as if made as of the Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Sellers, or either of them, on or
before the Closing Date pursuant to the terms hereof shall have been duly
performed or complied with on or before the Closing Date.
8.3. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the financial condition, Business, assets, results of
operations or prospects of Sellers or the Purchased Assets.
8.4. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.5. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Sellers in connection with the Closing including, without limitation,
NRTC and DirecTv consent as provided for in Section 7.3 herein, shall have been
duly obtained by Sellers and shall be in full force and effect without
conditions which are materially adverse to Purchaser.
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8.6. SUBSCRIBERS. On the Closing Date, Sellers shall have at least
1,770 Subscribers.
8.7. REVIEW OF SELLERS. Purchaser shall have completed its due
diligence investigation covering (i) the Business as provided for in Section 7.2
herein, (ii) the terms and provisions of the HCG Agreement as reflected in the
HCG Agreement Summary, and (iii) the rights Purchaser will be afforded to
provide DBS Services to the Locations after the expiration of the NRTC/Member
Agreement, and no fact or circumstance shall have come to the attention of
Purchaser as a result of such investigation which in the exercise of Purchaser's
reasonable judgement materially and adversely affects the business, prospects or
financial condition of the Business, including the prospects of the Business
after the expiration of the NRTC Agreements.
8.8. CLOSING OF PEEDEE ELECTRICOM, INC. ACQUISITION. An affiliate of
Purchaser shall have purchased from PeeDee Electricom, Inc. NRTC System No.
0001.
8.9. SELLERS' CLOSING DELIVERIES. Sellers shall have delivered to
Purchaser the following at Closing:
(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) all Records or copies of the Records which Purchaser may
reasonably request;
(c) a certified copy of Resolutions of the Board of Directors
of each of the Sellers and each of the Seller's shareholders authorizing the
execution, delivery and performance of this Agreement;
(d) a certificate of good standing of each of the Sellers from
the Secretary of State of South Carolina;
(e) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or otherwise addressed to
Purchaser's satisfaction;
(f) a list of the Accounts Receivable from all Customers
(Reports 18A and 19A) and a list of the Unearned Revenue (Report 17) each as of
the NRTC billing period ending immediately prior to the Closing Date;
(g) a list of all Subscribers who have purchased DSS(TM)
equipment on time from Sellers through September 30, 1996 and Sellers' actual
cost of DSS(TM) equipment sold on time to such Subscribers;
(h) a certificate signed by each of the Seller's presidents,
dated the Closing Date, to the effect that the conditions set forth in this
Article VIII have been satisfied;
(i) an opinion of Thomas E. Smith, Jr., counsel to Sellers, in
form and substance reasonably acceptable to Purchaser;
17
<PAGE> 20
(j) a certificate signed by each of the Seller's presidents,
dated the Closing Date, regarding the transfer of each of the Seller's accounts
at Huntington Bank; and
(k) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Sellers' satisfaction of each of their obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
Sellers' obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Sellers), on or before the Closing Date, of each of the following conditions
precedent:
9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in Section 7.3 herein) shall have been
duly obtained by Purchaser and shall be in full force and effect without
conditions which are materially adverse to Sellers.
9.5. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Sellers the following at Closing:
(a) the Closing Payment;
(b) the Note and the Security Agreement duly executed by
Purchaser;
(c) the Collateral Assignment executed and delivered by
Purchaser and consented to by the NRTC and DirecTv;
18
<PAGE> 21
(d) a certified copy of Resolutions of the general partner of
Purchaser authorizing the execution, delivery and performance of this Agreement;
(e) a certificate signed by Purchaser's general partner, dated
the Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied;
(f) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Purchaser, in form and substance reasonably acceptable to Sellers;
(g) a certificate signed by Purchaser's general partner, dated
the Closing Date, regarding the transfer of each of the Seller's accounts at
Huntington Bank; and
(h) such other documents and instruments as may be reasonably
requested and satisfactory to Sellers and its counsel in connection with
Purchaser's satisfaction of each of its obligations hereunder.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by any party to this Agreement or pursuant hereto shall
survive the Closing of the transactions hereunder. The representations and
warranties hereunder shall not be affected or diminished by any investigation at
any time by or on behalf of the party for whose benefit such representations and
warranties were made. All statements contained herein or in any Schedule,
exhibit, certificate, list or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Each of the Sellers, jointly and
severally, and its representatives, successors, heirs and assigns shall
indemnify, reimburse and hold Purchaser and each of its partners, subsidiaries,
affiliates, successors, assigns and agents harmless from, against, for and in
respect of any and all damages, losses, settlement payments, obligations,
liabilities, claims, demands, actions or causes of action, judgments,
encumbrances, costs and expenses (including reasonable attorneys' fees)
(collectively, the "Indemnifiable Damages") relating to, resulting from or
arising out of (i) any misrepresentation, untruth, inaccuracy, breach or
nonfulfillment of any representation, warranty, agreement or covenant of either
of the Sellers contained in or made in connection with this Agreement or in any
Schedule, exhibit, certificate or other document delivered pursuant hereto, (ii)
the failure of either of the Sellers to pay, perform or discharge promptly when
due any of their obligations, liabilities and debts except as provided under
this Agreement, (iii) any liability or obligation relating to the operation of
the Business prior to the Closing Date, (iv) any breach or default prior to the
Closing Date by either of the Sellers under any of the NRTC Agreements, (v) any
state or local sales, use, excise, personal property or similar tax liability
(including penalties and interest) of either of the Sellers, and (vi) any other
liabilities, obligations or claims, whether absolute or contingent, known or
unknown, matured or unmatured and not expressly assumed by Purchaser hereunder.
19
<PAGE> 22
10.3. INDEMNIFICATION OF SELLERS. Subject the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Sellers and each of
their shareholders, subsidiaries, affiliates, officers and directors harmless
from, against, for and in respect of any and all Indemnifiable Damages relating
to, resulting from or arising out of (i) any misrepresentation, untruth,
inaccuracy, breach or nonfulfillment of any representation, warranty, agreement
or covenant of Purchaser contained in or made in connection with this Agreement
or in any Schedule, exhibit, certificate or other document delivered pursuant
hereto, (ii) the failure of Purchaser to pay, perform or discharge promptly when
due (a) its obligations set forth in Section 4.2 herein, or (b) the Current
Liabilities, (iii) the assertion against Sellers of any liability or obligation
relating to Purchaser's operation of the Business after the Closing Date, and
(iv) any breach or default after the Closing Date by Purchaser under the NRTC
Agreements.
10.4. RIGHT TO CONTEST.
(a) If any party entitled to indemnification hereunder (the
"Indemnified Party") receives notice or has knowledge of any claim for which it
believes the other party hereto is obligated to provide indemnification pursuant
to Sections 10.2 or 10.3 herein (the "Indemnifying Party"), the Indemnified
Party shall notify the Indemnifying Party in writing of such claim within twenty
(20) days of its receipt of same (the "Indemnification Claim"). The
Indemnification Claim shall set forth a brief description of the facts giving
rise to such a claim and the amount (or reasonable estimate) of the
Indemnifiable Damages suffered or which may be suffered by the Indemnified
Party. The Indemnified Party shall, at the expense of the Indemnifying Party,
provide all information regarding the contest or defense of the claim and
cooperate fully with the Indemnifying Party in the conduct of any such contest
or defense. Before being required to make any payment pursuant to Sections 10.2
or 10.3 herein, the Indemnifying Party may, at its own expense, elect to
undertake and control the defense of, and take all necessary steps properly to
contest any claim in respect thereof involving third parties or to prosecute
such claim to conclusion or settlement satisfactory to the Indemnified Party. If
the Indemnifying Party makes the foregoing election, then the Indemnified Party
shall have the right to participate, at its own expense, in all proceedings but
shall not admit any liability, settle, compromise, pay or discharge the claim
without the prior written consent of the Indemnifying Party. If the Indemnifying
Party does not make such election, it shall be obligated to pay the costs of
defending or prosecuting such claim and shall be bound by whatever result is
obtained by the Indemnified Party respecting such claim.
(b) Except as herein expressly provided, the remedies provided
in this Article X shall be cumulative and shall not preclude assertion by any
party of any other rights or the seeking of any other remedies against any other
party hereto.
10.5. PURCHASER'S RIGHT OF OFFSET. Purchaser shall have the right, at
its sole discretion, to offset, on a dollar-for-dollar basis, against any and
all amounts due Satellite pursuant to the Note any amounts due to Purchaser from
Sellers pursuant to this Agreement, including, without limitation, Indemnifiable
Damages due pursuant to Section 10.2, adjustments pursuant to Section 4.3(d) and
any other amounts due from either of the Sellers pursuant to any other provision
hereof (the "Right of Offset"). Before exercising its Right of Offset, Purchaser
shall provide written notice of its intent to exercise such right.
20
<PAGE> 23
10.6. SELLERS' RIGHT OF OFFSET. Sellers shall have the right, at their
sole discretion, to offset, on a dollar-for-dollar basis, against any and all
amounts due Purchaser pursuant to the transactions contemplated by this
Agreement any amounts due to Sellers from Purchaser pursuant to this Agreement,
including, without limitation, Indemnifiable Damages due pursuant to Section
10.3, adjustments pursuant to Section 4.3(d) and any other amounts due from
Purchaser pursuant to any other provision hereof. Before exercising such right
of offset, Sellers shall provide written notice of their intent to exercise such
right.
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
To Purchaser: Digital Television Services of
South Carolina II, LP
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Sellers: Santee Satellite Systems, Inc.
Post Office Box 548
Kingstree, South Carolina 29556
Attn: Ed Whetsell
Santee Electric Cooperative, Inc.
Post Office Box 1164
Kingstree, South Carolina 29556
Attn: Ed Whetsell
21
<PAGE> 24
with a copy to: Thomas E. Smith, Jr., Esq.
512 South Walnut Street
Post Office Box 308
Pamplico, South Carolina 29583
11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
South Carolina, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns, if any, of the parties hereto. Except as
otherwise expressly provided herein, nothing expressed or implied herein is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto, any right or remedy hereunder or by reason hereof. This
Agreement may not be assigned by Purchaser (except to a party which, directly or
indirectly is controlled by, controls or is under common control with,
Purchaser) or Sellers without the prior written consent of the other party.
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules
attached hereto constitute the entire agreement and understanding of the parties
in respect of the transactions contemplated hereby and supersede all prior
correspondence, conversations, agreements, arrangements, understandings and
other writings. No promises, covenants or representations of any character or
nature other than those expressly stated herein have been made to induce either
party to enter into this Agreement. This Agreement may be amended or modified
only by a written instrument signed by Purchaser and Sellers.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives. Purchaser shall pay up to Five
22
<PAGE> 25
Hundred Dollars ($500) of any transfer fee due the NRTC in connection with the
transfer of the NRTC Agreements and any out of pocket fees and expenses of the
NRTC due in connection therewith.
11.10. KNOWLEDGE OF SELLERS. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Sellers confirm that they have made or caused to be made due and diligent
inquiry as to the matters that are the subject of such representations and
warranties.
11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Sellers, (ii) either party upon written
notice to the other party if the Closing has not occurred on or before the
Termination Date, (iii) Sellers if the covenants and conditions set forth in
Articles VII and IX required to be complied with or performed by Purchaser have
not been complied with or performed by Purchaser and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the sixtieth (60th) day
following written notice thereof from Sellers; provided that Sellers have not
defaulted in any material respect with respect to any of its obligations
hereunder, (iv) Purchaser if the covenants and conditions set forth in Articles
VII and VIII (other than Section 8.7) required to be complied with and performed
by Sellers have not been complied with or performed by Sellers and such
noncompliance and nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Sellers on or before the sixtieth
(60th) day following written notice thereof from Purchaser; provided that
Purchaser shall not have defaulted in any material respect with respect to any
of its obligations hereunder, or (v) Purchaser if the conditions set forth in
Section 8.7 required to be complied with and performed by Sellers have not been
complied with or performed by Sellers on or prior to December 31, 1996; provided
that Purchaser shall not have defaulted in any material respect with respect to
any of its obligations hereunder.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i) or (ii), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
(c) In the event of termination pursuant to Section 11.13(a)(iii),
Sellers shall be entitled to recover from Purchaser all damages, losses, costs
and expenses (including reasonable attorneys' fees) provided by law.
23
<PAGE> 26
(d) In the event of termination pursuant to Section 11.13(a)(iv),
Purchaser shall be entitled to recover from Sellers all damages, losses, costs
and expenses (including reasonable attorneys' fees) provided by law.
(e) In the event of termination pursuant to Section 11.13(a)(v),
Purchaser recognizes that Sellers would be damaged, the extent to which is
extremely difficult and impractical to ascertain. The parties, therefore, agree
that if this Agreement is terminated pursuant to Section 11.13(a)(v), Sellers
shall be entitled to the sum equal to Sellers' actual costs and expenses
(including attorneys' fees) incurred in connection with the transactions
contemplated by this Agreement, but in no event shall such sum exceed $50,000.
The parties agree that this sum shall constitute liquidated damages and shall be
in lieu of any and all other relief to which Sellers might otherwise be entitled
due to Purchaser's failure to consummate, or Purchaser's default under, this
Agreement.
11.14. POWER OF ATTORNEY. Each of the Sellers hereby irrevocably
appoints Purchaser, and all agents, officers, and employees designated by
Purchaser, as its true and lawful attorney-in-fact and duly authorized agent for
the period from and after the Closing Date to:
(i) open each of the Seller's mail and endorse and collect any
checks, notes, drafts or any other items payable to either of the
Sellers from Subscribers or otherwise issued in connection with the
Business, and deposit same to the account of Purchaser in any
depository institution;
(ii) sign receipts and other papers necessary for the
collection of any and all amounts due from Subscribers;
(iii) notify Subscribers that the accounts have been assigned
to Purchaser; and
(iv) direct such Subscribers to make all payments due from
them directly to Purchaser.
Purchaser shall furnish Sellers with a copy of any notice issued pursuant to
Sections 11.14(iii) or (iv) above and each of the Sellers hereby agrees that any
such notice shall be sent on Sellers' stationary, in which event Sellers shall
co-sign such notice with Purchaser, all at Purchaser's sole cost and expense.
SELLERS DO HEREBY RATIFY AND CONFIRM ALL THINGS DONE BY PURCHASER
WITHIN THE SCOPE OF THE AUTHORITY HEREIN GIVEN AS FULLY AND TO THE SAME EXTENT
AS IF DONE BY SELLERS PERSONALLY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of South Carolina II, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
---------------------------------
Douglas S. Holladay, Jr., President and
Manager
SATELLITE:
Santee Satellite Systems, Inc.
By:
---------------------------------
Ed Whetsell, President
SANTEE:
Santee Electric Cooperative, Inc.
By:
---------------------------------
Ed Whetsell, President
25
<PAGE> 1
EXHIBIT 10.10(b)
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this
"Amendment") is made as of November 4, 1996 by and among Digital Television
Services of South Carolina II, LP, a Georgia limited partnership ("Purchaser"),
Santee Satellite Systems, Inc., a South Carolina corporation ("Satellite") and
Santee Electric Cooperative, Inc., a South Carolina cooperative association
("Santee")(Satellite and Santee are hereinafter collectively referred to as
"Sellers").
RECITALS
Purchaser and Sellers entered into an Asset Purchase Agreement dated as
of October 5, 1996 (the "Agreement"). Capitalized terms used herein which are
not otherwise defined shall have the meaning set forth in the Agreement.
Purchaser and Sellers have determined that it is in their mutual best interest
to amend the Agreement in accordance with Section 11.8 thereof.
TERMS OF AMENDMENT
Purchaser and Sellers agree as follows:
1. AMENDMENT TO SECTION 7.3. Section 7.3 shall be deleted in its
entirety and the following new Section 7.3 shall be inserted in lieu thereof:
"7.3. CONSENT OF NRTC, DIRECTV AND OTHERS. Sellers and
Purchaser shall join in and deliver the requests for the consent of the NRTC and
DirecTv to the transfer of the NRTC Agreements, and such other requests for
consent that Purchaser reasonably determines may be necessary or appropriate to
consummate the transactions contemplated hereby, and they will each diligently
take all steps necessary or desirable to obtain such consents. The failure of
either of the parties to timely file or diligently seek the consents, or to
cooperate fully with the other party with respect thereto, shall be deemed a
material breach of this Agreement."
2. AMENDMENT TO ARTICLE VIII. Section 8.7 shall be deleted in its
entirety. Sections 8.8 and 8.9 shall be renumbered 8.7 and 8.8 respectively.
3. AMENDMENT TO SECTION 11.13. (i) Section 11.13(a) shall be deleted in
its entirety and the following new Section 11.13(a) shall be inserted in lieu
thereof:
"(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Sellers, (ii) either party upon written
notice to the other party if the Closing has not occurred on or before the
Termination Date, (iii) Sellers if the covenants and conditions set forth in
Articles VII and IX required to be complied with or performed by Purchaser have
not been complied with or performed by Purchaser and such noncompliance and
<PAGE> 2
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the sixtieth (60th) day
following written notice thereof from Sellers; provided that Sellers have not
defaulted in any material respect with respect to any of its obligations
hereunder, or (iv) Purchaser if the covenants and conditions set forth in
Articles VII and VIII required to be complied with and performed by Sellers have
not been complied with or performed by Sellers and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Sellers on or before the sixtieth (60th) day
following written notice thereof from Purchaser; provided that Purchaser shall
not have defaulted in any material respect with respect to any of its
obligations hereunder."
(ii) Section 11.13(e) shall be deleted in its entirety.
4. AMENDMENT OF SCHEDULE 4.2(d). Schedule 4.2(d) shall be deleted in
its entirety and the Schedule 4.2(d) attached hereto shall be inserted in lieu
thereof.
5. MODIFICATION. Except as modified hereby, the terms and conditions of
the Agreement shall remain in full force and effect.
6. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of South Carolina, without regard to the
choice of law provisions thereof.
7. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each which shall be deemed an original but all which shall
constitute one in the same Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 3
IN WITNESS WHEREOF, Purchaser and Sellers have executed this Amendment
as of this date first set forth above.
PURCHASER:
Digital Television Services of South Carolina II, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
------------------------------------
Douglas S. Holladay, Jr., President
and Manager
SELLERS:
SATELLITE:
Santee Satellite Systems, Inc.
By:
------------------------------------
Ed Whetsell, President
SANTEE:
Santee Electric Cooperative, Inc.
By:
------------------------------------
Ed Whetsell, President
3
<PAGE> 1
EXHIBIT 10.11(a)
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF OCTOBER 28, 1996
BY AND BETWEEN
DIGITAL TELEVISION SERVICES OF KENTUCKY, LP
AND
DIRECT PROGRAMMING SERVICES LIMITED PARTNERSHIP
================================================================================
<PAGE> 2
LIST OF SCHEDULES
Schedule 1.1 Escrow Agreement
Schedule 1.2 Fixed Assets (Disclosure Schedules)
Schedule 1.3 Locations (Disclosure Schedules)
Schedule 1.4 NRTC/Member Agreement (Disclosure Schedules)
Schedule 1.5 NRTC/Retail Agreement (Disclosure Schedules)
Schedule 1.6 Other Assumed Agreements (Disclosure Schedules)
Schedule 2.1(a) Assignment and Assumption Agreement
Schedule 2.1(b) Bill of Sale
Schedule 4.5 Allocation of Purchase Price
Schedule 5.2(b) Consent of Seller (Disclosure Schedules)
Schedule 5.3(a) Liens (Disclosure Schedules)
Schedule 5.4 Fixed Assets Needing Repairs (Disclosure Schedules)
Schedule 5.5(e) Suspended DBS Services (Disclosure Schedules)
Schedule 5.5(f) Customers and Suppliers (Disclosure Schedules)
Schedule 5.9 Changes or Events (Disclosure Schedules)
Schedule 5.10 Licenses and Permits (Disclosure Schedules)
Schedule 6.2(b) Consent of Purchaser (Disclosure Schedules)
Schedule 8.7 Noncompetition Agreement
[Schedules have been omitted and will be furnished upon request]
<PAGE> 3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 28th day of October, 1996, by and between Digital Television
Services of Kentucky, LP, a Georgia limited partnership ("Purchaser"), and
Direct Programming Services Limited Partnership, a Kentucky limited partnership
("Seller").
RECITALS
1. Seller owns and operates the National Rural Telecommunications
Cooperative's System No. 1013 (the "System") for the exclusive distribution in
certain areas in the State of Kentucky (the "Locations") of DBS Services offered
by DirecTv (the "Business").
2. Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser all of Seller's rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations, any residual rights of Seller
as a member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements and certain of the assets used in
the Business, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, Seller and
Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Seller to the
NRTC as of the Closing Date relating to the Business; including, without
limitation, accounts payable to the NRTC with respect to wholesale bills,
equipment and other services.
"Accounts Receivable" shall mean all of the accounts receivable of
Seller as of the Closing Date for all Customers, as determined in accordance
with GAAP except as modified hereby.
"Additional Deposit" shall mean the Ten Million Dollars ($10,000,000)
which may be deposited by Purchaser with the Escrow Agent in addition to the
Binder and the Signing Deposit.
"Binder" shall mean the Two Hundred Fifty Thousand Dollars ($250,000)
Purchaser deposited with Seller on October 1, 1996 as a good faith binder to
proceed with the transactions contemplated by this Agreement.
<PAGE> 4
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"Cash" shall mean all cash in Seller's bank accounts at Huntington Bank
as of the Closing Date.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Nelson Mullins Riley
& Scarborough, L.L.P., 100 North Tryon Street, Suite 3350, Charlotte, North
Carolina, 28202 (i) at Purchaser's election, on (a) the last business day of the
month in which all of the conditions precedent set forth in Articles VIII and IX
herein have been satisfied or waived, or (b) the calendar day of such month on
which NRTC's accounting period closes, or (c) at any time on or after November
29, 1996 but prior to January 4, 1997 if Purchaser has delivered to the Escrow
Agent the Additional Deposit as contemplated by Section 4.2 below or (ii) such
other date or at such other time or place (including via mail, overnight courier
or facsimile transmission) as the parties may mutually agree upon in writing.
The Closing shall be as effective as of the close of business on the Closing
Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Coop Residuals" shall mean all amounts due (whether now or in the
future) the parties listed in Items 33 through 38 (inclusive) of Schedule 1.6 of
the Disclosure Schedules and all other cooperative associations located in
Kentucky from Seller as a result of the activation of Subscribers prior to
December 31, 1996.
"Current Assets" shall mean Cash, Accounts Receivable, Inventory (if
purchased pursuant to Section 4.4(b) hereof) and Prepaid Expenses of Seller,
which will be acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Seller which will be assumed by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased telecommunications services, or entered into a binding agreement to
purchase telecommunications and related services, from Seller at any time during
the five (5) year period immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTv" shall mean DirecTv, Inc., a California corporation, the
successor in interest and rights holder to HCG.
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"Disclosure Schedules" shall mean the disclosure schedules delivered by
Seller to Purchaser pursuant to the terms of this Agreement.
"Escrow Agent" shall mean Union Bank of California, N.A., a national
banking association with offices in San Francisco, California.
"Escrow Agreement" shall mean the Escrow Agreement dated as of the date
hereof among the Escrow Agent, Purchaser and Seller which Escrow Agreement shall
be substantially in the form attached hereto as Schedule 1.1.
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, any MTE terminals and demonstration units owned
by Seller and used or useable in connection with the Business, which equipment
and tangible assets are listed on Schedule 1.2 of the Disclosure Schedules.
"Franchise" shall mean any residual rights of Seller, if any, as a
member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"HCG" shall mean Hughes Communications Galaxy, Inc.
"HCG Agreement" shall mean the agreement and all amendments which the
NRTC has entered into with HCG in which the NRTC has obtained the rights to
distribute through its members and affiliates certain DBS Services to rural
America.
"Inventory" shall mean any DSS(TM) subscriber equipment of Seller held
for resale which Purchaser notifies Seller pursuant to Section 4.4(b) hereof it
desires to purchase pursuant to this Agreement, which Inventory shall be valued
at each item's original cost.
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
"Locations" shall mean the counties and certain other areas in the
State of Kentucky set forth on Schedule 1.3 of the Disclosure Schedules in which
Seller has the exclusive right to distribute DBS Services pursuant to the NRTC
Agreements.
"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
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"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated December 18, 1992 by and
between the NRTC and Seller, as amended by that certain Amendment as of March
24, 1994 and as may be further amended from time to time, together with all
schedules and exhibits thereto, a copy of which is attached as Schedule 1.4 of
the Disclosure Schedules.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement dated October 8, 1993 by and between the NRTC and Seller, as amended
from time to time, together with all schedules and exhibits thereto, a copy of
which is attached as Schedule 1.5 of the Disclosure Schedules.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.6 of the Disclosure Schedules, including any
contracts and agreements with DirecTv, copies of which are attached to such
Schedule.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
"Prepaid Expenses" shall mean (i) all amounts not in excess of Seventy
Thousand Dollars ($70,000) which were paid by Seller to Subscribers during the
period from September 1, 1996 through the Closing Date in connection with
DirecTv's "$200 Cash Back" promotional offer, (ii) all amounts not in excess of
Thirty-Nine Thousand Dollars ($39,000) incurred by Seller in connection with the
equipment promotion to be held in three (3) Kentucky counties on November 2,
1996, (iii) all amounts not in excess of Twenty-Five Thousand Dollars ($25,000)
incurred by Seller after the date hereof in connection with newspaper and print
advertising featuring Rick Pitino, and (iv) all prepaid property taxes, prepaid
supplies, advances, deposits, deferred charges and other prepaid expenses (other
than prepaid insurance) shown on Seller's books and records as of the Closing
Date relating to the Business which Prepaid Expenses can be credited to
Purchaser's account after the Closing Date, as determined in accordance with
GAAP.
"Programming" shall mean Cable Programming and any programming provided
DirecTv pursuant to the NRTC Agreements.
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
"Purchased Assets" shall mean only the (i) NRTC Agreements, (ii)
Franchise, (iii) Current Assets, (iv) relationships, contracts and accounts with
Customers, (v) Fixed Assets, (vi) Records, (vii) telephone numbers used in the
Business and (viii) all other assets of Seller, whether tangible or intangible,
used in connection with the Business.
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"RCA Residuals" shall mean all amounts due (whether now or in the
future) the parties listed in Items 39 through 62 (inclusive), 65, 66, 68 and 70
of Schedule 1.6 of the Disclosure Schedules as a result of the activation of
Subscribers prior to the Closing Date.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Seller in the Locations, including, without
limitation, copies of Customer and prospective customer lists, computer
programs, tapes and electronic data processing software, accounting journals and
ledgers, accounts receivable records, and all NRTC reports, correspondence and
other documents relating to the NRTC Agreements and Other Assumed Agreements and
compliance therewith.
"Signing Deposit" shall mean One Million Two Hundred Fifty Thousand
Dollars ($1,250,000) to be deposited by Purchaser with the Escrow Agent on the
date hereof.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i)(a) is an active subscriber subscribing to a package of basic services, or
(b) a subscriber subscribing to a package of basic services that has not been
inactive or disconnected two or more times for more than ten (10) consecutive
days during the immediately preceding twelve (12) month period, (ii) is not an
employee or agent of the service provider or charged a fee that is nominal
(e.g., demonstration unit) or substantially below the service provider's
published rates, and (iii) has not given notice of intent to discontinue
service.
"Survival Termination Date" shall mean fifteen (15) months after the
Closing Date.
"Termination Date" shall mean November 29, 1996; provided, however,
that such date shall be extended until January 3, 1997 if Purchaser has
delivered to the Escrow Agent the Additional Deposit as contemplated by Section
4.2 below.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Seller as of the
Closing Date, as determined in accordance with GAAP.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Seller all of Seller's right, title and interest in and to the Purchased Assets,
free and clear of any and all Liens, on the Closing Date for the consideration
set forth in this Agreement. The sale, transfer, assignment and conveyance of
the Purchased Assets shall be made by the execution and delivery at Closing of
(i) an Assignment and Assumption Agreement substantially in the form attached
hereto as Schedule 2.1(a) (the "Assignment"), and (ii) a bill of sale
substantially in the form attached hereto as Schedule 2.1(b) (the "Bill of
Sale"), and (iii) such other recordable instruments of assignment, transfer and
conveyance as Purchaser shall reasonably request.
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ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLER. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Seller with respect to the following:
(a) the NRTC Agreements (other than the Coop Residuals) to the
extent the obligations therein arise out of the provision of DBS Services to
Customers and accrue on or after the Closing Date;
(b) the RCA Residuals; and
(c) all Current Liabilities as of the Closing Date.
Anything in this Agreement to the contrary notwithstanding,
except for the liabilities specifically set forth in this Section 3.1, Purchaser
shall not assume or be deemed to have assumed under this Agreement, by reason of
the transactions contemplated by this Agreement, or otherwise, any other trade
or other accounts payable, accrued expenses, debts, liabilities (including the
Coop Residuals), obligations or commitments of Seller of any nature whatsoever,
known or unknown, and the execution, delivery and performance of this Agreement
shall not render Purchaser liable for any such debt, liability, obligation or
commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Seller are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Seller under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Seller with or
for the benefit of any employee of Seller; and
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Seller,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution, sale or provision
of any services of Seller, or (ii) any failure or alleged failure to comply with
any federal, state or local law, rule or regulation applicable to Seller or the
Business.
Purchaser agrees to promptly notify Seller of any claims which Purchaser obtains
knowledge of which arise out of or result from liabilities of Seller not assumed
by Purchaser pursuant to this Agreement.
ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be Thirty Million Dollars ($30,000,000), subject to
adjustment as provided in Section 4.4 herein.
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4.2. ESCROW DEPOSIT. Contemporaneously with the execution of this
Agreement, Purchaser has delivered to the Escrow Agent the Signing Deposit and
Seller has delivered to the Escrow Agent the Binder (collectively, the "Escrow
Deposit") to be held by the Escrow Agent pursuant to the Escrow Agreement. In
the event Purchaser desires to extend the Closing Date, on or before November
29, 1996 Purchaser shall deliver to the Escrow Agent the Additional Deposit to
be held by the Escrow Agent pursuant to the Escrow Agreement, in which event the
term "Escrow Deposit" shall include, collectively, the Signing Deposit, the
Binder and the Additional Deposit.
4.3. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Seller as follows:
(a) The Escrow Deposit by certified or cashier's check, or by
wire transfer of immediately available funds to an account or accounts
designated in writing by Seller at least three (3) business days prior to the
Closing Date.
(b) The balance of the Purchase Price, subject to adjustment
as provided for in Section 4.4 herein, by certified or cashier's check, or by
wire transfer of immediately available funds to an account or accounts
designated in writing by Seller (together with the Escrow Deposit, the "Closing
Payment").
4.4. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the Current Assets of Seller and decreased by the
parties' good faith estimate of the Current Liabilities of Seller as of the
Closing Date (the "Closing Adjustment"), which adjustment shall be subject to
final adjustment as provided for in paragraph (c) below.
(b) No later than thirty (30) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Seller shall make and deliver
to Purchaser a balance sheet reflecting the Current Assets and Current
Liabilities of Seller as of the Closing Date (the "Closing Date Balance Sheet"),
prepared on a basis consistent with GAAP. For purposes of the Closing Adjustment
and the Final Closing Adjustment (as hereinafter defined), the amount of
Accounts Receivable of Seller to be included in the Closing Date Balance Sheet
shall include only Accounts Receivable of Subscribers whose accounts are not
more than ninety (90) days past due, less an amount equal to ten percent (10%)
of such Accounts Receivable as a reserve for Accounts Receivable which are not
collectible. In addition, the Closing Date Balance Sheet and the Final Closing
Adjustment shall not include as a Current Asset any DSS(TM) subscriber equipment
leased by Seller to any of its Customers. Purchaser may, by providing Seller
with written notice at least five (5) days prior to the Closing, elect to
purchase all, or certain of, the DSS(TM) subscriber equipment owned by Seller on
the Closing Date. Any such equipment which is purchased by Purchaser shall be
included as Inventory in the Closing Date Balance Sheet. Seller shall make
available to Purchaser its Records so Purchaser may verify the original cost of
the Inventory. Except as set forth in this Section 4.4(b), no other assets or
liabilities shall be included in the Closing Date Balance Sheet. Seller shall
make available to Purchaser such documentation, back-up, invoices, and books and
records of Seller as Purchaser may reasonably request.
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(c) Seller and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Seller and Purchaser are unable to
reconcile such discrepancies, Purchaser shall have fifteen (15) days from
presentment of the Closing Date Balance Sheet by Seller to notify Seller if
Purchaser wishes to have Seller's determination examined. If Purchaser elects to
have Seller's determination examined, it shall be submitted to the determination
in Charlotte, North Carolina, by the Certified Public Accounting firm of Coopers
& Lybrand LLP (or any other independent Certified Public Accounting firm
mutually acceptable to Seller and Purchaser), the cost of such examination to be
paid fifty percent (50%) by Seller and fifty percent (50%) by Purchaser. The
determination by Seller shall be final and binding on the parties unless
Purchaser elects to have an examination as provided herein, in which case the
results of the examination shall be made within thirty (30) days of such
referral, and shall be final and binding on the parties (the "Final Closing
Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Seller shall pay the difference in cash to Purchaser
within five (5) days after the final determination. In the event the Final
Closing Adjustment is greater than the Closing Adjustment, Purchaser shall pay
such excess in cash to Seller within five (5) days after the final
determination. If, following any payment pursuant to this Section 4.4(d), an
error (in billing or reporting by NRTC or otherwise) is thereafter discovered
which would have affected the Final Closing Adjustment, the party in whose favor
the error was made shall immediately pay in cash the amount of such error to the
other party.
4.5. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.5 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller hereby represents and warrants to
Purchaser as follows:
5.1. ORGANIZATION. Seller is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Kentucky,
with all requisite power and authority to own and operate the Business as it is
now conducted and to own the Purchased Assets in the places where the Business
is now conducted and where the Purchased Assets are now owned or operated.
5.2. AUTHORITY.
(a) Seller has full power and authority to execute, deliver
and perform this Agreement and all agreements and transactions contemplated
hereby. The execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly authorized by Seller and, except
for the consent of the NRTC, DirecTv and the other Persons set forth on Schedule
5.2(b) of the Disclosure Schedules, no other action or proceeding on the
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part of any other party is necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Seller and constitutes, and each of the
other agreements to be executed by Seller pursuant to the terms hereof will
constitute upon execution and delivery, a legal, valid and binding obligation of
Seller enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 5.2(b) of the Disclosure Schedules, the execution, delivery
and performance of this Agreement or any document related hereto by Seller and
the consummation by Seller of all of the transactions contemplated hereby or
thereby will not (with or without the giving of notice or the lapse of time or
both) (i) violate or require any consent or approval under any applicable
provision of any judgement, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in termination of,
accelerate the performance required by, result in a breach of, constitute a
default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Seller is a party or by which Seller or any of the
Purchased Assets may be bound or affected; (iii) require any consent or approval
by, notice to or registration with any governmental authority or any other
Person; (iv) conflict with or violate any provision of Seller's certificate of
limited partnership; or (v) result in the creation of a Lien upon any of the
Purchased Assets howsoever arising.
5.3. TITLE TO THE PURCHASED ASSETS.
(a) Seller has good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) of the Disclosure Schedules.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Seller was conducting the Business in the
ordinary course prior to the Closing Date.
5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.2 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Seller in the past, and no
currently needed repairs are reasonably likely to cost, either singularly or in
the aggregate with respect to all Fixed Assets, in excess of Five Thousand
Dollars ($5,000).
5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Schedules 1.4, 1.5 and 1.6 of the Disclosure Schedules are
true and complete copies of each of the NRTC/Member Agreement, the NRTC/Retail
Agreement, and the Other Assumed Agreements, if any, respectively, together with
all amendments, schedules and exhibits thereto. The NRTC/Member Agreement grants
Seller the exclusive right to distribute DBS Services in the Locations, except
as set forth in the NRTC/Member Agreement.
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(b) To the best of its knowledge, Seller has paid all sums to
NRTC or DirecTv, as appropriate, required under the NRTC/Member Agreement such
that Seller is entitled to the marketing and sales revenues as provided therein.
(c) Seller is in full compliance in all material respects with
any and all membership, affiliation, licensing or other requirements or
arrangements as may have been established by NRTC or DirecTv pursuant to the
NRTC Agreements, or otherwise.
(d) Seller is not in breach of the NRTC Agreements, nor has
Seller failed to perform any material obligation under the NRTC Agreements.
Seller has not received notice of any such breach or non-performance at any time
of such NRTC Agreements. To the best of Seller's knowledge, no other party to
any of the NRTC Agreements is in default thereunder or has failed to perform any
material obligation thereunder.
(e) Except as disclosed on Schedule 5.5(e) of the Disclosure
Schedules, none of the DBS Services distributed by Seller have been suspended at
any time since inception.
(f) Schedule 5.5(f) of the Disclosure Schedules (as
supplemented by applicable NRTC reports) sets forth a complete list of names and
addresses of all Customers of Seller, identified as Committed Member Residence
and Commercial Establishment for the five (5) year period immediately preceding
the date hereof. Schedule 5.5(f) includes the number of months such Customer has
been a Customer and whether such Customer's account is past due. Schedule 5.5(f)
will be updated not more than three (3) days prior to the Closing Date. Seller
has obtained and maintained information from each of its Customers regarding the
location of each Customer's descrambler.
5.6. INVENTORY. The Inventory shall be usable in the ordinary course of
business and shall comply in all respects with industry standards of quality and
marketability. The Inventory will not, as of the Closing Date, include any items
below standard quality, obsolete or sub-prime. The Inventory shall consist
solely of undamaged, original units in original, sealed cartons, located at
Seller's principal place of business. Seller owns all of the Inventory free and
clear of any and all Liens and has full power and authority to transfer the
Inventory to Purchaser.
5.7. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business and
none of the Accounts Receivable are subject to any counterclaim or setoff.
5.8. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
5.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9 of the Disclosure Schedules and other than changes or events which
have affected the DBS industry in general, since December 31, 1995 there has not
been:
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(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Seller which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Seller (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
relating to the Business other than obligations or liabilities incurred in the
ordinary course of business and consistent with past practices;
(c) any termination or waiver of any rights of Seller of
material value to the Business or to Seller;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) the adoption of any statute, rule, regulation or order
which adversely affects the Business or the Purchased Assets;
(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
5.10. LICENSES AND PERMITS. Schedule 5.10 of the Disclosure Schedules
is a list of all federal, state, local and foreign permits, certificates,
licenses, approvals and other authorizations necessary in the conduct of the
Business. All such licenses and permits of Seller are in full force and effect,
and no violations are or have been recorded in respect thereof, and no
proceeding is pending or threatened to revoke or limit any thereof. Seller and
its conduct of the Business is in compliance with all applicable laws, statutes,
ordinances, rules, regulations and order of any federal, foreign, state or local
government and any other government department or agency, and in any judgment,
decision, decree or order of any court or governmental agency, department or
authority.
5.11. TAX MATTERS.
(a) Seller has timely filed all federal, state, local and
foreign tax returns and tax reports required to be filed with respect to the
Business with the appropriate governmental agency in all jurisdictions in which
such returns and reports are required to be filed. All such returns and reports
are true, correct and complete, and all amounts shown as owing on them have been
paid, including all interest, penalties, deficiencies and assessments heretofore
levied or assessed against Seller. Seller has duly withheld, collected and
timely paid over, or holds for such payment, to the proper governmental
authorities all taxes required to be withheld or collected by it. There is no
agreement for extension of time of assessment or payment of any taxes of Seller.
No waiver of any statute of limitations has been executed by Seller for any tax
year which remains open or unsettled. To the best knowledge, information and
belief of Seller, there is no examination or audit pending by the Internal
Revenue Service or by any state or local taxing authority with respect to the
tax matters of Seller. There is no liability for taxes or any
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tax deficiency or the existence of any basis from which liability for taxes or
tax deficiency, including interest and penalties, might be asserted against
Seller for any period in excess of the applicable reserve for taxes, if any, and
Seller has no knowledge of any such liability or deficiency or the existence of
any basis therefor.
(b) All federal, state, local and foreign income, profits,
franchise, sales, use, occupation, property, excise and other taxes (including
interest and penalties), if any, payable by Seller or relating to or chargeable
against the Purchased Assets or chargeable against Seller's revenue or income
have been fully paid or are not past due and are fully disclosed and accrued on
the books and records of Seller and the proper amount of reserves exist for the
payment thereof.
5.12. DISCLOSURES. No representation or warranty made by Seller in this
Agreement, and no statement made in the Disclosure Schedules, any Schedule,
exhibit, certificate or other writing delivered or to be delivered in connection
with the transactions contemplated hereby contains or will contain any untrue
statement of a material fact, or omits or will omit any statement of a material
fact necessary to make the statements contained herein or therein not
misleading.
5.13. LITIGATION. There are not actions, suits, proceedings, orders,
investigations or claims pending or, to the best of Seller's knowledge, any
threats against or affecting Seller, the Purchased Assets or its Business, at
law or in equity, before any court, arbitration panel, tribunal or governmental
department, commission, board, bureau, agency or instrumentality.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser hereby represents and warrants to
Seller as follows:
6.1. ORGANIZATION. Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Georgia,
with all requisite power to own and operate its business as it is now conducted.
6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding on the part of any
other party is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser, and constitutes, and each of the other
agreements to be executed pursuant to the terms hereof upon execution and
delivery will constitute, a legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other
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document related hereto by Purchaser and the consummation by Purchaser of all of
the transactions contemplated hereby or thereby will not (with or without the
giving of notice or the lapse of time or both) (i) violate or require any
consent or approval under any applicable provision of any judgment, order, writ,
injunction, decree, rule, regulation or law; (ii) require any consent under,
conflict with, result in the termination of, accelerate the performance required
by, result in the breach of, constitute a default under or otherwise violate the
terms of any agreements, instruments or other obligations to which Purchaser is
a party; (iii) require any consent or approval by, notice to or registration
with any governmental authority or any other Person; or (iv) violate any
provision of Purchaser's certificate of limited partnership or limited
partnership agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in the Disclosure Schedules, any Schedule,
exhibit, certificate or other writing delivered or to be delivered in connection
with the transactions contemplated hereby contains or will contain any untrue
statement of a material fact, or omits or will omit any statement of a material
fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Seller shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use its best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(d) maintain its Records in accordance with prior practice,
maintain the Purchased Assets and the Inventory in their present condition,
ordinary wear and tear excepted, consistent with past practice, and otherwise
use its best efforts to operate the Business as currently operated and in the
ordinary course in accordance with practices during the twelve (12) months
preceding the date of this Agreement;
(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets or Inventory, except for sales or
dispositions of Inventory in the ordinary course of business;
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(f) use its best efforts to preserve intact the current
business organizations and relationships with employees, suppliers, advertisers,
Customers and other Persons having dealings with Seller relating to the
Business;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTv;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTv;
(i) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC Agreements, and (ii) copies of
all protests, complaints, challenges or other documents submitted to or filed
with the NRTC or DirecTv by third parties concerning the Business and, promptly
upon the filing or making thereof, copies of Seller's responses thereto; and
(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against Seller in any court, or any
action against Seller before any governmental agency, and notify Purchaser in
writing promptly upon receipt of any administrative or court order relating to
the Business. Without limiting the generality of the foregoing, Seller shall not
take any of the actions (over which Seller can exercise control) listed in
Section 5.9 herein.
7.2. ACCESS.
(a) Prior to the Closing, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Seller, its Records and the Business as Purchaser deems
necessary or advisable and shall have full access to the auditors and attorneys
of Seller. Seller shall permit Purchaser and its employees, agents and
representatives, on reasonable notice, to have access during normal business
hours to its premises, personnel and Records. Seller shall, and shall cause its
officers, attorneys and accountants to, furnish Purchaser with such financial
and operating data and other information as Purchaser from time to time shall
reasonably request, including, but not limited to, Seller's balance sheets for
the Business as of December 31, 1995 and June 30, 1996. No investigation by
Purchaser shall in any way affect or otherwise diminish the representations,
warranties and covenants of Seller hereunder; provided, however, that Purchaser
shall advise Seller as soon as practicable after it obtains knowledge of any
breach or nonperformance of the representations, warranties or covenants of
Seller.
(b) Purchaser will hold, and will cause its authorized
representatives (including its investors and lending institutions) to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or official request or by other requirements of law, all documents and
information concerning Seller and the Business furnished to Purchaser in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
Purchaser, (ii) in the public domain through no fault of Purchaser, or (iii)
later lawfully acquired by Purchaser from other
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sources) and will not release or disclose such information to any other Person,
except its auditors, attorneys, financial advisors and other consultants and
advisors and lending institutions (including banks) in connection with this
Agreement, it being understood that such Persons shall be informed by such party
of the confidential nature of such information and shall be directed by such
party and shall have agreed to treat such information as confidential. In the
event that the transactions contemplated herein are not consummated for any
reason, Purchaser will, upon request by Seller, promptly return to Seller all
copies of any Schedules, statements, documents or other written information
obtained in connection herewith, without retaining any copies or summaries
thereof, and shall maintain such confidence except to the extent such
information comes into the public domain through no fault of Purchaser.
7.3. CONSENT OF NRTC, DIRECTV AND OTHERS. Seller and Purchaser shall
join in and deliver the requests for the consent of the NRTC and DirecTv to the
transfer of the NRTC Agreements, and such other requests for consent that
Purchaser reasonably determines may be necessary or appropriate to consummate
the transactions contemplated hereby, and they will each diligently take all
steps necessary or desirable to obtain such consents. The failure of either of
the parties to timely file or diligently seek the consents, or to cooperate
fully with the other party with respect thereto, shall be deemed a material
breach of this Agreement.
7.4. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Seller and Purchaser shall
mutually agree in advance as to timing, form and content before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to reaching mutual agreement, except as may be
required by law. In the event that prior to the Closing Date either party is
required by law to make a statement with respect to the transactions
contemplated herein, such party shall notify the other party in writing as to
the timing, form and content of such statements. Seller and Purchaser agree to
maintain the confidentiality of this Agreement and the terms hereof and any
information exchanged by the parties in connection with the consummation of the
transaction contemplated hereby.
7.5. BEST EFFORTS. Subject to the terms and conditions herein provided,
Seller and Purchaser agree to use their best efforts to take, execute,
acknowledge and deliver, or cause to be taken, executed, acknowledged and
delivered, all actions, deeds, assignments, documents, instruments, transfers,
conveyances, discharges, releases, assurances and consents, and to do, or cause
to be done, all things necessary, proper or advisable under this Agreement and
all applicable laws and regulations to consummate, confirm, perfect, evidence
and otherwise make effective the transactions contemplated by this Agreement,
including actions necessary to obtain all requisite assignments of agreements
and contracts, and to fulfill the requirements of Articles VIII and IX hereof on
or prior to the Closing Date.
7.6. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Seller will refrain, and will cause all of its
agents and employees to refrain, from taking, directly or indirectly, any action
to encourage, initiate, solicit or continue any discussions or negotiations
with, or any other offers from, any other Person concerning a merger, sale of
substantial stock or any similar transaction concerning Seller which would
affect the Business, or the sale of the Purchased Assets or any portion thereof.
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7.7 REPORT 30. As soon as practicable after the Closing Date, Seller
shall provide to Purchaser a list of Customers and programs in the form of
NRTC's Report 30 (Average Service Retail Report) of the NRTC Central Billing
System Reports, dated as of the Closing Date.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller contained in this Agreement, and all
representations and warranties set forth in the Disclosure Schedules or in any
Schedule or exhibit attached hereto, shall have been true, complete and correct
when made and as of the Closing Date, without the necessity of any material
amendment or modification, with the same force and effect as if made as of the
Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Seller on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
8.3. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the financial condition, Business, assets, results of
operations or prospects of Seller or the Purchased Assets.
8.4. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.5. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Seller in connection with the Closing including, without limitation,
NRTC and DirecTv consent as provided for in Section 7.3 herein, shall have been
duly obtained by Seller and shall be in full force and effect without conditions
which are materially adverse to Purchaser.
8.6. SUBSCRIBERS. On the Closing Date, Seller shall have at least
18,000 Subscribers.
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8.7. SELLER'S CLOSING DELIVERIES. Seller shall have delivered to
Purchaser the following at Closing:
(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) all Records or copies of the Records;
(c) a certified copy of Resolutions of the general partner of
Seller authorizing the execution, delivery and performance of this Agreement;
(d) a certificate of existence of Seller from the Secretary of
State of Kentucky;
(e) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or otherwise addressed to
Purchaser's satisfaction;
(f) a list of the Accounts Receivable from all Customers and a
list of the Unearned Revenue, each as of the last billing period ending prior to
the Closing Date;
(g) a certificate signed by Seller's general partner, dated
the Closing Date, to the effect that the conditions set forth in this Article
VIII have been satisfied;
(h) an opinion of Greenebaum Doll & McDonald PLLC, counsel to
Seller, in form and substance reasonably acceptable to Purchaser;
(i) a certificate signed by Seller's general partner, dated
the Closing Date, regarding the transfer of Seller's account at Huntington Bank;
and
(j) Noncompetition Agreements with each of William C. Ballard,
R. Gene Smith, Steven B. Bing, and W. Bruce Lunsford, substantially in the form
attached hereto as Schedule 8.7.
(k) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Seller's satisfaction of each of its obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Seller's obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Seller), on or before the Closing Date, of each of the following conditions
precedent:
9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in the Disclosure Schedules or in any
Schedule or exhibit attached hereto, shall have been
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true, complete and correct when made and as of the Closing Date, without the
necessity of any material amendment or modification, with the same force and
effect as if made as of the Closing Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in Section 7.3 herein) shall have been
duly obtained by Purchaser and shall be in full force and effect without
conditions which are materially adverse to Seller.
9.5. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Seller the following at Closing:
(a) the Closing Payment;
(b) a certified copy of Resolutions of the general partner of
Purchaser authorizing the execution, delivery and performance of this Agreement;
(c) a certificate signed by Purchaser's general partner, dated
the Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied;
(d) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Purchaser, in form and substance reasonably acceptable to Seller; and
(e) a certificate signed by Purchaser's general partner, dated
the Closing Date, regarding the transfer of Seller's account at Huntington Bank.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise specifically provided herein, each and every representation and
warranty contained in this Agreement shall expire with, and be terminated and
extinguished by the Closing or the termination of this Agreement pursuant to
Section 11.13 hereof, and thereafter, except and to the extent otherwise
specifically provided herein, neither Purchaser, Seller or any partner or
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representative thereof shall be under any liability whatsoever with respect to
any such representation and warranty. The representations and warranties
hereunder shall not be affected or diminished by any investigation at any time
by or on behalf of the party for whose benefit such representations and
warranties were made. All statements contained herein or in any Schedule,
exhibit, certificate, list or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Subject to the limitations
hereinafter set forth, Seller and its representatives, successors, heirs and
assigns shall indemnify, reimburse and hold Purchaser and each of its partners,
subsidiaries, affiliates, successors, assigns and agents harmless from, against,
for and in respect of any and all damages, losses, settlement payments,
obligations, liabilities, claims, demands, actions or causes of action,
judgments, encumbrances, costs and expenses (including reasonable attorneys'
fees) (collectively, the "Indemnifiable Damages") relating to, resulting from or
arising out of (i) any misrepresentation, untruth, inaccuracy, breach or
nonfulfillment of any representation, warranty, agreement or covenant of Seller
contained in or made in connection with this Agreement or in any Schedule,
exhibit, certificate or other document delivered pursuant hereto, (ii) the
failure of Seller to pay, perform or discharge promptly when due any of its
obligations, liabilities and debts except as provided under this Agreement,
(iii) any liability or obligation relating to the operation of the Business
prior to the Closing Date which is not specifically assumed by Purchaser
pursuant to this Agreement, (iv) any breach or default prior to the Closing Date
by Seller under any of the NRTC Agreements, (v) any state or local sales, use,
excise, personal property or similar tax liability (including penalties and
interest) of Seller, and (vi) any other liabilities, obligations or claims,
whether absolute or contingent, known or unknown, matured or unmatured and not
expressly assumed by Purchaser hereunder.
10.3. INDEMNIFICATION OF SELLER. Subject the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Seller and its
shareholders, subsidiaries, affiliates, officers and directors harmless from,
against, for and in respect of any and all Indemnifiable Damages relating to,
resulting from or arising out of (i) any misrepresentation, untruth, inaccuracy,
breach or nonfulfillment of any representation, warranty, agreement or covenant
of Purchaser contained in or made in connection with this Agreement or in any
Schedule, exhibit, certificate or other document delivered pursuant hereto, (ii)
the failure of Purchaser to pay, perform or discharge promptly when due (a) its
obligations set forth in Section 4.3 herein, or (b) the Current Liabilities,
(iii) the assertion against Seller of any liability or obligation relating to
Purchaser's operation of the Business after the Closing Date, and (iv) any
breach or default after the Closing Date by Purchaser under the NRTC Agreements.
10.4. EXPIRATION OF INDEMNIFICATION OBLIGATIONS. The indemnification
obligations of Seller under Sections 10.2(i), (ii), (iii), (iv) and (vi) and
Purchaser under Section 10.3 above shall expire and terminate on the Survival
Termination Date, unless, prior to such termination, the party entitled to
indemnification hereunder (the "Indemnified Party") shall have provided written
notice to the other party hereto obligated to provide indemnification pursuant
to Sections 10.2 or 10.3 herein (the "Indemnifying Party") of an assertion by
the Indemnified Party of a right to indemnification under Sections 10.2 or 10.3
(the "Indemnification Claim").
10.5. THRESHOLD FOR INDEMNIFICATION; CEILING OF INDEMNIFICATION. Seller
shall not have any liability under Sections 10.2(i), (ii), (iii), (iv) or (vi)
hereof unless and until the
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aggregate amount of Indemnifiable Damages attributable to Seller exceeds Twenty
Thousand Dollars ($20,000), in which case Seller shall be liable for
indemnification hereunder for the entire amount of the Indemnifiable Damages
under Section 10.2(i), (ii), (iii), (iv), and (vi) hereof. Seller shall not have
any liability under Sections 10.2(i), (ii), (iii), (iv) and (vi) hereof for
Indemnifiable Damages attributable to Seller in excess of One Million Dollars
($1,000,000).
10.6. PURCHASER'S INSURANCE. Purchaser shall not be entitled to
Indemnifiable Damages to the extent such Indemnifiable Damages are payable from
an insurance policy or policies of Purchaser which cover such Indemnification
Claim; provided, however, that Purchaser has no obligation or other
responsibility to obtain or maintain any insurance; provided further, that any
and all increases in premiums (up to the amount of the Indemnification Claim)
due under any such insurance policy or policies as a result of an
Indemnification Claim being made or paid thereunder shall be included as
Indemnifiable Damages to the extent such increase is evidenced by documentation
reasonably acceptable to Seller; and provided further, that if any insurance
company providing coverage to Purchaser contends that the provisions of this
Section 10.6 constitute an impermissible wavier of its rights of subrogation or
otherwise adversely affects Purchaser's coverage under Purchaser's insurance
policy, this Section 10.6 shall be deemed null and void.
10.7. RIGHT TO CONTEST.
(a) If the Indemnified Party receives notice or has knowledge
of any claim for which it believes the Indemnifying Party is obligated to
provide indemnification, the Indemnified Party shall provide the Indemnifying
Party with an Indemnification Claim within twenty (20) days of its receipt of
same, but in no event later than ten (10) days prior to the date a responsive
pleading with respect to such Indemnification Claim is due. The Indemnification
Claim shall set forth a brief description of the facts giving rise to such a
claim and the amount (or reasonable estimate) of the Indemnifiable Damages
suffered or which may be suffered by the Indemnified Party. The Indemnified
Party shall, at the expense of the Indemnifying Party, provide all information
regarding the contest or defense of the claim and cooperate fully with the
Indemnifying Party in the conduct of any such contest or defense. Before being
required to make any payment pursuant to Sections 10.2 or 10.3 herein, the
Indemnifying Party may, at its own expense, elect to undertake and control the
defense of, and take all necessary steps properly to contest any claim in
respect thereof involving third parties or to prosecute such claim to conclusion
or settlement satisfactory to the Indemnified Party; provided, however, the
Indemnifying Party shall have no obligation or liability under Sections 10.2 or
10.3 hereof for Indemnifiable Damages with respect to any Indemnification Claim
in excess of any written settlement offer with respect to such Indemnification
Claim which the Indemnified Party did not accept. If the Indemnifying Party
makes the foregoing election, then the Indemnified Party shall have the right to
participate, at its own expense, in all proceedings but shall not admit any
liability, settle, compromise, pay or discharge the claim without the prior
written consent of the Indemnifying Party. If the Indemnifying Party does not
make such election, it shall be obligated to pay the costs of defending or
prosecuting such claim and shall be bound by whatever result is obtained by the
Indemnified Party respecting such claim.
(b) Except as otherwise specifically provided herein, the
remedies provided in this Agreement shall be the sole and exclusive remedies
available to the parties hereto.
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10.8. DISTRIBUTION RESERVE. Seller agrees to maintain a reserve of cash
or cash equivalents of at least One Million Dollars ($1,000,000) through the
Survival Termination Date, and after the Survival Termination Date the amount
sufficient to pay pending but unresolved Indemnification Claims.
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
To Purchaser: Digital Television Services of
Kentucky, LP
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Seller: Direct Programming Services Limited Partnership
3600 National City Tower
101 South 5th Street
Louisville, Kentucky 40202
Attn: Steve Bing
with a copy to: Charles Fassler, Esq.
Greenebaum Doll & McDonald PLLC
3300 National City Tower
101 South 5th Street
Louisville, Kentucky 40202
11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
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11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Georgia, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns, if any, of the parties hereto. Except as
otherwise expressly provided herein, nothing expressed or implied herein is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto, any right or remedy hereunder or by reason hereof. This
Agreement may not be assigned by Purchaser (except to a party which, directly or
indirectly is controlled by, controls or is under common control with,
Purchaser) or Seller without the prior written consent of the other party.
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Disclosure
Schedules and the Schedules attached hereto constitute the entire agreement and
understanding of the parties in respect of the transactions contemplated hereby
and supersede all prior correspondence, conversations, agreements, arrangements,
understandings and other writings, including the Term Sheet dated October 1,
1996 between Seller and Columbia DBS Management, LLC. No promises, covenants or
representations of any character or nature other than those expressly stated
herein have been made to induce either party to enter into this Agreement. This
Agreement may be amended or modified only by a written instrument signed by
Purchaser and Seller.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives. Purchaser shall pay up to Five Thousand Dollars ($5,000) of any
transfer or similar fees due the NRTC and up to one hundred twenty percent
(120%) of the NRTC's costs and expenses incurred to complete the transfer and
assignment in connection with the transactions contemplated by this Agreement.
Seller shall pay any transfer fees due the NRTC in excess of the amounts
required to be paid by Purchaser pursuant to the immediately preceding sentence.
11.10. KNOWLEDGE OF SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Seller confirms that it has made
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or caused to be made due and diligent inquiry as to the matters that are the
subject of such representations and warranties.
11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Seller and Purchaser, (ii) either party
upon written notice to the other party if the Closing has not occurred on or
before the Termination Date, (iii) Seller, if Sections 7.3, 9.1, 9.2 or 9.5 have
not been complied with or performed by Purchaser and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the tenth (10th) day following
written notice thereof from Seller; provided that Seller has not defaulted in
any material respect with respect to any of its obligations hereunder, or (iv)
Purchaser, if the covenants and conditions set forth in Articles VII and VIII
required to be complied with and performed by Seller have not been complied with
or performed by Seller and such noncompliance and nonperformance shall not have
been cured or eliminated (or by its nature cannot be cured or eliminated) by
Seller on or before the tenth (10th) day following written notice thereof from
Purchaser; provided that Purchaser shall not have defaulted in any material
respect with respect to any of its obligations hereunder.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i) or (ii), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
(c) In the event of termination pursuant to Section 11.13(a)(iii),
Purchaser recognizes that Seller would be damaged, the extent to which is
extremely difficult and impractical to ascertain. The parties, therefore, agree
that if this Agreement is terminated pursuant to Section 11.13(a)(iii), Seller
shall be entitled to the sum equal to the Escrow Deposit. The parties agree that
this sum shall constitute liquidated damages and shall be in lieu of any and all
other relief to which Seller might otherwise be entitled due to Purchaser's
failure to consummate, or Purchaser's default under, this Agreement. In the
event the Escrow Deposit is held by the Escrow Agent at the time Seller becomes
entitled to the liquidated damages hereunder, the parties to the Escrow
Agreement shall instruct the Escrow Agent to pay the Escrow Deposit to Seller.
(d) In the event of termination pursuant to Section 11.13(a)(iv),
Purchaser shall be entitled to recover from Seller all damages, losses, costs
and expenses (including reasonable attorneys' fees) provided by law.
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11.14. POWER OF ATTORNEY. Seller hereby irrevocably appoints Purchaser,
and all agents, officers, and employees designated by Purchaser, from and after
the Closing Date, as its true and lawful attorney-in-fact and duly authorized
agent to:
(i) open Seller's mail and endorse and collect any checks,
notes, drafts or any other items payable to Seller from Subscribers or
otherwise issued in connection with the Business, and deposit same to
the account of Purchaser in any depository institution;
(ii) sign receipts and other papers necessary for the
collection of any and all amounts due from Subscribers;
(iii) notify Subscribers that the accounts have been assigned
to Purchaser; and
(iv) direct such Subscribers to make all payments due from
them directly to Purchaser.
Purchaser shall furnish Seller with a copy of any notice issued pursuant to
Sections 11.14(iii) or (iv) above and Seller hereby agrees that any such notice,
in Purchaser's sole discretion, may be sent on Seller's stationary, in which
event Seller shall, upon demand, co-sign such notice with Purchaser.
SELLER DOES HEREBY RATIFY AND CONFIRM ALL THINGS DONE BY PURCHASER WITHIN THE
SCOPE OF THE AUTHORITY HEREIN GIVEN AS FULLY AND TO THE SAME EXTENT AS IF DONE
BY SELLER PERSONALLY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of Kentucky, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
----------------------------------
Douglas S. Holladay, Jr. President
and Manager
SELLER:
Direct Programming Services Limited Partnership
By: Direct Programming Services Associates, Ltd.
Its: General Partner
By: Direct Programming Services, Inc.
Its: General Partner
By:
------------------------------
Its:
---------------------
25
<PAGE> 1
EXHIBIT 10.11(b)
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this
"Amendment") is made as of November 26, 1996 by and among Digital Television
Services of Kentucky, LP, a Georgia limited partnership ("Purchaser") and Direct
Programming Services Limited Partnership, a Kentucky limited partnership
("Seller").
RECITALS
Purchaser and Seller entered into an Asset Purchase Agreement dated as
of October 28, 1996 (the "Asset Purchase Agreement"). Capitalized terms used
herein which are not otherwise defined shall have the meanings set forth in the
Asset Purchase Agreement. Purchaser and Seller have determined that it is in
their mutual best interest to clarify and amend the Asset Purchase Agreement in
accordance with Section 11.8 thereof.
TERMS OF AMENDMENT
Purchaser and Seller agree as follows:
1. AMENDMENT OF ARTICLE I "ADDITIONAL DEPOSIT." The definition of
"Additional Deposit" in Article I shall be deleted in its entirety.
2. AMENDMENT OF ARTICLE I "CLOSING." The definition of "Closing" in
Article I shall be deleted in its entirety and the following new definition
shall be inserted in lieu thereof:
""Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Nelson Mullins Riley
& Scarborough, L.L.P., 100 North Tryon Street, Suite 3350, Charlotte, North
Carolina, 28202 on (i) January 2, 1997 or (ii) such other date or at such other
time or place (including via mail, overnight courier or facsimile transmission)
as the parties may mutually agree upon in writing. The Closing shall be as
effective as of the close of business on the Closing Date; provided, however, if
the Closing occurs on January 2, 1997 the Closing shall be effective as of
January 1, 1997."
3. AMENDMENT OF ARTICLE I "TERMINATION DATE." The definition of
"Termination Date" in Article I shall be deleted in its entirety and the
following new definition shall be inserted in lieu thereof:
""Termination Date" shall mean January 10, 1997."
4. AMENDMENT OF SECTION 4.2. Section 4.2 shall be deleted in its
entirety and the following new Section 4.2 shall be inserted in lieu thereof:
<PAGE> 2
"4.2 ESCROW DEPOSIT. Contemporaneously with the execution of
this Agreement, Purchaser has delivered to the Escrow Agent the Signing Deposit
and Seller has delivered to the Escrow Agent the Binder (collectively, the
"Escrow Deposit") to be held by the Escrow Agent pursuant to the Escrow
Agreement."
5. MODIFICATION. Except as modified hereby, the terms and conditions of
the Asset Purchase Agreement shall remain in full force and effect.
6. GOVERNING LAW. This Amendment shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Georgia,
without regard to the choice of law provisions thereof.
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
PURCHASER:
Digital Television Services of Kentucky, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
--------------------------------------
Douglas S. Holladay, Jr.
Its: President and Manager
SELLER:
Direct Programming Services Limited Partnership
By: DPS Associates, Ltd.
Its: General Partner
By: DPS, Inc.
Its: General Partner
By:
-----------------------------
Its:
------------------------
2
<PAGE> 1
EXHIBIT 10.12(a)
AGREEMENT
This Agreement dated November 13, 1996 is between Northeast DBS
Enterprises, L.P. ("Seller") and Columbia DBS Management LLC ("Purchaser").
The parties hereby agree as follows:
1. At the closing of the transaction described herein (the "Closing")
Purchaser shall buy and Seller shall sell Seller's entire right, title and
interest in all of the assets of Seller (the "Assets"), free and clear of all
liens, claims and encumbrances, other than with respect to the Assumed
Liabilities, as hereinafter defined. The Assets include (but are not limited to)
rights under the NRTC/Member Agreement for Marketing and Distribution of DBS
Services and the NRTC/Member DBS Product Retail Agreement with respect to NRTC
System No. 1005 (the "NRTC Agreements"), equipment, furniture, inventory,
agreements, accounts receivable, prepaid expenses, tradenames, customer lists,
and other current and long-term, tangible and intangible, assets.
2. At the Closing the Purchaser shall assume (or discharge) the
liabilities of the Seller set forth below (the "Assumed Liabilities");
(a) All liabilities of Seller on the Closing reflected on the Closing
Date Balance Sheet (as defined below) with regard to the categories of
liabilities reflected on the unaudited balance sheet of Seller attached as
Exhibit A (the "Balance Sheet Liabilities"),
(b) All ongoing obligations of Seller after the Closing under the NRTC
Agreements, and
(c) All ongoing obligations of Seller after the Closing under all other
agreements of Seller entered into in the ordinary course of business, and which
relate to the DBS business, provided that, consistent with the Seller's past
practices, which will not include any residual commissions payable with respect
to activation of subscribers.
3. The purchase price ("Purchase Price") for the Assets shall be the
sum of $38,000,000 plus $400 for each subscriber at the Closing in excess of
20,000 subscribers. The Purchase Price shall be payable in cash in full at the
Closing.
4. Within 90 days after the Closing Seller will prepare, and the
Seller's accountants will audit and deliver to Purchaser, a statement setting
forth as of the Closing the current assets (excluding all deferred promotional
costs in excess of $350,000) (the "Adjusted Current Assets") and the Balance
Sheet Liabilities (the "Closing Date Balance Sheet"). Such statements will be
prepared in accordance with GAAP applied on a consistent basis with past
periods. The amount of the Purchase Price shall be adjusted on a "dollar for
dollar" basis to reflect the amount by which the Adjusted Current Assets is
greater or less than the the Balance Sheet Liabilities. Prior to the Closing the
parties will cooperate in estimating such adjustment which shall be the basis
for the amount tendered at Closing.
<PAGE> 2
5. Seller shall be liable for and shall pay any transfer, sales and use
taxes that may be levied on the acquisition.
6. Seller shall, prior to the Closing, continue to operate the business
in the normal course; it will not dispose of the business of any of the Assets
other than in the normal course; and it will not effect any recapitalization,
declare or pay any dividends, or make any distributions to the shareholders of
Seller.
7. Any broker's or finder's fee incurred by any party as a result of
the acquisition are solely the responsibility of the party that incurred the
obligation.
8. Robert Bloch and Jeffrey Price shall enter into standard
non-competition agreements with respect to the DBS business within the
territories served by the NRTC and its members, which agreements shall terminate
one year after the Closing; provided, however, that in the event Purchaser and
Robert Bloch are unable to reach a mutually agreeable arrangement with respect
to the employment or consulting relationship with Purchaser after the Closing,
the territory with respect to Bloch's noncompetition agreement shall be limited
to the territory covered by the NRTC Agreements.
9. Purchaser acknowledges that it has been provided, and it has
reviewed, detailed financial and operational information concerning the Seller
and its business. Notwithstanding such review, Seller acknowledges that
Purchaser has the right, during the 30-day period from the date hereof, to
access the books and records of the Seller to confirm the information previously
provided to Purchaser. Seller shall cooperate fully with Purchaser in providing
access to such books and records.
10. From the date hereof to the Closing, Seller shall refrain, and will
cause all of its agents, employees, and partners to refrain from taking,
directly or indirectly, any action to encourage, initiate, solicit or continue
any discussions or negotiations with, or any other offers from, any person,
corporation, partnership, limited liability company or any other entity
concerning a merger, sale of assets (other than in the ordinary course of
business), sale of partnership interests in Seller or any similar transaction
concerning Seller which would result in the transfer (of control or otherwise)
of NRTC System No. 1005.
11. The parties shall refrain from disclosing the existence or terms of
this Agreement or any information concerning the other party and its business
(which it shall keep strictly confidential) except upon the mutual consent of
the parties. The parties shall cooperate in preparing and disseminating a joint
press release regarding the transaction.
12. The parties shall cooperate in promptly amending this Agreement to
add representations, indemnities and covenants customarily contained in business
acquisition agreements. The indemnification provisions of the amended agreement
shall specify a one-year survival of representations and a $5,000,000 cap on
such indemnification liability, and apply with respect to (i) a breach of any
representation of Seller, and (ii) any liabilities of Seller, contingent or
otherwise, arising prior to Closing, other than the Assumed Liabilities. In
order to satisfy indemnification claims of Purchaser, Seller agrees (a) to make
no distributions of the
<PAGE> 3
Purchase Price unless and until Seller receives recontribution agreements from
its partners limited in the aggregate to $5 million (including the $1 million
held in escrow) enforceable by Purchaser to the extent Purchaser is entitled to
indemnification, and (b) deposit into escrow $1 million to be held pursuant to a
mutually agreeable escrow agreement through the first anniversary of Closing. In
the event that the parties are not able to agree within 30 days of the date
hereof on what are customary representations, indemnities and covenants for
business acquisition agreements (or on what is a standard non-competition
agreement or escrow agreements), the issue in dispute shall be resolved by
arbitration as described below.
13. The obligation of the Purchaser to consummate the transaction shall
be subject to the following conditions (and no others):
(a) Seller having at least 20,000 subscribers at Closing,
(b) the parties shall have received the approval of the NRTC and
DirecTv (and, if required, Hart Scott Rodino approval), and this Agreement shall
have been approved by the limited partners of the Seller (and each of Robert
Bloch and Jeffrey Price agrees to vote in favor of the transactions contemplated
hereby in his capacity as a partner of Seller and as a director and shareholder
of the general partner of Seller),
(c) the representation of Seller contained in the amended Agreement
shall be true in all material respects on the Closing,
(d) in the course of Purchaser's confirmatory due diligence
investigation it shall not have discovered a discrepancy between the information
previously provided by Seller and the information contained in the books and
records of Seller, which discrepancy would have an adverse material effect on
the business of the Seller,
(e) there shall be no governmental or court order restraining either
party from consummating the transaction, and
(f) all agreement, obligations, conditions and covenants to be
performed or complied with by Seller on or before the Closing pursuant to the
terms hereof shall have been duly performed or complied with on or before the
Closing and Seller shall have delivered an assignment, bill of sale and other
instruments of transfer to effectively assign, transfer and convey good and
marketable title to the Assets as Purchaser shall reasonably request.
14. The parties shall cooperate in diligently seeking the approval of
the NRTC and DirecTv. The Closing shall occur within 30 days after receiving the
approval of both the NRTC and DirecTv. This Agreement shall terminate in the
event that either: (a) a required approval is not obtained, or (b) the Closing
does not occur by March 31, 1997, except as extended pursuant to this paragraph.
In the event of the termination of this Agreement, except as specified in
paragraph 15 below, neither party shall have any further obligations of any kind
to the other party arising hereunder, provided that the provisions of paragraph
11 shall survive termination of this Agreement for a period of three years.
Notwithstanding anything else herein to the contrary, Seller shall have until
March 31 to reach 20,000 subscribers, and if the failure
<PAGE> 4
to reach 20,000 subscribers is the only unfulfilled closing conditions as of
March 31, 1997, this Agreement and the Closing shall be extended to April 30 to
afford Seller an additional month to reach 20,000 subscribers. Seller shall use
its best efforts to keep the mix of packages subscribed to after the date hereof
consistent with the mix as of the date hereof.
15. Purchaser acknowledges that Seller has been negotiating with other
parties for the sale of its business. In order to induce Seller to terminate
such negotiations and enter into this Agreement, and with the understanding that
Seller would be irreparably harmed if the Purchaser subsequently failed to
consummate the transactions described herein, Purchaser has deposited by wire
transfer on the date hereof to Seller $1,000,000 (the "Break-Up Fee"). Within 15
business days of the date hereof the Break-Up Fee shall be deposited into escrow
to be held pursuant to a standard escrow agreement reflecting the terms of this
Agreement, mutually acceptable to the parties. In the event that Purchaser fails
to consummate the transaction, Seller shall be entitled to retain the Break-Up
Fee and to recover up to a additional $4 million as liquidated damages in lieu
of any and all other relief to which Seller might otherwise be entitle due to
Purchaser's failure to consummate the transactions contemplated hereby, unless
one or more of the conditions to Purchaser's obligation to close in accordance
with paragraph 13 are not met by March 31, 1997, in which case Seller shall
immediately thereafter return the BreakUp Fee to Purchaser. Upon the Closing,
the Break-Up Fee shall be credited against the Purchase Price. Subject to
Section 12 hereof, Purchaser shall have all remedies under law or equity for
breach by Seller of this Agreement.
16. This Agreement shall be governed by the laws of the State of
Delaware. In the event of any dispute arising out of this Agreement, either
party may submit the dispute to binding arbitration in Delaware, with an
arbitrator to be selected by the American Arbitration Association, and with the
commencement of arbitration, any litigation regarding the dispute shall be
terminated without prejudice. The determination of the arbitrator shall be final
and binding, and may be enforced by any court of competent jurisdiction. The
parties shall cooperate in providing all information to the arbitrator so that
the arbitrator can render a decision within 90 days of a party first submitting
the matter to arbitration. The fees of the arbitrator shall be borne in
accordance with the decision of the arbitrator. The parties shall bear their own
respective costs in the arbitration.
17. This Agreement represents the entire agreement between the parties
and supersedes all prior written and oral agreements, statements and promises of
all kinds.
18. This Agreement may be executed in counterparts, which together
shall form one Agreement.
19. This Agreement may not be assigned by either party, except to an
affiliate.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
<PAGE> 5
Northeast DBS Enterprises, L.P.
By: /s/
-------------------------------------
For its general partner
Columbia DBS Management, LLC
By: /s/
-------------------------------------
/s/
-------------------------------------
Robert Bloch, as to his personal obligations in paragraph 8 and 13.
/s/
-------------------------------------
Jeffrey Price, as to his personal obligations in paragraph 8 and 13.
<PAGE> 1
EXHIBIT 10.12(b)
FIRST AMENDMENT
TO
AGREEMENT
This FIRST AMENDMENT TO AGREEMENT (this "Amendment") is made as of
February 11, 1997 by and among DTS Management, LLC, a Georgia limited liability
company formerly known as Columbia DBS Management, LLC ("Columbia"), Digital
Television Services of Vermont, LLC, a Georgia limited liability company
("Purchaser") and Northeast DBS Enterprises, L.P., a Vermont limited partnership
("Seller").
RECITALS
Columbia and Seller entered into an Agreement dated as of November 13,
1996 (as amended, the "Asset Purchase Agreement"). Capitalized terms used herein
which are not otherwise defined shall have the meanings set forth in the Asset
Purchase Agreement. Purchaser and Seller have determined that it is in their
mutual best interest to amend the Asset Purchase Agreement pursuant to Section
12 thereof.
TERMS OF AMENDMENT
Columbia, Purchaser and Seller agree as follows:
1. ASSIGNMENT. Columbia hereby assigns, transfers and coveys to
Purchaser all right, title and interest in and to the Asset Purchase Agreement,
and Purchaser hereby assumes and agrees to perform and discharge all liabilities
and obligations of Columbia under the Asset Purchase Agreement, including
without limitation, the obligation to pay to Seller the Purchase Price. Seller
hereby consents to the assignment of the Asset Purchase Agreement to Purchaser.
2. AMENDMENT TO SECTION 8. Section 8 shall be deleted in its entirety
and the following new Section 8 shall be inserted in lieu thereof:
"8. Robert Bloch and Jeffrey Price shall enter into noncompetition
agreements substantially in the form attached hereto as Schedule 8; provided,
however, that in the event Purchaser and Robert Bloch are unable to reach a
mutually agreeable arrangement with respect to the employment or consulting
relationship with Purchaser after the Closing, the territory with respect to
Bloch's noncompetition agreement shall be limited to the territory covered by
the NRTC Agreements."
3. AMENDMENT TO SECTION 12. Section 12 shall be deleted in its entirety
and the following new Section 12 shall be inserted in lieu thereof:
"12. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
12.1. REPRESENTATIONS AND WARRANTIES OF SELLER. To induce Purchaser to
enter into this Asset Purchase Agreement and to consummate the transactions
contemplated hereby, Seller hereby represents and warrants to Purchaser as
follows:
<PAGE> 2
(a) ORGANIZATION. Seller is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Vermont, with all requisite power and authority to own and
operate the National Rural Telecommunications Cooperative's System No.
1005 for the exclusive distribution in certain areas in the State of
Vermont of DBS Services offered by DirecTv (the "Business") as it is
now conducted and to own the Assets in the places where the Business is
now conducted and where the Assets are now owned or operated.
(b) AUTHORITY.
(i) Seller has full power and authority to execute,
deliver and perform this Asset Purchase Agreement and all agreements
and transactions contemplated hereby. The execution, delivery and
performance of this Asset Purchase Agreement and all transactions
contemplated hereby have been duly authorized by Seller and, except for
the consent of the NRTC, DirecTv and the other Persons set forth on
Schedule 12.1(b) hereof, no other action or proceeding on the part of
any other party is necessary to authorize this Asset Purchase Agreement
or to consummate the transactions contemplated hereby. This Asset
Purchase Agreement has been duly and validly executed and delivered by
Seller and constitutes, and each of the other agreements to be executed
by Seller pursuant to the terms hereof will constitute upon execution
and delivery, a legal, valid and binding obligation of Seller
enforceable in accordance with its terms.
(ii) Except for the NRTC, DirecTv and the other
Persons set forth on Schedule 12.1(b) hereof, the execution, delivery
and performance of this Asset Purchase Agreement or any document
related hereto by Seller and the consummation by Seller of all of the
transactions contemplated hereby or thereby will not (with or without
the giving of notice or the lapse of time or both) (i) violate or
require any consent or approval under any applicable provision of any
judgement, order, writ, injunction, decree, rule, regulation or law;
(ii) require any consent under, conflict with, result in termination
of, accelerate the performance required by, result in a breach of,
constitute a default under or otherwise violate the terms of any
agreements, instruments or other obligations to which Seller is a party
or by which Seller or any of the Assets may be bound or affected; (iii)
require any consent or approval by, notice to or registration with any
governmental authority or any other Person; (iv) conflict with or
violate any provision of Seller's certificate of limited partnership;
or (v) result in the creation of a Lien upon any of the Assets
howsoever arising.
(c) TITLE TO THE ASSETS.
(i) Seller has good and marketable title to all of
the Assets, free and clear of all Liens except those Liens disclosed on
Schedule 12.1(c) hereof.
(ii) Immediately following the Closing, Purchaser
shall have sufficient title in and to the Assets to operate and conduct
the business of Seller in the same fashion as Seller was conducting the
business in the ordinary course prior to the Closing.
2
<PAGE> 3
(d) CONDITION OF FIXED ASSETS. Set forth on Schedule 12.1(d)
are all of the equipment and other tangible assets, including, without
limitation, any MTE terminals and demonstration units owned by Seller
and used or useable in connection with the Business (the "Fixed
Assets"). The Fixed Assets are in good operating condition, in a state
of good maintenance and repair, and are adequate and suitable for the
purposes which are presently being used. All appropriate repair and
maintenance of the Fixed Assets has been performed on a current basis
and in accordance with generally accepted industry standards. Except as
set forth on Schedule 12.1(d) attached hereto, none of the Fixed Assets
are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Seller in the past, and
no currently needed repairs with respect to the Fixed Assets are
reasonably likely to cost in excess of Five Thousand Dollars ($5,000),
singularly, or Twenty-Five Thousand Dollars ($25,000), in the
aggregate.
(e) NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(i) Attached hereto as Schedule 12.1(e) are true and
complete copies of each of the NRTC Agreements, together with all
amendments, schedules and exhibits thereto, and a true and complete
list of all other contracts, agreements, commitments and instruments
relating to the Business and to which Seller is a party or by which
Seller is bound (the "Other Agreements").
(ii) To the best of its knowledge, Seller has paid
all sums to NRTC or DirecTv, as appropriate, required under the NRTC
Agreements such that Seller is entitled to the marketing and sales
revenues as provided therein.
(iii) Seller is in full compliance in all material
respects with any and all membership, affiliation, licensing or other
requirements or arrangements as may have been established by NRTC or
DirecTv pursuant to the NRTC Agreements, or otherwise.
(iv) Seller is not in breach of the NRTC Agreements
or the Other Agreements, nor has Seller failed to perform any material
obligation under the NRTC Agreements or the Other Agreements. Seller
has not received notice of any such breach or non-performance at any
time of the NRTC Agreements or the Other Agreements. To the best of
Seller's knowledge, no other party to any of the NRTC Agreements or the
Other Agreements is in default thereunder or has failed to perform any
material obligation thereunder.
(f) INVENTORY. The inventory shall be usable in the ordinary
course of business and shall comply in all respects with industry
standards of quality and marketability. The inventory included on the
Closing Date Balance Sheet shall not include any items below standard
quality, obsolete or sub-prime. Such inventory shall consist solely of
(i) undamaged, original units in original, sealed cartons, and (ii)
reconditioned units in saleable condition; provided such reconditioned
units in the aggregate do not exceed more than Twelve Thousand Dollars
($12,000) (valued at
3
<PAGE> 4
such inventory's original cost). Seller owns all of the inventory free
and clear of any and all Liens and has full power and authority to
transfer the inventory to Purchaser.
(g) ACCOUNTS RECEIVABLE. The accounts receivable to be
included on the Closing Date Balance Sheet represent arms' length
transactions with subscribers made in the ordinary course of business
and none of such accounts receivable shall be subject to any
counterclaim or setoff.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Schedule 12.1(h) hereof and other than changes or events reflected
on the interim financial statements delivered by Seller to Purchaser or
which have affected the DBS industry in general, since December 31,
1995 there has not been:
(i) any change in the position, financial or
otherwise, assets, liabilities, earnings, book value, Business,
operations or prospects of Seller which is materially adverse,
singularly or in the aggregate;
(ii) any obligation or liability incurred by Seller
(whether absolute, accrued, contingent or otherwise and whether due or
to become due) relating to the Business other than obligations or
liabilities incurred in the ordinary course of business and consistent
with past practices;
(iii) any termination or waiver of any rights of
Seller of material value to the Business or to Seller;
(iv) any damage, destruction or loss, whether or not
covered by insurance, adversely affecting the Business or the Assets;
(v) the adoption of any statute, rule, regulation or
order which adversely affects the Business or the Assets;
(vi) any sale, transfer or other disposition of any
of the Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(vii) any agreement to do any of the foregoing.
(i) LICENSES AND PERMITS. Schedule 12.1(i) hereof is a list of
all federal, state, local and foreign permits, certificates, licenses,
approvals and other authorizations necessary in the conduct of the
Business. All such licenses and permits of Seller are in full force and
effect, and no violations are or have been recorded in respect thereof,
and no proceeding is pending or threatened to revoke or limit any
thereof. Seller and its conduct of the Business is in compliance with
all applicable laws, statutes, ordinances, rules, regulations and
orders of any federal, foreign, state or local government and any other
government department or agency, and is in compliance with judgment,
decision, decree or order of any court or governmental agency,
department or authority, except where the failure to so comply would
not have
4
<PAGE> 5
a material adverse effect on the financial condition, Business, assets,
results of operations or prospects of Seller.
(j) TAX MATTERS.
(i) Seller has timely filed all federal, state, local
and foreign tax returns and tax reports required to be filed with
respect to the Business with the appropriate governmental agency in all
jurisdictions in which such returns and reports are required to be
filed. All such returns and reports are true, correct and complete, and
all amounts shown as owing on them have been paid, including all
interest, penalties, deficiencies and assessments heretofore levied or
assessed against Seller. Seller has duly withheld, collected and timely
paid over, or holds for such payment, to the proper governmental
authorities all taxes required to be withheld or collected by it. There
is no agreement for extension of time of assessment or payment of any
taxes of Seller. No waiver of any statute of limitations has been
executed by Seller for any tax year which remains open or unsettled. To
the best knowledge, information and belief of Seller, there is no
examination or audit pending by the Internal Revenue Service or by any
state or local taxing authority with respect to the tax matters of
Seller. There is no liability for taxes or any tax deficiency or the
existence of any basis from which liability for taxes or tax
deficiency, including interest and penalties, might be asserted against
Seller for any period in excess of the applicable reserve for taxes, if
any, and Seller has no knowledge of any such liability or deficiency or
the existence of any basis therefor.
(ii) All federal, state, local and foreign income,
profits, franchise, sales, use, occupation, property, excise and other
taxes (including interest and penalties), if any, payable by Seller or
relating to or chargeable against the Assets or chargeable against
Seller's revenue or income have been fully paid or are not past due and
are fully disclosed and accrued on the books and records of Seller and
the proper amount of reserves exist for the payment thereof.
(k) DISCLOSURES. No representation or warranty made by Seller
in this Asset Purchase Agreement, and no statement made in any
Schedule, exhibit, certificate or other writing delivered or to be
delivered pursuant hereto contains or will contain any untrue statement
of a material fact, or omits or will omit any statement of a material
fact necessary to make the statements contained herein or therein not
misleading.
(l) LITIGATION. Except as set forth on Schedule 12.1(l), there
are no actions, suits, proceedings, orders, investigations or claims
pending or, to the best of Seller's knowledge, any threats against or
affecting Seller, the Assets or its Business, at law or in equity,
before any court, arbitration panel, tribunal or governmental
department, commission, board, bureau, agency or instrumentality.
12.2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. To induce Seller to
enter into this Asset Purchase Agreement and to consummate the transactions
contemplated hereby, Purchaser hereby represents and warrants to Seller as
follows:
5
<PAGE> 6
(a) ORGANIZATION. Purchaser is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Georgia, with all requisite power to own and operate its
business as it is now conducted.
(b) AUTHORITY.
(i) Purchaser has full power and authority to
execute, deliver, and perform this Asset Purchase Agreement. The
execution, delivery and performance of this Asset Purchase Agreement
and all transactions contemplated hereby have been duly authorized by
Purchaser and no other action or proceeding on the part of any other
party is necessary to authorize this Asset Purchase Agreement or to
consummate the transactions contemplated hereby. This Asset Purchase
Agreement has been duly and validly executed and delivered by
Purchaser, and constitutes, and each of the other agreements to be
executed pursuant to the terms hereof upon execution and delivery will
constitute, a legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
(ii) Except for the NRTC, DirecTv and the other
Persons set forth on Schedule 12.2(b) attached hereto, the execution,
delivery and performance of this Asset Purchase Agreement or any other
document related hereto by Purchaser and the consummation by Purchaser
of all of the transactions contemplated hereby or thereby will not
(with or without the giving of notice or the lapse of time or both) (i)
violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule,
regulation or law; (ii) require any consent under, conflict with,
result in the termination of, accelerate the performance required by,
result in the breach of, constitute a default under or otherwise
violate the terms of any agreements, instruments or other obligations
to which Purchaser is a party; (iii) require any consent or approval
by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's certificate
of limited partnership or limited partnership agreement.
(c) DISCLOSURES. No representation or warranty made by
Purchaser in this Asset Purchase Agreement, and no statement made in
any Schedule exhibit, certificate or other writing delivered or to be
delivered pursuant hereto contains or will contain any untrue statement
of a material fact, or omits or will omit any statement of a material
fact necessary to make the statements contained herein or therein not
misleading.
12.3. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise specifically provided herein, each and every representation and
warranty contained in this Asset Purchase Agreement shall expire with, and be
terminated and extinguished by the Closing or the termination of this Asset
Purchase Agreement pursuant to Section 14 hereof, and thereafter, except and to
the extent otherwise specifically provided herein, neither Purchaser, Seller or
any partner or representative thereof shall be under any liability whatsoever
with respect to any such representation and warranty. The representations and
warranties hereunder shall not be affected or diminished by any investigation at
any time by or on behalf of the party for whose benefit such representations and
warranties were made.
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<PAGE> 7
All statements contained herein or in any Schedule, exhibit, certificate, list
or other document delivered pursuant hereto shall be deemed to be
representations and warranties.
12.4. INDEMNIFICATION OF PURCHASER. Subject to the limitations
hereinafter set forth, Seller and its representatives, successors, heirs and
assigns shall indemnify, reimburse and hold Purchaser and each of its partners,
subsidiaries, affiliates, successors, assigns and agents harmless from, against,
for and in respect of any and all damages, losses, settlement payments,
obligations, liabilities, claims, demands, actions or causes of action,
judgments, encumbrances, costs and expenses (including reasonable attorneys'
fees) (collectively, the "Indemnifiable Damages") relating to, resulting from or
arising out of (i) any misrepresentation, untruth, inaccuracy, breach or
nonfulfillment of any representation, warranty, agreement or covenant of Seller
contained in or made in connection with this Asset Purchase Agreement or in any
Schedule, exhibit, certificate or other document delivered pursuant hereto, (ii)
the failure of Seller to pay, perform or discharge promptly when due any of its
obligations, liabilities and debts except as provided under this Asset Purchase
Agreement, (iii) any liability or obligation relating to the operation of the
Business prior to the Closing Date which is not specifically assumed by
Purchaser pursuant to this Asset Purchase Agreement, (iv) any breach or default
prior to the Closing Date by Seller under any of the NRTC Agreements or the
Other Agreements, (v) any state or local sales, use, excise, personal property
or similar tax liability (including penalties and interest) of Seller, and (vi)
any other liabilities, obligations or claims, whether absolute or contingent,
known or unknown, matured or unmatured and not expressly assumed by Purchaser
hereunder.
12.5. INDEMNIFICATION OF SELLER. Subject the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Seller and its
shareholders, subsidiaries, affiliates, officers and directors harmless from,
against, for and in respect of any and all Indemnifiable Damages relating to,
resulting from or arising out of (i) any misrepresentation, untruth, inaccuracy,
breach or nonfulfillment of any representation, warranty, agreement or covenant
of Purchaser contained in or made in connection with this Asset Purchase
Agreement or in any Schedule, exhibit, certificate or other document delivered
pursuant hereto, (ii) the failure of Purchaser to pay, perform or discharge
promptly when due the Balance Sheet Liabilities, (iii) the assertion against
Seller of any liability or obligation relating to Purchaser's operation of the
Business after the Closing Date, and (iv) any breach or default after the
Closing Date by Purchaser under the NRTC Agreements and the Other Agreements.
12.6. EXPIRATION OF INDEMNIFICATION OBLIGATIONS. The indemnification
obligations of Seller under Section 12.4 and Purchaser under Section 12.5 above
shall expire and terminate on the first (1st) anniversary of the Closing (the
"Survival Termination Date"), unless, prior to such termination, the party
entitled to indemnification hereunder (the "Indemnified Party") shall have
provided written notice to the other party hereto obligated to provide
indemnification pursuant to Sections 12.4 or 12.5 herein (the "Indemnifying
Party") of an assertion by the Indemnified Party of a right to indemnification
under Sections 12.4 or 12.5 (the "Indemnification Claim").
12.7. CEILING OF INDEMNIFICATION. Seller shall not have any liability
under Section 12.4 hereof for Indemnifiable Damages attributable to Seller in
excess of Five Million Dollars ($5,000,000).
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<PAGE> 8
12.8. RIGHT TO CONTEST.
(a) If the Indemnified Party receives notice or has knowledge
of any claim for which it believes the Indemnifying Party is obligated
to provide indemnification, the Indemnified Party shall provide the
Indemnifying Party with an Indemnification Claim within twenty (20)
days of its receipt of same, but in no event later than ten (10) days
prior to the date a responsive pleading with respect to such
Indemnification Claim is due. The Indemnification Claim shall set forth
a brief description of the facts giving rise to such a claim and the
amount (or reasonable estimate) of the Indemnifiable Damages suffered
or which may be suffered by the Indemnified Party. The Indemnified
Party shall, at the expense of the Indemnifying Party, provide all
information regarding the contest or defense of the claim and cooperate
fully with the Indemnifying Party in the conduct of any such contest or
defense. Before being required to make any payment pursuant to Sections
12.4 or 12.5 herein, the Indemnifying Party may, at its own expense,
elect to undertake and control the defense of, and take all necessary
steps properly to contest any claim in respect thereof involving third
parties or to prosecute such claim to conclusion or settlement
satisfactory to the Indemnified Party; provided, however, the
Indemnifying Party shall have no obligation or liability under Sections
12.4 or 12.5 hereof for Indemnifiable Damages with respect to any
Indemnification Claim in excess of any written settlement offer with
respect to such Indemnification Claim which the Indemnified Party did
not accept. If the Indemnifying Party makes the foregoing election,
then the Indemnified Party shall have the right to participate, at its
own expense, in all proceedings but shall not admit any liability,
settle, compromise, pay or discharge the claim without the prior
written consent of the Indemnifying Party. If the Indemnifying Party
does not make such election, it shall be obligated to pay the costs of
defending or prosecuting such claim and shall be bound by whatever
result is obtained by the Indemnified Party respecting such claim.
(b) Except as otherwise specifically provided herein, the
remedies provided in Section 12.4 and 12.5 shall be cumulative and
shall not preclude assertion by any party of any other rights or the
seeking of any other remedies (including specific performance of this
Asset Purchase Agreement) against any other party hereto.
12.9. DISTRIBUTION RESERVE. Seller acknowledges and agrees that
distributions to its partners which would render Seller unable to satisfy
Indemnification Claims hereunder will constitute wrongful distributions pursuant
to Section 1407 of the Vermont Limited Partnership Act. Accordingly, Seller
agrees to (i) make no distributions of the Purchase Price unless and until
Seller receives recontribution agreements from its partners in an aggregate
amount equal to at least $5,000,000 (inclusive of the $1,000,000 held pursuant
to the Escrow Agreement) enforceable by Purchaser to the extent Purchaser is
entitled to indemnification under Section 12.4 hereof, and (ii) deposit into
escrow $1,000,000 to be held through the Survival Termination Date by Union Bank
of California, N.A.(the "Escrow Agent") pursuant to the terms and provisions of
the Escrow Agreement attached hereto as Schedule 12.9.
12.10. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon
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<PAGE> 9
receipted delivery by overnight courier, charges prepaid or charged to the
sender's account if delivery is confirmed by the delivery service, upon receipt
of a confirmed transmission if by facsimile transmission, or three (3) days
after mailing if mailed by certified or registered mail, postage prepaid, return
receipt requested, as follows (or at such other address for a party as shall be
specified by like notice; provided that notice of a change of address shall be
effective only upon receipt thereof):
To Purchaser: Digital Television Services of
Vermont, LP
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Seller: Northeast DBS Enterprises, L.P.
P.O. Box 20
Wycombe, Pennsylvania 18980
Attn: Jeffrey P. Price
with a copy to: Seth Weinberger, Esq.
Mayer Brown & Platt
190 South LaSalle
Chicago, Illinois 60603"
4. AMENDMENT TO SECTION 13(b). Section 13(b) shall be deleted in its
entirety and the following new Section 13(b) shall be inserted in lieu thereof:
"(b) the parties shall have received the approval of NRTC and DirecTv
(and, if required, Hart Scott Rodino approval),"
5. MODIFICATION. Except as modified hereby, the terms and conditions of
the Asset Purchase Agreement shall remain in full force and effect.
6. GOVERNING LAW. This Amendment shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Delaware,
without regard to the choice of law provisions thereof.
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
COLUMBIA:
DTS Management, LLC
By:
---------------------------------
Douglas S. Holladay, Jr.
Its: President and Manager
PURCHASER:
Digital Television Services of Vermont, LLC
By: DTS Management, LLC
Its: Manager
By:
---------------------------------
Douglas S. Holladay, Jr.
Its: President and Manager
SELLER:
Northeast DBS Enterprises, L.P.
By:
---------------------------------
Its: General Partner
---------------------------------
Jeffrey P. Price, solely with respect to
Section 8 hereof
---------------------------------
Robert Bloch, solely with respect to
Section 8 hereof
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<PAGE> 11
SCHEDULE 12.1(l)
LITIGATION
1. On 1/28/97, Mountain Cable Company d/b/a Adelphia Communications
commenced an action in Rutland Superior Court against Seller, alleging
that Seller improperly used and interfered with Adelphia's cable system
equipment in providing service to 2 multi- unit condominium projects in
Sherburne, Vermont, formerly served by Adelphia. The action seeks
injunctive relief, preventing Seller from using or interfering with
Adelphia's cable system equipment, and also seeks monetary damages for
damage caused to Adelphia's cable equipment and an interruption of
service to Adelphia's customers, during Seller's installation. Seller
has consented to a preliminary injunction, dated January 31, 1997 by
which Seller agrees not to use or interfere with Adelphia's cable
system equipment. Seller denies that it has caused damage to any of
Adelphia's cable system equipment or has caused any material
interruption of service to Adelphia's customers. Seller will vigorously
defend any claim for damages by Adelphia.
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<PAGE> 1
EXHIBIT 10.13
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 22, 1996
BY AND BETWEEN
DIGITAL TELEVISION SERVICES OF KANSAS, LP
AND
SKYWAVE COMMUNICATIONS, INC.
================================================================================
<PAGE> 2
LIST OF SCHEDULES
Schedule 1.1 Fixed Assets
Schedule 1.2 Locations
Schedule 1.3 NRTC/Member Agreement
Schedule 1.4 NRTC/Retail Agreement
Schedule 1.5 Other Assumed Agreements
Schedule 1.6 Purchased Assets
Schedule 2.1(a) Assignment and Assumption Agreement
Schedule 2.1(b) Bill of Sale
Schedule 4.5 Allocation of Purchase Price
Schedule 5.2(b) Consent of Seller
Schedule 5.3(a) Liens
Schedule 5.4 Fixed Assets Needing Repairs
Schedule 5.5(e) Suspended DBS Services
Schedule 5.5(f) Customers and Suppliers
Schedule 5.9 Changes or Events
Schedule 5.10 Licenses and Permits
Schedule 6.2(b) Consent of Purchaser
Schedule 8.8 Noncompetition Agreement
[Schedules have been omitted but will be furnished upon request]
<PAGE> 3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 22nd day of November, 1996, by and between Digital Television
Services of Kansas, LP, a Georgia Limited Partnership ("Purchaser"), and Skywave
Communications, Inc., a Kansas corporation ("Seller").
RECITALS
1. Seller owns and operates the National Rural Telecommunications
Cooperative's System No. 0156 (the "System") for the exclusive distribution in
certain areas in the State of Kansas (the "Locations") of DBS Services offered
by DirecTv (the "Business").
2. Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser all of Seller's rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations, any residual rights of Seller
as a member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements and certain of the assets used in
the Business, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, Seller and
Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Seller to the
NRTC as of the Closing Date relating to the Business; including, without
limitation, accounts payable to the NRTC with respect to wholesale bills,
equipment and other services.
"Accounts Receivable" shall mean all of the accounts receivable of
Seller as of the Closing Date for all Customers which are listed on Report 19A
(Accounts Receivable Summary) of the NRTC Central Billing Systems Reports.
"Binder" shall mean the Fifty Thousand Dollars ($50,000) Purchaser
deposited with Seller on November 8, 1996 as a good faith binder to proceed with
the transactions contemplated by this Agreement.
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
<PAGE> 4
"Cash" shall mean all cash in Seller's bank accounts at Bank IV and at
Southwest National Bank in Wichita, Kansas as of the Closing Date.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the Seller's office, (i) on the
calendar day of such month on which NRTC's accounting period closes after which
all of the conditions precedent set forth in Articles VIII and IX herein have
been satisfied or waived, or (ii) such other date or at such other time or place
(including via mail, overnight courier or facsimile transmission) as the parties
may mutually agree upon in writing. The Closing shall be as effective as of the
close of business on the Closing Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Current Assets" shall mean Cash, Accounts Receivable, Inventory (if
purchased pursuant to Section 4.4(b) hereof) and Prepaid Expenses of Seller,
which will be acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Seller which will be assumed by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased DBS Services, or entered into a binding agreement to purchase DBS and
related services, from Seller at any time during the five (5) year period
immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTv" shall mean DirecTv, Inc., a California corporation, the
successor in interest and rights holder to Hughes Communications Galaxy, Inc.
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, any MTE terminals, demonstration units and
DSS(TM) equipment leased or rented to Subscribers owned by Seller and used or
useable in connection with the Business, which equipment and tangible assets are
listed on Schedule 1.1 attached hereto.
"Franchise" shall mean any residual rights of Seller, if any, as a
member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
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<PAGE> 5
"Golden Wheat" shall mean Golden Wheat, Inc., a Kansas corporation and
the parent of Seller.
"Inventory" shall mean any DSS(TM) subscriber equipment units (other
than DSS(TM) subscriber units leased or rented to Subscribers) of Seller held
for resale which Purchaser notifies Seller pursuant to Section 4.4(b) hereof it
desires to purchase pursuant to this Agreement, which Inventory shall be valued
at the lesser of each item's (i) actual cost and (ii) current wholesale value.
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
"Locations" shall mean the counties and certain other areas in the
State of Kansas set forth on Schedule 1.2 attached hereto in which Seller has
the exclusive right to distribute DBS Services pursuant to the NRTC Agreements.
"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated November 30, 1993 by and
between the NRTC and Seller, as amended by that certain Amendment as of March
25, 1994 and as may be further amended from time to time, together with all
schedules and exhibits thereto, a copy of which is attached as Schedule 1.3.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement dated November 30, 1993 by and between the NRTC and Seller, as amended
from time to time, together with all schedules and exhibits thereto, a copy of
which is attached as Schedule 1.4.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.5 attached hereto, including any contracts and
agreements with DirecTv, copies of which are attached to such Schedule.
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<PAGE> 6
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
"Prepaid Expenses" shall mean all prepaid property taxes, prepaid
supplies, advances, deposits, deferred charges and other prepaid expenses (other
than prepaid insurance) shown on Seller's books and records as of the Closing
Date relating to the Business which Prepaid Expenses can be credited to
Purchaser's account after the Closing Date, as determined in accordance with
GAAP.
"Programming" shall mean Cable Programming and any programming provided
DirecTv pursuant to the NRTC Agreements.
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
"Purchased Assets" shall mean only the (i) NRTC Agreements, (ii)
Franchise, (iii) Current Assets, (iv) relationships, contracts and accounts with
Customers, (v) Fixed Assets, (vi) Records, (vii) telephone numbers used in the
Business and (viii) all other assets of Seller, whether tangible or intangible,
used in connection with the Business and set forth on Schedule 1.6 attached
hereto.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Seller in the Locations, including, without
limitation, copies of Customer and prospective customer lists, computer
programs, tapes and electronic data processing software, accounting journals and
ledgers, accounts receivable records, and all NRTC reports, correspondence and
other documents relating to the NRTC Agreements and Other Assumed Agreements and
compliance therewith.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i) is an active subscriber subscribing to a package of basic services, (ii) on
the last day of the calendar month prior to such date, whose account is not more
than sixty (60) days past due from the date payment is due, (iii) is not an
employee or agent of the service provider or charged a fee that is nominal
(e.g., demonstration unit) or substantially below the service provider's
published rates, and (iv) has not given notice of intent to discontinue service.
"Survival Termination Date" shall mean the last day of the eighteenth
(18th) month after the Closing Date.
"Termination Date" shall mean April 30, 1997.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Seller as of the
Closing Date which are listed on Report 17 (Unearned Revenue Report) of the NRTC
Central Billing System Reports.
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<PAGE> 7
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Seller all of Seller's right, title and interest in and to the Purchased Assets,
free and clear of any and all Liens, on the Closing Date for the consideration
set forth in this Agreement. The sale, transfer, assignment and conveyance of
the Purchased Assets shall be made by the execution and delivery at Closing of
(i) an Assignment and Assumption Agreement substantially in the form attached
hereto as Schedule 2.1(a) (the "Assignment"), and (ii) a bill of sale
substantially in the form attached hereto as Schedule 2.1(b) (the "Bill of
Sale"), and (iii) such other recordable instruments of assignment, transfer and
conveyance as Purchaser shall reasonably request.
ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLER. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Seller with respect to the following:
(a) the NRTC Agreements to the extent the obligations therein
arise out of the provision of DBS Services to Customers and accrue on
or after the Closing Date; and
(b) all Current Liabilities as of the Closing Date.
Anything in this Agreement to the contrary notwithstanding,
except for the liabilities specifically set forth in this Section 3.1, Purchaser
shall not assume or be deemed to have assumed under this Agreement, by reason of
the transactions contemplated by this Agreement, or otherwise, any other trade
or other accounts payable, accrued expenses, debts, liabilities, obligations or
commitments of Seller of any nature whatsoever, known or unknown, and the
execution, delivery and performance of this Agreement shall not render Purchaser
liable for any such debt, liability, obligation or commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Seller are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Seller under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Seller with or
for the benefit of any employee of Seller; and
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Seller,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution, sale or provision
of any services of Seller, or (ii) any failure or alleged failure to comply with
any federal, state or local law, rule or regulation applicable to Seller or the
Business.
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<PAGE> 8
Purchaser agrees to promptly notify Seller of any claims which Purchaser obtains
knowledge of which arise out of or result from liabilities of Seller not assumed
by Purchaser pursuant to this Agreement.
ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be Five Million Twenty-Five Thousand Dollars
($5,025,000), subject to adjustment as provided in Section 4.4 herein.
4.2. BINDER. One November 8, 1996 Purchaser deposited Fifty Thousand
Dollars ($50,000) with Seller as a good faith binder to proceed with the
transactions contemplated hereby (the "Binder").
4.3. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price, subject to adjustment as provided for in Section 4.4
herein, by certified or cashier's check, or by wire transfer of immediately
available funds to an account or accounts designated in writing by Seller (the
"Closing Payment").
4.4. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the Current Assets of Seller and decreased by the
parties' good faith estimate of the Current Liabilities of Seller as of the
Closing Date (the "Closing Adjustment"), which adjustment shall be subject to
final adjustment as provided for in paragraph (c) below.
(b) No later than thirty (30) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Purchaser shall make and
deliver to Seller a balance sheet reflecting the Current Assets and Current
Liabilities of Seller as of the Closing Date (the "Closing Date Balance Sheet"),
prepared on a basis consistent with this Agreement. For purposes of the Closing
Adjustment and the Final Closing Adjustment (as hereinafter defined), the amount
of Accounts Receivable of Seller to be included in the Closing Date Balance
Sheet shall include only Accounts Receivable of Subscribers as reflected on
Report 18A (Subscriber Accounts Receivable Aging by Account) of the NRTC Central
Billing System Reports less a reserve for Accounts Receivable which are not
collectible as determined in accordance with GAAP ("Bad Debt Reserve"). In
addition, the Closing Date Balance Sheet and the Final Closing Adjustment shall
not include as a Current Asset or Current Liability the net book value or
liability associated with any DSS(TM) equipment leased or rented by Seller to
any of its Customers and any accounts receivable arising from such leases or
rental agreements, other than accounts receivable arising from Programming.
Purchaser may, by providing Seller with written notice at least fifteen (15)
days prior to the Closing, elect to purchase all, or certain of, the DSS(TM)
Subscriber equipment owned by Seller (other than rental or leased DSS(TM)
subscriber equipment) on the Closing Date. Any such equipment which is purchased
by Purchaser shall be included as Inventory in the Closing Date Balance Sheet.
Seller shall make available to Purchaser its Records so Purchaser may verify the
actual cost of the Inventory. Except as set forth in this Section 4.4(b), no
other
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<PAGE> 9
assets or liabilities shall be included in the Closing Date Balance Sheet.
Seller shall make available to Purchaser such documentation, back-up, invoices,
and books and records of Seller as Purchaser may reasonably request.
(c) Seller and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Seller and Purchaser are unable to
reconcile such discrepancies, Purchaser shall have fifteen (15) days from
presentment of the Closing Date Balance Sheet by Seller to notify Seller if
Purchaser wishes to have Seller's determination examined. If Purchaser elects to
have Seller's determination examined, it shall be submitted to the determination
in Kansas City, Missouri, by the Certified Public Accounting firm of KMPG Peat
Marwick (or any other independent Certified Public Accounting firm mutually
acceptable to Seller and Purchaser), the cost of such examination to be paid
fifty percent (50%) by Seller and fifty percent (50%) by Purchaser; provided the
fees of such firm in excess of Five Thousand Dollars ($5,000) shall be paid by
Purchaser. The determination by Purchaser shall be final and binding on the
parties unless Seller elects to have an examination as provided herein, in which
case the results of the examination shall be made within thirty (30) days of
such referral, and shall be final and binding on the parties (the "Final Closing
Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Seller shall pay the difference in cash to Purchaser
within five (5) days after the final determination. In the event the Final
Closing Adjustment is greater than the Closing Adjustment, Purchaser shall pay
such excess in cash to Seller within five (5) days after the final
determination. If, following any payment pursuant to this Section 4.4(d), an
error (in billing or reporting by NRTC or otherwise) is thereafter discovered
which would have affected the Final Closing Adjustment, the party in whose favor
the error was made shall immediately pay in cash the amount of such error to the
other party.
4.5. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.5 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller hereby represents and warrants to
Purchaser as follows:
5.1. ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Kansas, with all
requisite power and authority to own and operate the Business as it is now
conducted and to own the Purchased Assets in the places where the Business is
now conducted and where the Purchased Assets are now owned or operated.
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5.2. AUTHORITY.
(a) Seller has full power and authority to execute, deliver
and perform this Agreement and all agreements and transactions contemplated
hereby. The execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly authorized by Seller and, except
for the consent of the NRTC, DirecTv and the other Persons set forth on Schedule
5.2(b), no other action or proceeding on the part of any other party is
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and constitutes, and each of the other agreements to be
executed by Seller pursuant to the terms hereof will constitute upon execution
and delivery, a legal, valid and binding obligation of Seller enforceable in
accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 5.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any document related hereto by Seller and the
consummation by Seller of all of the transactions contemplated hereby or thereby
will not (with or without the giving of notice or the lapse of time or both) (i)
violate or require any consent or approval under any applicable provision of any
judgement, order, writ, injunction, decree, rule, regulation or law; (ii)
require any consent under, conflict with, result in termination of, accelerate
the performance required by, result in a breach of, constitute a default under
or otherwise violate the terms of any agreements, instruments or other
obligations to which Seller is a party or by which Seller or any of the
Purchased Assets may be bound or affected; (iii) require any consent or approval
by, notice to or registration with any governmental authority or any other
Person; (iv) conflict with or violate any provision of Seller's organization
documents; or (v) result in the creation of a Lien upon any of the Purchased
Assets howsoever arising.
5.3. TITLE TO THE PURCHASED ASSETS.
(a) Seller has good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) attached hereto. Schedule 1.6 attached hereto contains a true,
accurate and complete list of other assets used in connection with the Business.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Seller was conducting the Business in the
ordinary course prior to the Closing Date.
5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.1 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Seller in the past, and no
currently needed repairs are reasonably likely to cost, either singularly or in
the aggregate with respect to all Fixed Assets, in excess of Five Thousand
Dollars ($5,000).
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5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Attached hereto as Schedules 1.3, 1.4 and 1.5 are true and
complete copies of each of the NRTC/Member Agreement, the NRTC/Retail Agreement,
and the Other Assumed Agreements, if any, respectively, together with all
amendments, schedules and exhibits thereto. The NRTC/Member Agreement grants
Seller the exclusive right to distribute DBS Services in the Locations, except
as set forth in the NRTC/Member Agreement.
(b) Seller has paid all sums to NRTC or DirecTv, as
appropriate, required under the NRTC/Member Agreement such that Seller is
entitled to the marketing and sales revenues as provided therein.
(c) Seller is in full compliance in all material respects with
any and all membership, affiliation, licensing or other requirements or
arrangements as may have been established by NRTC or DirecTv pursuant to the
NRTC Agreements, or otherwise.
(d) Seller is not in breach of the NRTC Agreements, nor has
Seller failed to perform any material obligation under the NRTC Agreements.
Seller has not received notice of any such breach or non-performance at any time
of such NRTC Agreements. To the best of Seller's knowledge, no other party to
any of the NRTC Agreements is in default thereunder or has failed to perform any
material obligation thereunder.
(e) Except as disclosed on Schedule 5.5(e) attached hereto,
none of the DBS Services distributed by Seller have been suspended at any time
since inception.
(f) Schedule 5.5(f) attached hereto (as supplemented by
applicable NRTC reports) sets forth a complete list of names and addresses of
all Customers of Seller, identified as Committed Member Residence and Commercial
Establishment for the five (5) year period immediately preceding the date
hereof. Schedule 5.5(f) includes the number of months such Customer has been a
Customer and whether such Customer's account is past due. Schedule 5.5(f) will
be updated not more than three (3) days prior to the Closing Date. Seller has
obtained and maintained full and complete information regarding the location of
each Customer's descrambler.
5.6. INVENTORY. The Inventory shall be usable in the ordinary course of
business and shall comply in all respects with industry standards of quality and
marketability. The Inventory will not, as of the Closing Date, include any items
below standard quality, obsolete or sub-prime. The Inventory shall consist
solely of undamaged, original units in original, sealed cartons, located at
Seller's principal place of business. Seller owns all of the Inventory free and
clear of any and all Liens and has full power and authority to transfer the
Inventory to Purchaser.
5.7. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business and
none of the Accounts Receivable are subject to any counterclaim or setoff.
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5.8. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
5.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9 attached hereto, since December 31, 1995 there has not been:
(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Seller which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Seller (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
other than obligations or liabilities incurred in the ordinary course of
business and consistent with past practices;
(c) any termination or waiver of any rights of Seller of
material value to the Business or to Seller;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) the adoption of any statute, rule, regulation or order
which adversely affects the Business or the Purchased Assets;
(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
5.10. LICENSES AND PERMITS. Attached hereto in Schedule 5.10 is a list
of all federal, state, local and foreign permits, certificates, licenses,
approvals and other authorizations necessary in the conduct of the Business. All
such licenses and permits of Seller are in full force and effect, and no
violations are or have been recorded in respect thereof, and no proceeding is
pending or threatened to revoke or limit any thereof. Seller and its conduct of
the Business is in compliance with all applicable laws, statutes, ordinances,
rules, regulations and order of any federal, foreign, state or local government
and any other government department or agency, and in any judgment, decision,
decree or order of any court or governmental agency, department or authority.
5.11. TAX MATTERS.
(a) Seller has timely filed all federal, state, local and
foreign tax returns and tax reports required to be filed with respect to the
Business with the appropriate governmental agency in all jurisdictions in which
such returns and reports are required to be filed. All such returns and reports
are true, correct and complete, and all amounts shown as owing on them have been
paid, including all interest, penalties, deficiencies and assessments heretofore
levied or assessed against Seller. Seller has duly withheld, collected and
timely paid over, or holds
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for such payment, to the proper governmental authorities all taxes required to
be withheld or collected by it. There is no agreement for extension of time of
assessment or payment of any taxes of Seller. No waiver of any statute of
limitations has been executed by Seller for any tax year which remains open or
unsettled. To the best knowledge, information and belief of Seller, there is no
examination or audit pending by the Internal Revenue Service or by any state or
local taxing authority with respect to the tax matters of Seller. There is no
liability for taxes or any tax deficiency or the existence of any basis from
which liability for taxes or tax deficiency, including interest and penalties,
might be asserted against Seller for any period in excess of the applicable
reserve for taxes, if any, and Seller has no knowledge of any such liability or
deficiency or the existence of any basis therefor.
(b) All federal, state, local and foreign income, profits,
franchise, sales, use, occupation, property, excise and other taxes (including
interest and penalties), if any, payable by Seller or relating to or chargeable
against the Purchased Assets or chargeable against Seller's revenue or income
have been fully paid or are not past due and are fully disclosed and accrued on
the books and records of Seller and the proper amount of reserves exist for the
payment thereof.
5.12. DISCLOSURES. No representation or warranty made by Seller in this
Agreement, and no statement made in any Schedule, exhibit, certificate or other
writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
5.13. LITIGATION. There are not actions, suits, proceedings, orders,
investigations or claims pending or, to the best of Seller's knowledge, any
threats against or affecting Seller, the Purchased Assets or the Business, at
law or in equity, before any court, arbitration panel, tribunal or governmental
department, commission, board, bureau, agency or instrumentality.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser hereby represents and warrants to
Seller as follows:
6.1. ORGANIZATION. Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Georgia,
with all requisite power to own and operate its business as it is now conducted.
As of the Closing Date, Purchaser shall have the right to transact business as a
foreign limited partnership in the State of Kansas.
6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding on the part of any
other party is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and
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delivered by Purchaser, and constitutes, and each of the other agreements to be
executed pursuant to the terms hereof upon execution and delivery will
constitute, a legal, valid and binding obligation of Purchaser, enforceable in
accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other document related hereto by Purchaser
and the consummation by Purchaser of all of the transactions contemplated hereby
or thereby will not (with or without the giving of notice or the lapse of time
or both) (i) violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in the termination
of, accelerate the performance required by, result in the breach of, constitute
a default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Purchaser is a party; (iii) require any consent or
approval by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's certificate of
limited partnership or limited partnership agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any Schedule, exhibit, certificate or
other writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Seller shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use its best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(d) maintain its Records in accordance with prior practice,
maintain the Purchased Assets and the Inventory in their present condition,
ordinary wear and tear excepted, consistent with past practice, and otherwise
use its best efforts to operate the Business as currently operated and in the
ordinary course in accordance with practices during the twelve (12) months
preceding the date of this Agreement;
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(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets or Inventory, except for sales or
dispositions of Inventory in the ordinary course of business;
(f) use its best efforts to preserve intact the current
business organizations and relationships with employees, suppliers, advertisers,
Customers and other Persons having dealings with Seller relating to the
Business;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTv;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTv;
(i) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC Agreements, and (ii) copies of
all protests, complaints, challenges or other documents submitted to or filed
with the NRTC or DirecTv by third parties concerning the Business and, promptly
upon the filing or making thereof, copies of Seller's responses thereto; and
(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against Seller in any court, or any
action against Seller before any governmental agency, and notify Purchaser in
writing promptly upon receipt of any administrative or court order relating to
the Business. Without limiting the generality of the foregoing, Seller shall not
take any of the actions (over which Seller can exercise control) listed in
Section 5.9 herein.
7.2. ACCESS.
(a) Prior to the Closing, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Seller, its Records and the Business as Purchaser deems
necessary or advisable and shall have full access to the auditors and attorneys
of Seller. Seller shall permit Purchaser and its employees, agents and
representatives, on reasonable notice, to have access during normal business
hours to its premises, personnel and Records. Seller shall cooperate to provide
access to its Customers, suppliers and such other parties as Purchaser may
reasonably request. Seller shall, and shall cause its officers, attorneys and
accountants to, furnish Purchaser with such financial and operating data and
other information as Purchaser from time to time shall reasonably request,
including, but not limited to, Seller's balance sheets for the Business as of
December 31, 1995 and June 30, 1996. No investigation by Purchaser shall in any
way affect or otherwise diminish the representations, warranties and covenants
of Seller hereunder; provided, however, that Purchaser shall advise Seller as
soon as practicable after it obtains knowledge of any breach or nonperformance
of the representations, warranties or covenants of Seller.
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(b) Purchaser will hold, and will cause its authorized
representatives (including its investors and lending institutions) to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or official request or by other requirements of law, all documents and
information concerning Seller and the Business furnished to Purchaser in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
Purchaser, (ii) in the public domain through no fault of Purchaser, or (iii)
later lawfully acquired by Purchaser from other sources) and will not release or
disclose such information to any other Person, except its auditors, attorneys,
financial advisors and other consultants and advisors and lending institutions
(including banks) in connection with this Agreement, it being understood that
such Persons shall be informed by such party of the confidential nature of such
information and shall be directed by such party and shall have agreed to treat
such information as confidential. In the event that the transactions
contemplated herein are not consummated for any reason, Purchaser will, upon
request by Seller, promptly return to Seller all copies of any Schedules,
statements, documents or other written information obtained in connection
herewith, without retaining any copies or summaries thereof, and shall maintain
such confidence except to the extent such information comes into the public
domain through no fault of Purchaser.
7.3. CONSENT OF NRTC, DIRECTV AND OTHERS. Seller and Purchaser shall
join in and deliver the requests for the consent of the NRTC and DirecTv to the
transfer of the NRTC Agreements, and such other requests for consent that
Purchaser reasonably determines may be necessary or appropriate to consummate
the transactions contemplated hereby, and they will each diligently take all
steps necessary or desirable to obtain such consents. The failure of either of
the parties to timely file or diligently seek the consents, or to cooperate
fully with the other party with respect thereto, shall be deemed a material
breach of this Agreement.
7.4. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Seller and Purchaser shall
mutually agree in advance as to timing, form and content before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to reaching mutual agreement, except as may be
required by law. In the event that prior to the Closing Date either party is
required by law to make a statement with respect to the transactions
contemplated herein, such party shall notify the other party in writing as to
the timing, form and content of such statements. Seller and Purchaser agree to
maintain the confidentiality of this Agreement and the terms hereof and any
information exchanged by the parties in connection with the consummation of the
transaction contemplated hereby.
7.5. BEST EFFORTS. Subject to the terms and conditions herein provided,
Seller and Purchaser agree to use their best efforts to take, execute,
acknowledge and deliver, or cause to be taken, executed, acknowledged and
delivered, all actions, deeds, assignments, documents, instruments, transfers,
conveyances, discharges, releases, assurances and consents, and to do, or cause
to be done, all things necessary, proper or advisable under this Agreement and
all applicable laws and regulations to consummate, confirm, perfect, evidence
and otherwise make effective the transactions contemplated by this Agreement,
including actions necessary to obtain all requisite assignments of agreements
and contracts, and to fulfill the requirements of Articles VIII and IX hereof on
or prior to the Closing Date.
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7.6. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Seller will refrain, and will cause all of its
agents and employees to refrain, from taking, directly or indirectly, any action
to encourage, initiate, solicit or continue any discussions or negotiations
with, or any other offers from, any other Person concerning a merger, sale of
substantial stock or any similar transaction concerning Seller which would
affect the Business, or the sale of the Purchased Assets or any portion thereof.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Seller on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
8.3. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the financial condition, Business, assets, results of
operations or prospects of Seller or the Purchased Assets.
8.4. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.5. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Seller in connection with the Closing including, without limitation,
NRTC and DirecTv consent as provided for in Section 7.3 herein, shall have been
duly obtained by Seller and shall be in full force and effect without conditions
which are materially adverse to Purchaser.
8.6. SUBSCRIBERS. On the Closing Date, Seller shall have at least 2,000
Subscribers.
8.7. REVIEW OF SELLER. The satisfactory completion, in Purchaser's
reasonable discretion, of Purchaser's due diligence investigation covering the
Business as provided for in Section 7.2 herein.
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8.8. SELLER'S CLOSING DELIVERIES. Seller shall have delivered to
Purchaser the following at Closing:
(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) all Records or copies of the Records;
(c) a certified copy of Resolutions of the Board of Directors
and Shareholders of Seller authorizing the execution, delivery and performance
of this Agreement;
(d) a certificate of good standing of Seller from the
Secretary of State of Kansas;
(e) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or otherwise addressed to
Purchaser's satisfaction;
(f) a list of the Accounts Receivable from all Customers
(Reports 18A and 19A) and a list of the Unearned Revenue (Report 17), each as of
the last billing period ending prior to the Closing Date;
(g) a certificate signed by Seller's President, dated the
Closing Date, to the effect that the conditions set forth in this Article VIII
have been satisfied;
(h) an opinion of James Caplinger, Jr., Esq., counsel to
Seller, in form and substance reasonably acceptable to Purchaser;
(i) a certificate signed by Seller's President, dated the
Closing Date, regarding the transfer of Seller's account at Bank IV and
Southwest National Bank in Wichita, Kansas;
(j) Noncompetition Agreements with Seller, Golden Wheat and
its principals, substantially in the form attached hereto as Schedule 8.8; and
(k) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Seller's satisfaction of each of its obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Seller's obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Seller), on or before the Closing Date, of each of the following conditions
precedent:
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9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in Section 7.3 herein) shall have been
duly obtained by Purchaser and shall be in full force and effect without
conditions which are materially adverse to Seller.
9.5. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Seller the following at Closing:
(a) the Closing Payment;
(b) a certified copy of Resolutions of the general partner of
Purchaser authorizing the execution, delivery and performance of this Agreement;
(c) a certificate signed by Purchaser's general partner, dated
the Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied;
(d) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Purchaser, in form and substance reasonably acceptable to Seller; and
(e) a certificate signed by Purchaser's general partner, dated
the Closing Date, regarding the transfer of Seller's account at Bank IV and
Southwest National Bank in Wichita, Kansas.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise specifically provided herein, each and every representation and
warranty contained in this
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Agreement shall expire with, and be terminated and extinguished by the Closing
or the termination of this Agreement pursuant to Section 11.13 hereof, and
thereafter, except and to the extent otherwise specifically provided herein,
neither Purchaser, Seller or any partner or representative thereof shall be
under any liability whatsoever with respect to any such representation or
warranty. The representations and warranties hereunder shall not be affected or
diminished by any investigation at any time by or on behalf of the party for
whose benefit such representations and warranties were made. All statements
contained herein or in any Schedule, exhibit, certificate, list or other
document delivered pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Subject to the limitations
hereinafter set forth, Seller, Golden Wheat and its principals, representatives,
successors, heirs and assigns shall indemnify, reimburse and hold Purchaser and
each of its partners, subsidiaries, affiliates, successors, assigns and agents
harmless from, against, for and in respect of any and all damages, losses,
settlement payments, obligations, liabilities, claims, demands, actions or
causes of action, judgments, encumbrances, costs and expenses (including
reasonable attorneys' fees) (collectively, the "Indemnifiable Damages") relating
to, resulting from or arising out of (i) any misrepresentation, untruth,
inaccuracy, breach or nonfulfillment of any representation, warranty, agreement
or covenant of Seller contained in or made in connection with this Agreement or
in any Schedule, exhibit, certificate or other document delivered pursuant
hereto, (ii) the failure of Seller to pay, perform or discharge promptly when
due any of its obligations, liabilities and debts except as provided under this
Agreement, (iii) any liability or obligation relating to the operation of the
Business prior to the Closing Date which is not specifically assumed by
Purchaser pursuant to this Agreement, (iv) any breach or default prior to the
Closing Date by Seller under any of the NRTC Agreements, (v) any state or local
sales, use, excise, personal property or similar tax liability (including
penalties and interest) of Seller, and (vi) any other liabilities, obligations
or claims, whether absolute or contingent, known or unknown, matured or
unmatured and not expressly assumed by Purchaser hereunder.
10.3. INDEMNIFICATION OF SELLER. Subject to the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Seller and its
shareholders, subsidiaries, affiliates, officers and directors harmless from,
against, for and in respect of any and all Indemnifiable Damages relating to,
resulting from or arising out of (i) any misrepresentation, untruth, inaccuracy,
breach or nonfulfillment of any representation, warranty, agreement or covenant
of Purchaser contained in or made in connection with this Agreement or in any
Schedule, exhibit, certificate or other document delivered pursuant hereto, (ii)
the failure of Purchaser to pay, perform or discharge promptly when due (a) its
obligations set forth in Section 4.3 herein, or (b) the Current Liabilities,
(iii) the assertion against Seller of any liability or obligation relating to
Purchaser's operation of the Business after the Closing Date, and (iv) any
breach or default after the Closing Date by Purchaser under the NRTC Agreements.
10.4. EXPIRATION OF INDEMNIFICATION OBLIGATIONS. The indemnification
obligations of Seller under Sections 10.2(i), (ii), (iii), (iv) and (vi) and
Purchaser under Section 10.3 above shall expire and terminate on the Survival
Termination Date, unless, prior to such termination, the party entitled to
indemnification hereunder (the "Indemnified Party") shall have provided written
notice to the other party hereto obligated to provide indemnification pursuant
to Sections 10.2 or 10.3 herein (the "Indemnifying Party") of an assertion by
the Indemnified Party of a right to indemnification under Sections 10.2 or 10.3
("Indemnification Claim").
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<PAGE> 21
10.5. RIGHT TO CONTEST.
(a) If the Indemnified Party receives notice or has knowledge
of any claim for which it believes the Indemnifying Party is obligated to
provide indemnification, the Indemnified Party shall provide the Indemnifying
Party with an Indemnification Claim within twenty (20) days of its receipt of
same, but in no event later than ten (10) days prior to the date a responsive
pleading with respect to such Indemnification Claim is due. The Indemnification
Claim shall set forth a brief description of the facts giving rise to such a
claim and the amount (or reasonable estimate) of the Indemnifiable Damages
suffered or which may be suffered by the Indemnified Party. The Indemnified
Party shall, at the expense of the Indemnifying Party, provide all information
regarding the contest or defense of the claim and cooperate fully with the
Indemnifying Party in the conduct of any such contest or defense. Before being
required to make any payment pursuant to Sections 10.2 or 10.3 herein, the
Indemnifying Party may, at its own expense, elect to undertake and control the
defense of, and take all necessary steps properly to contest any claim in
respect thereof involving third parties or to prosecute such claim to conclusion
or settlement satisfactory to the Indemnified Party. If the Indemnifying Party
makes the foregoing election, then the Indemnified Party shall have the right to
participate, at its own expense, in all proceedings but shall not admit any
liability, settle, compromise, pay or discharge the claim without the prior
written consent of the Indemnifying Party. If the Indemnifying Party does not
make such election, it shall be obligated to pay the costs of defending or
prosecuting such claim and shall be bound by whatever result is obtained by the
Indemnified Party respecting such claim.
(b) Except as otherwise specifically provided herein, the
remedies provided in this Article X shall be cumulative and shall not preclude
assertion by any party of any other rights or the seeking of any other remedies
against any other party hereto.
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
To Purchaser: Digital Television Services of
Kansas, LP
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
19
<PAGE> 22
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Seller: Skywave Communications, Inc.
106 West 1st Street
Udall, Kansas 67146
Attention: Mr. Greg Reed
with a copy to: James Caplinger, Jr., Esq.
J.R. Caplinger
823 West 10th Street
Topeka, Kansas 66612-1618
11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Kansas, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns, if any, of the parties hereto. Except as
otherwise expressly provided herein, nothing expressed or implied herein is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto, any right or remedy hereunder or by reason hereof. This
Agreement may not be assigned by Purchaser (except to a party which, directly or
indirectly is controlled by, controls or is under common control with,
Purchaser) or Seller without the prior written consent of the other party.
20
<PAGE> 23
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules
attached hereto constitute the entire agreement and understanding of the parties
in respect of the transactions contemplated hereby and supersede all prior
correspondence, conversations, agreements, arrangements, understandings and
other writings, including the Term Sheet dated October 6, 1996 between Seller
and Columbia DBS Management, LLC. No promises, covenants or representations of
any character or nature other than those expressly stated herein have been made
to induce either party to enter into this Agreement. This Agreement may be
amended or modified only by a written instrument signed by Purchaser and Seller.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives. Purchaser shall pay all of the transfer or similar fees and all
expenses due the NRTC incurred to complete the transfer and assignment in
connection with the transactions contemplated by this Agreement.
11.10. KNOWLEDGE OF SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Seller confirms that it has made or caused to be made due and diligent inquiry
as to the matters that are the subject of such representations and warranties.
11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Seller and Purchaser, (ii) either party
upon written notice to the other party if the Closing has not occurred on or
before the Termination Date, (iii) Seller, if Sections 7.3, 9.1, 9.2 or 9.5 have
not been complied with or performed by Purchaser and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the tenth (10th) day following
written notice thereof from Seller; provided that Seller has not defaulted in
any material respect with respect to any of its obligations hereunder, or (iv)
Purchaser, if the covenants and conditions set forth in Articles VII and VIII
required to be complied with and performed by Seller have not been complied with
or performed by Seller and such noncompliance and nonperformance shall not have
been cured or eliminated (or by its nature cannot be cured or eliminated) by
Seller on or before the tenth (10th) day following written notice thereof from
Purchaser; provided that Purchaser shall not have defaulted in any material
respect with respect to any of its obligations hereunder.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i) or (ii), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
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<PAGE> 24
(c) In the event of termination pursuant to Section 11.13(a)(iii),
Purchaser recognizes that Seller would be damaged, the extent to which is
extremely difficult and impractical to ascertain. The parties, therefore, agree
that if this Agreement is terminated pursuant to Section 11.13(a)(iii), Seller
shall be entitled to retain the Binder. The parties agree that this sum shall
constitute liquidated damages. Seller shall be entitled to recover from
Purchaser any additional damages, losses, costs and expenses (including
reasonable attorneys' fees) provided by law due to Purchaser's failure to
consummate, or Purchaser's default under, this Agreement.
(d) In the event of termination pursuant to Section 11.13(a)(iv),
Purchaser shall be entitled to recover from Seller all damages, losses, costs
and expenses (including reasonable attorneys' fees) provided by law.
11.14. POWER OF ATTORNEY. Seller hereby irrevocably appoints Purchaser,
and all agents, officers, and employees designated by Purchaser, from and after
the Closing Date, as its true and lawful attorney-in-fact and duly authorized
agent to:
(i) open Seller's mail and endorse and collect any checks,
notes, drafts or any other items payable to Seller from Subscribers or
otherwise issued in connection with the Business, and deposit same to
the account of Purchaser in any depository institution;
(ii) sign receipts and other papers necessary for the
collection of any and all amounts due from Subscribers;
(iii) notify Subscribers that the accounts have been assigned
to Purchaser; and
(iv) direct such Subscribers to make all payments due from
them directly to Purchaser.
Purchaser shall furnish Seller with a copy of any notice issued pursuant to
Sections 11.14(iii) or (iv) above and Seller hereby agrees that any such notice,
in Purchaser's sole discretion, may be sent on Seller's stationary, in which
event Seller shall, upon demand, co-sign such notice with Purchaser.
SELLER DOES HEREBY RATIFY AND CONFIRM ALL THINGS DONE BY PURCHASER WITHIN THE
SCOPE OF THE AUTHORITY HEREIN GIVEN AS FULLY AND TO THE SAME EXTENT AS IF DONE
BY SELLER PERSONALLY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of Kansas, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
--------------------------------
Douglas S. Holladay, Jr. President
and Manager
SELLER:
Skywave Communications, Inc.
By:
------------------------------------
Its:
-------------------------------
IN WITNESS WHEREOF, the undersigned has duly executed this Agreement as
of the date first above written for the purpose of agreeing to the provisions of
Article X hereof.
Golden Wheat, Inc.
By:
------------------------------------
Its:
-------------------------------
23
<PAGE> 1
EXHIBIT 10.14
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 22, 1996
BY AND BETWEEN
DIGITAL TELEVISION SERVICES OF KANSAS, LP
AND
KANSAS DBS, L.L.C.
================================================================================
<PAGE> 2
LIST OF SCHEDULES
Schedule 1.1 Escrow Agreement
Schedule 1.2 Fixed Assets
Schedule 1.3 Locations
Schedule 1.4 NRTC/Member Agreement
Schedule 1.5 NRTC/Retail Agreement
Schedule 1.6 Other Assumed Agreements
Schedule 2.1(a) Assignment and Assumption Agreement
Schedule 2.1(b) Bill of Sale
Schedule 4.5 Allocation of Purchase Price
Schedule 5.2(b) Consent of Seller
Schedule 5.3(a) Liens
Schedule 5.4 Fixed Assets Needing Repairs
Schedule 5.9 Changes or Events
Schedule 5.10 Licenses and Permits
Schedule 6.2(b) Consent of Purchaser
Schedule 8.8 Noncompetition Agreement
Schedule 11.1 Notices
[Schedules have been omitted but will be furnished upon request]
<PAGE> 3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 22nd day of November, 1996, by and between Digital Television
Services of Kansas, LP, a Georgia Limited Partnership ("Purchaser"), and Kansas
DBS, L.L.C., a Kansas limited liability company ("Seller").
RECITALS
1. Seller owns and operates the National Rural Telecommunications
Cooperative's System No. 0109 (the "System") for the exclusive distribution in
certain areas in the State of Kansas (the "Locations") of DBS Services offered
by DirecTv (the "Business").
2. Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser all of Seller's rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations, any residual rights of Seller
as a member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements and certain of the assets used in
the Business, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, Seller and
Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Seller to the
NRTC as of the Closing Date as reflected on the Closing Date Balance Sheet
relating to the Business; including, without limitation, accounts payable to the
NRTC with respect to wholesale bills, equipment and other services.
"Accounts Receivable" shall mean all of the accounts receivable of
Seller as of the Closing Date for all Customers which are listed on Report 18A
(Accounts Receivable Aging Summary) of the NRTC Central Billing Systems Reports.
"Binder" shall mean the Fifty Thousand Dollars ($50,000) Purchaser
deposited with Seller on November 12, 1996 as a good faith binder to proceed
with the transactions contemplated by this Agreement.
<PAGE> 4
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"Cash" shall mean all cash in Seller's bank accounts at Huntington Bank
as of the Closing Date.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Seller, on (i) the
calendar day of such month on which NRTC's accounting period closes after which
all of the conditions precedent set forth in Articles VIII and IX herein have
been satisfied or waived, or (ii) such other date or at such other time or place
(including via mail, overnight courier or facsimile transmission) as the parties
may mutually agree upon in writing. The parties anticipate that the Closing will
occur on January 31, 1997. The Closing shall be effective as of the close of
business on the Closing Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Current Assets" shall mean Cash, Accounts Receivable, Inventory and
Prepaid Expenses of Seller, which will be acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Seller as reflected on the Closing Date Balance Sheet which will be assumed
by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased DBS Services, or entered into a binding agreement to purchase DBS and
related services, from Seller at any time during the five (5) year period
immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTv" shall mean DirecTv, Inc., a California corporation, the
successor in interest and rights holder to Hughes Communications Galaxy, Inc.
"Escrow Agent" shall mean Bank IV, a national banking association with
offices in Hays, Kansas.
"Escrow Agreement" shall mean the Escrow Agreement dated as of the date
hereof among the Escrow Agent, Purchaser and Seller which Escrow Agreement shall
be substantially in the form attached hereto as Schedule 1.1.
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<PAGE> 5
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, any MTE terminals, demonstration units and
DSS(TM) equipment leased to Subscribers, owned by Seller and used or useable in
connection with the Business, which equipment and tangible assets are listed on
Schedule 1.2 attached hereto.
"Franchise" shall mean any residual rights of Seller, if any, as a
member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Inventory" shall mean (i) all undamaged, original DSS(TM) subscriber
units in original, sealed cartons of Seller held for resale, which units shall
be valued at the lesser of each item's (a) actual cost and (b) current wholesale
value, and (ii) all used and refurbished DSS(TM) subscriber units of Seller,
which units shall be valued at $175 per unit.
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
"Locations" shall mean the counties and certain other areas in the
State of Kansas set forth on Schedule 1.3 attached hereto in which Seller has
the exclusive right to distribute DBS Services pursuant to the NRTC Agreements.
"Name" shall mean "Kansas DBS."
"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated November 12, 1993 by and
between the NRTC and Seller, as amended by that certain Amendment as of March
25, 1994 and as may be further amended from time to time, together with all
schedules and exhibits thereto, a copy of which is attached as Schedule 1.4.
3
<PAGE> 6
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement dated August 3, 1993 by and between the NRTC and Seller, as amended
from time to time, together with all schedules and exhibits thereto, a copy of
which is attached as Schedule 1.5.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.6 attached hereto, including any contracts and
agreements with DirecTv, copies of which are attached to such Schedule.
"Patronage Capital" shall mean the amount of patronage capital
dividends credited to the account of Seller or any of its members at the NRTC
for the period through the Closing Date pursuant to Article XII of the NRTC
Bylaws, as amended.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
"Prepaid Expenses" shall mean (i) all advertising expenses of Seller
not in excess of Twenty Thousand Dollars ($20,000) per month incurred during the
period from January 1, 1997 through the Closing Date, (ii) all amounts not in
excess of Two Thousand Five Hundred Dollars ($2,500) incurred by Seller during
the thirty (30) days prior to the Closing Date in connection with the repair of
DSS(TM) subscriber units, and (iii) all prepaid property taxes, prepaid
supplies, advances, deposits, deferred charges and other prepaid expenses (other
than prepaid insurance) shown on Seller's books and records as of the Closing
Date relating to the Business which Prepaid Expenses can be credited to
Purchaser's account after the Closing Date, as determined in accordance with
GAAP.
"Programming" shall mean Cable Programming and any programming provided
DirecTv pursuant to the NRTC Agreements.
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
"Purchased Assets" shall mean only the (i) NRTC Agreements, (ii)
Franchise, (iii) Current Assets, (iv) relationships, contracts and accounts with
Customers, (v) Fixed Assets, (vi) Records, (vii) telephone numbers used in the
Business, (viii) the Name and (ix) all other assets of Seller, whether tangible
or intangible, used in connection with the Business, excepting only the
Patronage Capital and all C-Band leases of Seller.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Seller in the Locations, including, without
limitation, copies of Customer and prospective customer lists, computer
programs, tapes and electronic data processing software, accounting journals and
ledgers, accounts receivable records, and all NRTC reports, correspondence and
other documents relating to the NRTC Agreements and Other Assumed Agreements and
compliance therewith.
4
<PAGE> 7
"Signing Deposit" shall mean Four Hundred Fifty Thousand Dollars
($450,000) to be deposited by Purchaser with the Escrow Agent on the date
hereof.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i) is an active subscriber subscribing to a package of basic services, (ii) on
the last day of the calendar month prior to such date, whose account is not more
than sixty (60) days past due from the date payment is due, (iii) is not an
employee or agent of the service provider or charged a fee that is nominal
(e.g., demonstration unit) or substantially below the service provider's
published rates, and (iv) has not given notice of intent to discontinue service.
"Subscriber Sales Promotion" shall mean the six (6) months of "free"
Programming which was offered to Subscribers during the period ending on
November 15, 1996 in connection with DirecTv's promotional offer.
"Survival Termination Date" shall mean the first (1st) anniversary of
the Closing Date.
"Termination Date" shall mean April 30, 1997.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Seller as of the
Closing Date which are listed on Report 17 (Unearned Revenue Report) of the NRTC
Central Billing System Reports and as reflected on the Closing Date Balance
Sheet.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Seller all of Seller's right, title and interest in and to the Purchased Assets,
free and clear of any and all Liens, on the Closing Date for the consideration
set forth in this Agreement. The sale, transfer, assignment and conveyance of
the Purchased Assets shall be made by the execution and delivery at Closing of
(i) an Assignment and Assumption Agreement substantially in the form attached
hereto as Schedule 2.1(a) (the "Assignment"), and (ii) a bill of sale
substantially in the form attached hereto as Schedule 2.1(b) (the "Bill of
Sale").
ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLER. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Seller with respect to the following:
(a) the NRTC Agreements to the extent the obligations therein
arise on or after the Closing Date;
5
<PAGE> 8
(b) all liabilities associated with the Subscriber Sales
Promotion;
(c) all liabilities incurred in connection with activations
after the Closing Date with respect to DirecTv's "$200 Cash Back" promotional
offer; and
(d) all Current Liabilities as of the Closing Date.
Anything in this Agreement to the contrary notwithstanding,
except for the liabilities specifically set forth in this Section 3.1, Purchaser
shall not assume or be deemed to have assumed under this Agreement, by reason of
the transactions contemplated by this Agreement, or otherwise, any other trade
or other accounts payable, accrued expenses, debts, liabilities, obligations or
commitments of Seller of any nature whatsoever, known or unknown, and the
execution, delivery and performance of this Agreement shall not render Purchaser
liable for any such debt, liability, obligation or commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Seller are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Seller under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Seller with or
for the benefit of any employee of Seller; and
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Seller,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution of any services of
Seller except for the liabilities assumed by Purchaser as set forth above, or
(ii) any failure or alleged failure to comply with any federal, state or local
law, rule or regulation applicable to Seller or the Business.
Purchaser agrees to promptly notify Seller of any claims which Purchaser obtains
knowledge of which arise out of or result from liabilities of Seller not assumed
by Purchaser pursuant to this Agreement.
ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be Fourteen Million Four Hundred Thousand Dollars
($14,400,000), subject to adjustment as provided in Section 4.4 herein.
4.2. ESCROW DEPOSIT. Contemporaneously with the execution of this
Agreement, Purchaser has delivered to the Escrow Agent the Signing Deposit and
Seller has delivered to the Escrow Agent the Binder (collectively, the "Escrow
Deposit") to be held by the Escrow Agent pursuant to the Escrow Agreement.
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4.3. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Seller as follows:
(a) The Escrow Deposit by certified or cashier's check, or by
wire transfer of immediately available funds to an account or accounts
designated in writing by Seller at least three (3) business days prior to the
Closing Date.
(b) The balance of the Purchase Price, subject to adjustment
as provided for in Section 4.4 herein, by certified or cashier's check, or by
wire transfer of immediately available funds to an account or accounts
designated in writing by Seller (together with the Escrow Deposit, the "Closing
Payment").
4.4. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the Current Assets of Seller and decreased by the
parties' good faith estimate of the Current Liabilities of Seller as of the
Closing Date (the "Closing Adjustment"), which adjustment shall be subject to
final adjustment as provided for in paragraph (c) below.
(b) No later than thirty (30) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Purchaser shall make and
deliver to Seller a balance sheet reflecting the Current Assets and Current
Liabilities of Seller as of the Closing Date (the "Closing Date Balance Sheet"),
prepared on a basis consistent with this Agreement. For purposes of the Closing
Adjustment and the Final Closing Adjustment (as hereinafter defined), (i) the
amount of Accounts Receivable of Seller to be included in the Closing Date
Balance Sheet shall include only Accounts Receivable as reflected on Report 18A
(Subscriber Accounts Receivable Aging by Account) of the NRTC Central Billing
System Reports less a reserve for Accounts Receivable which are not collectible
as determined in accordance with GAAP ("Bad Debt Reserve"), and (ii) the amount
of Inventory of Seller to be included in the Closing Date Balance Sheet shall
not exceed (a) $100,000 for all undamaged, original units in original sealed
cartons and (b) $20,000 for all used and refurbished units. In addition, the
Closing Date Balance Sheet and the Final Closing Adjustment shall not include as
a Current Asset the net book value of any DSS(TM) subscriber units of Seller
leased by it to any of its Customers and any accounts receivable arising from
such leases. Except as set forth in this Section 4.4(b), no other assets or
liabilities shall be included in the Closing Date Balance Sheet. Seller shall
make available to Purchaser such documentation, back-up, invoices, and books and
records of Seller as Purchaser may reasonably request.
(c) Seller and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Seller and Purchaser are unable to
reconcile such discrepancies, Seller shall have fifteen (15) days from
presentment of the Closing Date Balance Sheet by Purchaser to notify Purchaser
if Seller wishes to have Purchaser's determination examined. If Seller elects to
have Purchaser's determination examined, it shall be submitted to the
determination in Kansas City, Missouri, by the Certified Public Accounting firm
of KMPG Peat Marwick (or any other
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independent Certified Public Accounting firm mutually acceptable to Seller and
Purchaser), the cost of such examination to be paid fifty percent (50%) by
Seller and fifty percent (50%) by Purchaser; provided the fees of such firm
shall not exceed $10,000. The determination by Purchaser shall be final and
binding on the parties unless Seller elects to have an examination as provided
herein, in which case the results of the examination shall be made within thirty
(30) days of such referral, and shall be final and binding on the parties (the
"Final Closing Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Seller shall pay the difference in cash to Purchaser
within five (5) days after the final determination. In the event the Final
Closing Adjustment is greater than the Closing Adjustment, Purchaser shall pay
such excess in cash to Seller within five (5) days after the final
determination. If, following any payment pursuant to this Section 4.4(d), an
error (in billing or reporting by NRTC or otherwise) is thereafter discovered
which would have affected the Final Closing Adjustment, the party in whose favor
the error was made shall, provided such error is discovered within six (6)
months of the Closing Date, immediately pay in cash the amount of such error to
the other party.
4.5. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.5 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller hereby represents and warrants to
Purchaser as follows:
5.1. ORGANIZATION. Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Kansas, with all requisite power and authority to own and operate the Business
as it is now conducted and to own the Purchased Assets in the places where the
Business is now conducted and where the Purchased Assets are now owned or
operated.
5.2. AUTHORITY.
(a) Seller has full power and authority to execute, deliver
and perform this Agreement and all agreements and transactions contemplated
hereby. The execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly authorized by Seller and, except
for the consent of the NRTC, DirecTv and the other Persons set forth on Schedule
5.2(b), no other action or proceeding on the part of any other party is
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and constitutes, and
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each of the other agreements to be executed by Seller pursuant to the terms
hereof will constitute upon execution and delivery, a legal, valid and binding
obligation of Seller enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 5.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any document related hereto by Seller and the
consummation by Seller of all of the transactions contemplated hereby or thereby
will not (with or without the giving of notice or the lapse of time or both) (i)
violate or require any consent or approval under any applicable provision of any
judgement, order, writ, injunction, decree, rule, regulation or law; (ii)
require any consent under, conflict with, result in termination of, accelerate
the performance required by, result in a breach of, constitute a default under
or otherwise violate the terms of any agreements, instruments or other
obligations to which Seller is a party or by which Seller or any of the
Purchased Assets may be bound or affected; (iii) require any consent or approval
by, notice to or registration with any governmental authority or any other
Person; (iv) conflict with or violate any provision of Seller's organization
documents; or (v) result in the creation of a Lien upon any of the Purchased
Assets howsoever arising.
5.3. TITLE TO THE PURCHASED ASSETS.
(a) Seller has good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) attached hereto.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Seller was conducting the Business in the
ordinary course prior to the Closing Date.
5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.2 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets (other than the subscriber units of Seller leased to Subscribers)
are in need of any repairs which are outside the ordinary course of maintenance
and repair routinely performed by Seller in the past, and no currently needed
repairs are reasonably likely to cost, either singularly or in the aggregate
with respect to all Fixed Assets, in excess of Five Thousand Dollars ($5,000).
5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Attached hereto as Schedules 1.4, 1.5 and 1.6 are true and
complete copies of each of the NRTC/Member Agreement, the NRTC/Retail Agreement,
and the Other Assumed Agreements, if any, respectively, together with all
amendments, schedules and exhibits thereto. The NRTC/Member Agreement grants
Seller the exclusive right to distribute DBS Services in the Locations, except
as set forth in the NRTC/Member Agreement.
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(b) Seller has paid all sums to NRTC or DirecTv, as
appropriate, required under the NRTC/Member Agreement such that Seller is
entitled to the marketing and sales revenues as provided therein.
(c) Seller is in full compliance in all material respects with
any and all membership, affiliation, licensing or other requirements or
arrangements as may have been established by NRTC or DirecTv pursuant to the
NRTC Agreements, or otherwise.
(d) Seller is not in breach of the NRTC Agreements, nor has
Seller failed to perform any material obligation under the NRTC Agreements.
Seller has not received notice of any such breach or non-performance at any time
of such NRTC Agreements. To the best of Seller's knowledge, no other party to
any of the NRTC Agreements is in default thereunder or has failed to perform any
material obligation thereunder.
5.6. INVENTORY. The Inventory shall be usable in the ordinary course of
business and shall comply in all respects with industry standards of quality and
marketability. The Inventory will not, as of the Closing Date, include any items
below standard quality, obsolete or sub-prime. The Inventory shall consist
solely of (i) undamaged, original units in original, sealed cartons, and (ii)
used and refurbished units. Seller owns all of the Inventory free and clear of
any and all Liens and has full power and authority to transfer the Inventory to
Purchaser.
5.7. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business.
5.8. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
5.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9 attached hereto, to the best of Seller's knowledge, since December
31, 1995 there has not been:
(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Seller which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Seller (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
other than obligations or liabilities incurred in the ordinary course of
business and consistent with past practices;
(c) any termination or waiver of any rights of Seller of
material value to the Business or to Seller;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) the adoption of any statute, rule, regulation or order
which adversely affects the Business or the Purchased Assets;
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(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
5.10. LICENSES AND PERMITS. Attached hereto in Schedule 5.10 is a list
of all federal, state, local and foreign permits, certificates, licenses,
approvals and other authorizations necessary in the conduct of the Business. All
such licenses and permits of Seller are in full force and effect, and no
violations are or have been recorded in respect thereof, and no proceeding is
pending or threatened to revoke or limit any thereof. Seller and its conduct of
the Business is in compliance with all applicable laws, statutes, ordinances,
rules, regulations and order of any federal, foreign, state or local government
and any other government department or agency, and in any judgment, decision,
decree or order of any court or governmental agency, department or authority.
5.11. TAX MATTERS.
(a) Seller has timely filed all federal, state, local and
foreign tax returns and tax reports required to be filed with respect to the
Business with the appropriate governmental agency in all jurisdictions in which
such returns and reports are required to be filed. All such returns and reports
are true, correct and complete, and all amounts shown as owing on them have been
paid, including all interest, penalties, deficiencies and assessments heretofore
levied or assessed against Seller. Seller has duly withheld, collected and
timely paid over, or holds for such payment, to the proper governmental
authorities all taxes required to be withheld or collected by it. There is no
agreement for extension of time of assessment or payment of any taxes of Seller.
No waiver of any statute of limitations has been executed by Seller for any tax
year which remains open or unsettled. To the best knowledge, information and
belief of Seller, there is no examination or audit pending by the Internal
Revenue Service or by any state or local taxing authority with respect to the
tax matters of Seller. There is no liability for taxes or any tax deficiency or
the existence of any basis from which liability for taxes or tax deficiency,
including interest and penalties, might be asserted against Seller for any
period in excess of the applicable reserve for taxes, if any, and Seller has no
knowledge of any such liability or deficiency or the existence of any basis
therefor.
(b) All federal, state, local and foreign income, profits,
franchise, sales, use, occupation, property, excise and other taxes (including
interest and penalties), if any, payable by Seller or relating to or chargeable
against the Purchased Assets or chargeable against Seller's revenue or income
have been fully paid or are not past due and are fully disclosed and accrued on
the books and records of Seller and the proper amount of reserves exist for the
payment thereof.
5.12. DISCLOSURES. No representation or warranty made by Seller in this
Agreement, and no statement made in any Schedule, exhibit, certificate or other
writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
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5.13. LITIGATION. There are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of Seller's knowledge, any
threats against or affecting Seller, the Purchased Assets or the Business, at
law or in equity, before any court, arbitration panel, tribunal or governmental
department, commission, board, bureau, agency or instrumentality.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser hereby represents and warrants to
Seller as follows:
6.1. ORGANIZATION. Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Georgia,
with all requisite power to own and operate its business as it is now conducted.
As of the Closing Date, Purchaser shall have the right to transact business as a
foreign limited partnership in the State of Kansas.
6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding on the part of any
other party is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser, and constitutes, and each of the other
agreements to be executed pursuant to the terms hereof upon execution and
delivery will constitute, a legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other document related hereto by Purchaser
and the consummation by Purchaser of all of the transactions contemplated hereby
or thereby will not (with or without the giving of notice or the lapse of time
or both) (i) violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in the termination
of, accelerate the performance required by, result in the breach of, constitute
a default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Purchaser is a party; (iii) require any consent or
approval by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's certificate of
limited partnership or limited partnership agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any Schedule, exhibit, certificate or
other writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
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ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Seller shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use its best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(d) maintain its Records in accordance with prior practice,
maintain the Purchased Assets and the Inventory in their present condition,
ordinary wear and tear excepted, consistent with past practice, and otherwise
use its best efforts to operate the Business as currently operated and in the
ordinary course in accordance with practices during the twelve (12) months
preceding the date of this Agreement;
(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets or Inventory, except for sales or
dispositions of Inventory in the ordinary course of business;
(f) use its best efforts to preserve intact the current
business organizations and relationships with employees, suppliers, advertisers,
Customers and other Persons having dealings with Seller relating to the
Business; provided, however, Seller may enter into employment agreements and
stay bonus arrangements with key personnel of Seller; provided further that
Purchaser shall not have any liability with respect to such agreements or
arrangements;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTv;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTv;
(i) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC
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Agreements, and (ii) copies of all protests, complaints, challenges or other
documents submitted to or filed with the NRTC or DirecTv by third parties
concerning the Business and, promptly upon the filing or making thereof, copies
of Seller's responses thereto; and
(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against Seller in any court, or any
action against Seller before any governmental agency, and notify Purchaser in
writing promptly upon receipt of any administrative or court order relating to
the Business. Without limiting the generality of the foregoing, Seller shall not
take any of the actions (over which Seller can exercise control) listed in
Section 5.9 herein.
7.2. ACCESS.
(a) Prior to the Closing, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Seller, its Records and the Business as Purchaser deems
necessary or advisable and shall have full access to the auditors and attorneys
of Seller. Seller shall permit Purchaser and its employees, agents and
representatives, on reasonable notice, to have access during normal business
hours to its premises, personnel and Records. Seller shall, and shall cause its
officers, attorneys and accountants to, furnish Purchaser with such financial
and operating data and other information as Purchaser from time to time shall
reasonably request, including, but not limited to, Seller's balance sheets for
the Business as of December 31, 1995 and June 30, 1996. No investigation by
Purchaser shall in any way affect or otherwise diminish the representations,
warranties and covenants of Seller hereunder; provided, however, that Purchaser
shall advise Seller as soon as practicable after it obtains knowledge of any
breach or nonperformance of the representations, warranties or covenants of
Seller.
(b) Purchaser will hold, and will cause its authorized
representatives (including its investors and lending institutions) to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or official request or by other requirements of law, all documents and
information concerning Seller and the Business furnished to Purchaser in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
Purchaser, (ii) in the public domain through no fault of Purchaser, or (iii)
later lawfully acquired by Purchaser from other sources) and will not release or
disclose such information to any other Person, except its auditors, attorneys,
financial advisors and other consultants and advisors and lending institutions
(including banks) in connection with this Agreement, it being understood that
such Persons shall be informed by such party of the confidential nature of such
information and shall be directed by such party and shall have agreed to treat
such information as confidential. In the event that the transactions
contemplated herein are not consummated for any reason, Purchaser will, upon
request by Seller, promptly return to Seller all copies of any Schedules,
statements, documents or other written information obtained in connection
herewith, without retaining any copies or summaries thereof, and shall maintain
such confidence except to the extent such information comes into the public
domain through no fault of Purchaser.
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7.3. CONSENT OF NRTC, DIRECTV AND OTHERS. Seller and Purchaser shall
join in and deliver the requests for the consent of the NRTC and DirecTv to the
transfer of the NRTC Agreements, and such other requests for consent that the
parties reasonably deem necessary or appropriate to consummate the transactions
contemplated hereby, and they will each diligently take all steps necessary or
desirable to obtain such consents. The failure of either of the parties to
timely file or diligently seek the consents, or to cooperate fully with the
other party with respect thereto, shall be deemed a material breach of this
Agreement.
7.4. CONFIDENTIALITY. Seller and Purchaser agree to maintain the
confidentiality of this Agreement and the terms hereof and any information
exchanged by the parties in connection with the consummation of the transaction
contemplated hereby; provided, however, that Seller shall not be deemed to have
breached this Section 7.4 if one of its members fails to maintain the
confidentiality of this Agreement if Seller has requested such member to keep
such information confidential.
7.5. BEST EFFORTS. Subject to the terms and conditions herein provided,
Seller and Purchaser agree to use their best efforts to take, execute,
acknowledge and deliver, or cause to be taken, executed, acknowledged and
delivered, all actions, deeds, assignments, documents, instruments, transfers,
conveyances, discharges, releases, assurances and consents, and to do, or cause
to be done, all things necessary, proper or advisable under this Agreement and
all applicable laws and regulations to consummate, confirm, perfect, evidence
and otherwise make effective the transactions contemplated by this Agreement,
including actions necessary to obtain all requisite assignments of agreements
and contracts, and to fulfill the requirements of Articles VIII and IX hereof on
or prior to the Closing Date.
7.6. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Seller will refrain, and will cause all of its
agents and employees to refrain, from, directly or indirectly, encouraging,
initiating, soliciting or continuing any discussions or negotiations with, or
any other offers from, any other Person concerning a merger, sale of any of the
member interests in Seller or any similar transaction concerning Seller which
would affect the Business, or the sale of the Purchased Assets or any portion
thereof.
7.7. NEW SERVICES. In the event that in the future new satellite
services become available to Purchaser as a result of its license with NRTC
(such as satellite meter reading or load management) which are useful to Seller
or its members in their energy and water distribution or telephone businesses,
Purchaser will make such services available to Seller or its members at a price
equal to Purchaser's cost plus a royalty not to exceed 2% of such cost; provided
that making such services available does not interfere with Purchaser's ability
to provide DBS services to its Subscribers.
7.8. SELLER AS AGENT. If Seller or its members desire to become agents
of Purchaser, Purchaser will permit them to act as agents in their own name and
will compensate them at a rate no less than favorable than the rate which
Purchaser is paying to any of its agents in the Locations with respect to
contracts entered into by Purchaser with such agents (i.e. excluding contracts
which apply to the entire country or major portions thereof, such as key
contracts or national accounts).
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ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Seller on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
8.3. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the financial condition, Business, assets, results of
operations or prospects of Seller or the Purchased Assets.
8.4. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.5. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Seller in connection with the Closing including, without limitation,
NRTC and DirecTv consent as provided for in Section 7.3 herein, shall have been
duly obtained by Seller and shall be in full force and effect without conditions
which are materially adverse to Purchaser.
8.6. SUBSCRIBERS. On the Closing Date, Seller shall have at least 8,300
Subscribers.
8.7. REVIEW OF SELLER. The satisfactory completion, in Purchaser's
reasonable discretion, of Purchaser's due diligence investigation covering the
Business as provided for in Section 7.2 herein.
8.8. SELLER'S CLOSING DELIVERIES. Seller shall have delivered to
Purchaser the following at Closing:
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(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) copies of the Records which Purchaser may reasonably
request;
(c) a certified copy of Resolutions of the Board of Managers
of Seller authorizing the execution, delivery and performance of this Agreement;
(d) a certificate of good standing of Seller from the
Secretary of State of Kansas;
(e) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or Purchaser shall have
received a payoff letter from the secured party holding such liens obligating
such party to release such liens upon receipt of the amount reflected in the
payoff letter;
(f) a list of the Accounts Receivable from all Customers
(Reports 18A and 19A) and a list of the Unearned Revenue (Report 17), each as of
the last billing period ending prior to the Closing Date;
(g) a certificate signed by a member or manager of Seller,
dated the Closing Date, to the effect that the conditions set forth in this
Article VIII have been satisfied;
(h) an opinion of counsel to Seller, in form and substance
reasonably acceptable to Purchaser;
(i) a certificate signed by a member or manager of Seller,
dated the Closing Date, regarding the transfer of Seller's account at Huntington
Bank;
(j) Noncompetition Agreements with Seller and each of its
members, substantially in the form attached hereto as Schedule 8.8; and
(k) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Seller's satisfaction of each of its obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Seller's obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Seller), on or before the Closing Date, of each of the following conditions
precedent:
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<PAGE> 20
9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in Section 7.3 herein) shall have been
duly obtained by Purchaser and shall be in full force and effect without
conditions which are materially adverse to Seller.
9.5. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Seller the following at Closing:
(a) the Closing Payment;
(b) a certified copy of Resolutions of the general partner of
Purchaser authorizing the execution, delivery and performance of this Agreement;
(c) a certificate signed by Purchaser's general partner, dated
the Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied;
(d) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Purchaser, in form and substance reasonably acceptable to Seller; and
(e) a certificate signed by Purchaser's general partner, dated
the Closing Date, regarding the transfer of Seller's account at Huntington Bank.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise specifically provided herein, each and every representation and
warranty contained in this
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<PAGE> 21
Agreement shall expire with, and be terminated and extinguished by the Closing
or the termination of this Agreement pursuant to Section 11.13 hereof, and
thereafter, except and to the extent otherwise specifically provided herein,
neither Purchaser, Seller or any partner or representative thereof shall be
under any liability whatsoever with respect to any such representation or
warranty. The representations and warranties hereunder shall not be affected or
diminished by any investigation at any time by or on behalf of the party for
whose benefit such representations and warranties were made. All statements
contained herein or in any Schedule, exhibit, certificate, list or other
document delivered pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Subject to the limitations
hereinafter set forth, Seller and its members, representatives, successors,
heirs and assigns shall indemnify, reimburse and hold Purchaser and each of its
partners, subsidiaries, affiliates, successors, assigns and agents harmless
from, against, for and in respect of any and all damages, losses, settlement
payments, obligations, liabilities, claims, demands, actions or causes of
action, judgments, encumbrances, costs and expenses (collectively, the
"Indemnifiable Damages") relating to, resulting from or arising out of (i) any
misrepresentation, untruth, inaccuracy, breach or nonfulfillment of any
representation, warranty, agreement or covenant of Seller contained in or made
in connection with this Agreement or in any Schedule, exhibit, certificate or
other document delivered pursuant hereto, (ii) the failure of Seller to pay,
perform or discharge promptly when due any of its obligations, liabilities and
debts except as provided under this Agreement, (iii) any liability or obligation
relating to the operation of the Business prior to the Closing Date which is not
specifically assumed by Purchaser pursuant to this Agreement, (iv) any breach or
default prior to the Closing Date by Seller under any of the NRTC Agreements,
(v) any state or local sales, use, excise, personal property or similar tax
liability (including penalties and interest) of Seller, and (vi) any other
liabilities, obligations or claims, whether absolute or contingent, known or
unknown, matured or unmatured and not expressly assumed by Purchaser hereunder.
10.3. INDEMNIFICATION OF SELLER. Subject to the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Seller and its
shareholders, subsidiaries, affiliates, officers and directors harmless from,
against, for and in respect of any and all Indemnifiable Damages relating to,
resulting from or arising out of (i) any misrepresentation, untruth, inaccuracy,
breach or nonfulfillment of any representation, warranty, agreement or covenant
of Purchaser contained in or made in connection with this Agreement or in any
Schedule, exhibit, certificate or other document delivered pursuant hereto, (ii)
the failure of Purchaser to pay, perform or discharge promptly when due (a) its
obligations set forth in Section 4.3 herein, or (b) the Current Liabilities,
(iii) the assertion against Seller of any liability or obligation relating to
Purchaser's operation of the Business after the Closing Date, and (iv) any
breach or default after the Closing Date by Purchaser under the NRTC Agreements.
10.4. EXPIRATION OF INDEMNIFICATION OBLIGATIONS. The indemnification
obligations of Seller under Sections 10.2(i), (ii), (iii), (iv) and (vi) and
Purchaser under Section 10.3 above shall expire and terminate on the Survival
Termination Date, unless, prior to such termination, the party entitled to
indemnification hereunder (the "Indemnified Party") shall have provided
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<PAGE> 22
written notice to the other party hereto obligated to provide indemnification
pursuant to Sections 10.2 or 10.3 herein (the "Indemnifying Party") of an
assertion by the Indemnified Party of a right to indemnification under Sections
10.2 or 10.3 ("Indemnification Claim").
10.5. RIGHT TO CONTEST.
(a) If the Indemnified Party receives notice or has knowledge
of any claim for which it believes the Indemnifying Party is obligated to
provide indemnification, the Indemnified Party shall provide the Indemnifying
Party with an Indemnification Claim within twenty (20) days of its receipt of
same, but in no event later than ten (10) days prior to the date a responsive
pleading with respect to such Indemnification Claim is due. The Indemnification
Claim shall set forth a brief description of the facts giving rise to such a
claim and the amount (or reasonable estimate) of the Indemnifiable Damages
suffered or which may be suffered by the Indemnified Party. The Indemnified
Party shall, at the expense of the Indemnifying Party, provide all information
regarding the contest or defense of the claim and cooperate fully with the
Indemnifying Party in the conduct of any such contest or defense. Before being
required to make any payment pursuant to Sections 10.2 or 10.3 herein, the
Indemnifying Party may, at its own expense, elect to undertake and control the
defense of, and take all necessary steps properly to contest any claim in
respect thereof involving third parties or to prosecute such claim to conclusion
or settlement satisfactory to the Indemnified Party. If the Indemnifying Party
makes the foregoing election, then the Indemnified Party shall have the right to
participate, at its own expense, in all proceedings but shall not admit any
liability, settle, compromise, pay or discharge the claim without the prior
written consent of the Indemnifying Party. If the Indemnifying Party does not
make such election, it shall be obligated to pay the costs of defending or
prosecuting such claim and shall be bound by whatever result is obtained by the
Indemnified Party respecting such claim.
(b) Except as otherwise specifically provided herein, the
remedies provided in this Article X shall be cumulative and shall not preclude
assertion by any party of any other rights or the seeking of any other remedies
against any other party hereto.
10.6. DISTRIBUTION RESERVE. Seller acknowledges and agrees that
distributions to its members which render Seller unable to satisfy
Indemnification Claims hereunder will constitute wrongful distributions pursuant
to the Kansas Limited Liability Company Act. Accordingly, Seller agrees, at
Purchaser's sole option, to either (i) make no distributions of the Purchase
Price unless and until Seller receives recontribution agreements from its
members enforceable by Purchaser to the extent Purchaser is entitled to
indemnification under this Article X and to maintain a reserve of cash or cash
equivalents of at least Five Hundred Thousand Dollars ($500,000) through
December 1, 1997 and after December 1, 1997 the amount sufficient to pay pending
but unresolved Indemnification Claims or (ii) deposit into escrow Five Hundred
Thousand Dollars ($500,000) to be held pursuant to the Escrow Agreement through
December 1, 1997 as a reserve to satisfy Indemnification Claims of Purchaser.
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<PAGE> 23
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
To Purchaser: Digital Television Services of
Kansas, LP
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Seller: Kansas DBS, L.L.C.
1111 East 30th
Hays, Kansas 67601
Attention: Mr. Lyn Klein
with a copy to the entities set forth on Schedule 11.1 attached hereto.
11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Kansas, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
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<PAGE> 24
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns, if any, of the parties hereto. Except as
otherwise expressly provided herein, nothing expressed or implied herein is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto, any right or remedy hereunder or by reason hereof. This
Agreement may not be assigned by Purchaser (except to a party which, directly or
indirectly is controlled by, controls or is under common control with,
Purchaser) or Seller without the prior written consent of the other party.
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules
attached hereto constitute the entire agreement and understanding of the parties
in respect of the transactions contemplated hereby and supersede all prior
correspondence, conversations, agreements, arrangements, understandings and
other writings, including the Term Sheet dated November 8, 1996 between Seller
and Columbia DBS Management, LLC. No promises, covenants or representations of
any character or nature other than those expressly stated herein have been made
to induce either party to enter into this Agreement. This Agreement may be
amended or modified only by a written instrument signed by Purchaser and Seller.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives. Purchaser shall pay up to Five Thousand Dollars ($5,000) of any
transfer or similar fees due the NRTC and up to one hundred twenty percent
(120%) of the NRTC's costs and expenses incurred to complete the transfer and
assignment in connection with the transactions contemplated by this Agreement.
Seller shall pay any transfer fees due the NRTC in excess of the amounts
required to be paid by Purchaser pursuant to the immediately preceding sentence.
11.10. KNOWLEDGE OF SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Seller confirms that it has made or caused to be made due and diligent inquiry
as to the matters that are the subject of such representations and warranties.
11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
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<PAGE> 25
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Seller and Purchaser, (ii) either party
upon written notice to the other party if the Closing has not occurred on or
before the Termination Date, (iii) Seller, if Sections 7.3, 9.1, 9.2 or 9.5 have
not been complied with or performed by Purchaser and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the tenth (10th) day following
written notice thereof from Seller; provided that Seller has not defaulted in
any material respect with respect to any of its obligations hereunder, or (iv)
Purchaser, if the covenants and conditions set forth in Articles VII and VIII
required to be complied with and performed by Seller have not been complied with
or performed by Seller and such noncompliance and nonperformance shall not have
been cured or eliminated (or by its nature cannot be cured or eliminated) by
Seller on or before the tenth (10th) day following written notice thereof from
Purchaser; provided that Purchaser shall not have defaulted in any material
respect with respect to any of its obligations hereunder.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i) or (ii), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
(c) In the event of termination pursuant to Section 11.13(a)(iii),
Purchaser recognizes that Seller would be damaged, the extent to which is
extremely difficult and impractical to ascertain. The parties, therefore, agree
that if this Agreement is terminated pursuant to Section 11.13(a)(iii), Seller
shall be entitled to the sum equal to the Escrow Deposit. The parties agree that
this sum shall constitute liquidated damages and shall be in lieu of any and all
other relief to which Seller might otherwise be entitled due to Purchaser's
failure to consummate, or Purchaser's default under, this Agreement. In the
event the Escrow Deposit is held by the Escrow Agent at the time Seller becomes
entitled to the liquidated damages hereunder, the parties to the Escrow
Agreement shall instruct the Escrow Agent to pay the Escrow Deposit to Seller.
(d) In the event of termination pursuant to Section 11.13(a)(iv),
Purchaser shall be entitled to recover from Seller all damages, losses, costs
and expenses provided by law.
11.14. POWER OF ATTORNEY. Seller hereby irrevocably appoints Purchaser,
and all agents, officers, and employees designated by Purchaser, from and after
the Closing Date, as its true and lawful attorney-in-fact and duly authorized
agent to:
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(i) open Seller's mail and endorse and collect any checks,
notes, drafts or any other items payable to Seller from Subscribers or
otherwise issued in connection with the Business, and deposit same to
the account of Purchaser in any depository institution with the sole
exception of any checks from NRTC for Patronage Capital;
(ii) sign receipts and other papers necessary for the
collection of any and all amounts due from Subscribers;
(iii) notify Subscribers that the accounts have been assigned
to Purchaser; and
(iv) direct such Subscribers to make all payments due from
them directly to Purchaser.
Purchaser shall furnish Seller with a copy of any notice issued pursuant to
Sections 11.14(iii) or (iv) above and Seller hereby agrees that any such notice,
in Purchaser's sole discretion, may be sent on Seller's stationary, in which
event Seller shall, upon demand, co-sign such notice with Purchaser.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of Kansas, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
----------------------------------
Douglas S. Holladay, Jr. President
and Manager
SELLER:
Kansas DBS, L.L.C.
By:
----------------------------------------
Its:
-----------------------------------
25
<PAGE> 1
EXHIBIT 10.15
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF FEBRUARY 19, 1997
BY AND BETWEEN
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC
AND
MITCHELL ELECTRIC MEMBERSHIP CORPORATION
================================================================================
<PAGE> 2
LIST OF SCHEDULES
Schedule 1.1 Escrow Agreement
Schedule 1.2 Fixed Assets
Schedule 1.3 Locations
Schedule 1.4 NRTC/Member Agreement
Schedule 1.5 NRTC/Retail Agreement
Schedule 1.6 Other Assumed Agreements
Schedule 2.1(a) Assignment and Assumption Agreement
Schedule 2.1(b) Bill of Sale
Schedule 4.3(c) Promissory Note
Schedule 4.3(d) Letter of Credit
Schedule 4.5 Allocation of Purchase Price
Schedule 5.2(b) Consent of Seller
Schedule 5.3(a) Liens
Schedule 5.4 Fixed Assets Needing Repairs
Schedule 5.9 Changes or Events
Schedule 5.10 Licenses and Permits
Schedule 5.13 Litigation
Schedule 6.2(b) Consent of Purchaser
Schedule 8.9 Noncompetition Agreement
[Schedules have been omitted but will be furnished upon request]
<PAGE> 3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 19th day of February, 1997, by and between Digital Television
Services of Georgia, LLC, a Georgia limited liability company ("Purchaser"), and
Mitchell Electric Membership Corporation, a nonprofit Georgia electric
membership corporation ("Seller").
RECITALS
1. Seller owns and operates the National Rural Telecommunications
Cooperative's System No. 0422 (the "System") for the exclusive distribution in
certain areas in the State of Georgia of DBS Services offered by DirecTv (the
"Business").
2. Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser all of Seller's rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations, any residual rights of Seller
as a member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements and certain of the assets used in
the Business, subject to the terms and conditions of this Agreement. Purchaser
acknowledges and agrees that it is not acquiring and Seller shall retain all
assets relating to its Electric Business, all Leased Subscriber Equipment and
all accounts receivable related thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, Seller and
Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Seller to the
NRTC as of the Closing Date relating to the Business; including, without
limitation, accounts payable to the NRTC with respect to wholesale bills,
equipment and other services.
"Accounts Receivable" shall mean all of the accounts receivable of
Seller as of the Closing Date for all Customers which are listed on Report 19A
(Accounts Receivable Summary) of the NRTC Central Billing Systems Reports, other
than accounts receivable of Seller relating to the rental or lease of Leased
Subscriber Equipment to Customers, whether arising prior to or after the Closing
Date.
<PAGE> 4
"Binder" shall mean the One Hundred Seven Thousand Two Hundred Twenty
Dollars ($107,220) of the Two Hundred Thousand Dollars ($200,000) Purchaser
deposited with Seller as agent for the Georgia DBS Sellers, on December 17, 1996
as a good faith binder to proceed with the transactions contemplated by this
Agreement.
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"Cash" shall mean all cash in Seller's bank accounts at Huntington Bank
as of the Closing Date.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Nelson Mullins Riley
& Scarborough, L.L.P., First Union Plaza, 999 Peachtree Street N.E., Suite 1400,
Atlanta, Georgia 30309 (i) at Purchaser's election, on the later of (a) the last
business day of the month in which all of the conditions precedent set forth in
Articles VIII and IX herein have been satisfied or waived, or (b) April 30,
1997; or (ii) such other date or at such other time or place (including via
mail, overnight courier or facsimile transmission) as the parties may mutually
agree upon in writing. The Closing shall be as effective as of the close of
business on the Closing Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Current Assets" shall mean Cash, Accounts Receivable, Inventory (if
purchased pursuant to Section 4.4(b) hereof) and Prepaid Expenses of Seller,
which will be acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Seller which will be assumed by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased DBS Services, or entered into a binding agreement to purchase DBS and
related services, from Seller at any time during the five (5) year period
immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTv" shall mean DirecTv, Inc., a California corporation, the
successor in interest and rights holder to Hughes Communications Galaxy, Inc.
2
<PAGE> 5
"Electric Business" shall mean the electric distribution system and
business of Seller operated in the State of Georgia and all assets related
thereto, including, without limitation, all real estate, motor vehicles, cash
and accounts receivable.
"Escrow Agent" shall mean Synovus Trust Company, a Georgia trust
company with offices in Albany, Georgia.
"Escrow Agreement" shall mean the Escrow Agreement dated as of the date
hereof among the Escrow Agent, Purchaser and the Georgia DBS Sellers which
Escrow Agreement shall be substantially in the form attached hereto as Schedule
1.1.
"Excluded Assets" shall mean (i) all Leased Subscriber Equipment, (ii)
all assets (including, but not limited to, real estate, motor vehicles, cash and
accounts receivable) of Seller relating to or used in connection with the
Electric Business, and (iii) all Patronage Capital and capital credits.
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, any MTE terminals and demonstration units owned
by Seller and used or useable in connection with the Business, which equipment
and tangible assets are listed on Schedule 1.2 attached hereto.
"Franchise" shall mean any residual rights of Seller, if any, as a
member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Georgia DBS Sellers" shall mean Seller, Washington Electric Membership
Corporation, Planters Electric Membership Corporation and DigiCom Services, Inc.
"Inventory" shall mean any DSS(TM) subscriber equipment of Seller held
for resale, other than Leased Subscriber Equipment, which Purchaser notifies
Seller pursuant to Section 4.4(b) hereof it desires to purchase pursuant to this
Agreement, which Inventory shall be valued at the lesser of each item's (i)
actual cost and (ii) current wholesale value.
"Leased Subscriber Equipment" shall mean all DSS(TM) subscriber
equipment of Seller leased or rented to Subscribers, all accounts receivable
arising therefrom and all records associated therewith.
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
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<PAGE> 6
"Locations" shall mean the counties and certain other areas in the
State of Georgia set forth on Schedule 1.3 attached hereto in which Seller has
the exclusive right to distribute DBS Services pursuant to the NRTC Agreements.
"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated December 18, 1992 by and
between the NRTC and Seller, as amended by that certain Amendment as of March
31, 1994 and as may be further amended from time to time, together with all
schedules and exhibits thereto, a copy of which is attached as Schedule 1.4.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement dated August 3, 1993 by and between the NRTC and Seller, as amended
from time to time, together with all schedules and exhibits thereto, a copy of
which is attached hereto as Schedule 1.5.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.6 attached hereto, including any contracts and
agreements with DirecTv, copies of which are attached to such Schedule.
"Patronage Capital" shall mean the amount of patronage capital
dividends credited to the account of Seller at the NRTC for the period through
the Closing Date pursuant to Article XII of the NRTC Bylaws, as amended.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
"Prepaid Expenses" shall mean (i) Two Hundred Seventy-Five Dollars
($275) for each activation of a new Subscriber in the Locations to a Total
Choice Package (or its equivalent) from the date hereof to the Closing Date;
(ii) One Hundred Twenty-Five Dollars ($125) for each activation of a new
Subscriber to an Economy Choice Package (or its equivalent) from the date hereof
to the Closing Date; and (iii) all prepaid property taxes, prepaid supplies,
advances, deposits, deferred charges and other prepaid expenses (other than
prepaid insurance) shown on Seller's books and records as of the Closing Date
relating to the Business which Prepaid Expenses can be credited to Purchaser's
account after the Closing Date, as determined in accordance with GAAP.
"Programming" shall mean Cable Programming and any programming provided
DirecTv pursuant to the NRTC Agreements.
4
<PAGE> 7
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
"Purchased Assets" shall mean only (i) the NRTC Agreements, (ii)
Franchise, (iii) Current Assets, (iv) relationships, contracts and accounts with
Customers, (v) Fixed Assets, (vi) Records, and (vii) all other assets of Seller,
whether tangible or intangible, used in connection with the Business, and shall
specifically exclude the Excluded Assets.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Seller in the Locations, including, without
limitation, copies of Customer and prospective customer lists, computer
programs, tapes and electronic data processing software, accounting journals and
ledgers, accounts receivable records, and all NRTC reports, correspondence and
other documents relating to the NRTC Agreements and Other Assumed Agreements and
compliance therewith, other than the books and records associated with the
Leased Subscriber Equipment.
"Signing Deposit" shall mean Two Hundred Fourteen Thousand Four Hundred
Forty Dollars ($214,440) of the Four Hundred Thousand Dollars ($400,000) to be
deposited by Purchaser with the Escrow Agent on the date hereof.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i) is an active subscriber subscribing to a package of basic services, (ii) on
the last day of the calendar month prior to such date, whose account is not more
than sixty (60) days past due from the date payment is due, (iii) is not an
employee or agent of the service provider or charged a fee that is nominal
(e.g., demonstration unit) or substantially below the service provider's
published rates, and (iv) has not given notice of intent to discontinue service.
"Survival Termination Date" shall mean the last day of the eighteenth
(18th) month after the Closing Date.
"Termination Date" shall mean May 31, 1997.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Seller as of the
Closing Date which are listed on Report 17 (Unearned Revenue Report) of the NRTC
Central Billing System Reports.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Seller all of Seller's right, title and interest in and to the Purchased Assets,
free and clear of any and all Liens, on the Closing Date for the consideration
set forth in this Agreement. The sale, transfer, assignment and conveyance of
the Purchased Assets shall be made by the execution and delivery at Closing of
(i) an Assignment and Assumption Agreement substantially in the form attached
hereto as Schedule 2.1(a) (the "Assignment"), and (ii) a bill of sale
substantially in the form attached hereto as Schedule 2.1(b) (the "Bill of
Sale"), and (iii) such other recordable instruments of assignment, transfer and
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conveyance as Purchaser shall reasonably request.
ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLER. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Seller with respect to the following:
(a) the NRTC Agreements to the extent the obligations therein
arise out of the provision of DBS Services to Customers and accrue on or after
the Closing Date; and
(b) all Current Liabilities as of the Closing Date and all
services to Customers associated with the Unearned Revenue.
Anything in this Agreement to the contrary notwithstanding, except for
the liabilities specifically set forth in this Section 3.1, Purchaser shall not
assume or be deemed to have assumed under this Agreement, by reason of the
transactions contemplated by this Agreement, or otherwise, any other trade or
other accounts payable, accrued expenses, debts, liabilities, obligations or
commitments of Seller of any nature whatsoever, known or unknown, and the
execution, delivery and performance of this Agreement shall not render Purchaser
liable for any such debt, liability, obligation or commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Seller are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Seller under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Seller with or
for the benefit of any employee of Seller; and
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Seller,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution, sale or provision
of any services of Seller, or (ii) any failure or alleged failure to comply with
any federal, state or local law, rule or regulation applicable to Seller or the
Business.
Purchaser agrees to promptly notify Seller of any claims which Purchaser obtains
knowledge of which arise out of or result from liabilities of Seller not assumed
by Purchaser pursuant to this Agreement.
ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be Eleven Million Three Hundred Forty-Two Thousand Seven
Hundred Thirty-Four Dollars ($11,342,734), subject to adjustment as provided in
Section 4.4 herein.
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4.2. ESCROW DEPOSIT. Contemporaneously with the execution of this
Agreement, Purchaser has delivered to the Escrow Agent the Signing Deposit and
Seller has delivered to the Escrow Agent the Binder (collectively, the "Escrow
Deposit") to be held by the Escrow Agent pursuant to the Escrow Agreement.
4.3. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Seller as follows:
(a) The Escrow Deposit shall continue to be held by the Escrow
Agent pursuant to the Escrow Agreement. Purchaser shall also deposit with the
Escrow Agent Two Hundred Fourteen Thousand Four Hundred Dollars ($214,400) to be
held by the Escrow Agent pursuant to the Escrow Agreement (the "Additional
Deposit").
(b) An aggregate amount not to exceed Ten Million Eight
Hundred Six Thousand Six Hundred Seventy-Four Dollars ($10,806,674), subject to
adjustment as provided for in Section 4.4 herein, by certified or cashier's
check, or by wire transfer of immediately available funds to an account or
accounts designated in writing by Seller (together with the Escrow Deposit and
the Additional Deposit, the "Closing Payment"). Seller shall notify Purchaser no
later than thirty (30) days prior to the Closing Date of the actual amount of
the Closing Payment.
(c) The balance of the Purchase Price by the delivery of a
Promissory Note substantially in the form attached hereto as Schedule 4.3(c)
(the "Note"). The Note will be secured by an irrevocable standby letter of
credit substantially in the form attached hereto as Schedule 4.3(d) (the "Letter
of Credit"). The Letter of Credit shall be issued by a financial institution
with offices in, and with authority to transact business in, the United States
and which has capital surplus and undivided profits aggregating at least $500
million. The Letter of Credit, by its terms, shall not expire or be released
until all amounts due Seller under the Note have been paid. Purchaser shall have
the right to replace the Letter of Credit with a Letter of Credit issued by a
financial institution meeting the requirements set forth above (the "Substitute
Letter of Credit"); provided that the Substitute Letter of Credit shall be in an
amount equal to the principal amount of the Note at the time of such
substitution; and provided further that the written consent of Seller is
required prior to the issuance of a Substitute Letter of Credit, which consent
shall not be unreasonably withheld.
4.4. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the Current Assets of Seller and decreased by the
parties' good faith estimate of the Current Liabilities of Seller as of the
Closing Date (the "Closing Adjustment"), which adjustment shall be subject to
final adjustment as provided for in paragraph (c) below.
(b) No later than sixty (60) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Purchaser shall make and
deliver to Seller a balance sheet reflecting the Current Assets and Current
Liabilities of Seller as of the Closing Date (the "Closing Date Balance Sheet"),
prepared on a basis consistent with GAAP. For purposes of the Closing Adjustment
and the Final Closing Adjustment (as hereinafter defined), the amount of
Accounts
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Receivable of Seller to be included in the Closing Date Balance Sheet shall
include only Accounts Receivable of Subscribers as reflected on Report 18A
(Subscriber Accounts Receivable Aging By Account) of the NRTC Central Billing
System Reports less a reserve of six percent (6%) for Accounts Receivable which
are not collectible. In addition, the Closing Date Balance Sheet and the Final
Closing Adjustment shall not include as a Current Asset any accounts receivable
arising from Leased Subscriber Equipment. Purchaser may, by providing Seller
with written notice at least five (5) days prior to the Closing, elect to
purchase all, or certain of, the DSS(TM) subscriber equipment owned by Seller
(other than Leased Subscriber Equipment) on the Closing Date; provided, however,
Purchaser shall not have the right to acquire any assets attributable to
Seller's Electric Business. Any such equipment which is purchased by Purchaser
shall be included as Inventory in the Closing Date Balance Sheet. Except as set
forth in this Section 4.4(b), no other assets or liabilities shall be included
in the Closing Date Balance Sheet. Seller shall make available to Purchaser such
documentation, back-up, invoices, and books and records of Seller as Purchaser
may reasonably request.
(c) Seller and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Seller and Purchaser are unable to
reconcile such discrepancies, Seller shall have fifteen (15) days from
presentment of the Closing Date Balance Sheet by Purchaser to notify Purchaser
if Seller wishes to have Purchaser's determination examined. If Seller elects to
have Purchaser's determination examined, it shall be submitted to the
determination in Atlanta, Georgia, by the Certified Public Accounting firm of
KMPG Peat Marwick (or any other independent Certified Public Accounting firm
mutually acceptable to Seller and Purchaser), the cost of such examination to be
paid fifty percent (50%) by Seller and fifty percent (50%) by Purchaser. The
determination by Purchaser shall be final and binding on the parties unless
Seller elects to have an examination as provided herein, in which case the
results of the examination shall be made within thirty (30) days of such
referral, and shall be final and binding on the parties (the "Final Closing
Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Seller shall pay the difference in cash to Purchaser
within five (5) days after the final determination. In the event the Final
Closing Adjustment is greater than the Closing Adjustment, Purchaser shall pay
such excess in cash to Seller within five (5) days after the final
determination. If, following any payment pursuant to this Section 4.4(d), an
error (in billing or reporting by NRTC or otherwise) is thereafter discovered
which would have affected the Final Closing Adjustment, the party in whose favor
the error was made shall immediately pay in cash the amount of such error to the
other party.
4.5. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.5 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
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ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller hereby represents and warrants to
Purchaser as follows:
5.1. ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia, with all
requisite power and authority to own and operate the Business as it is now
conducted and to own the Purchased Assets in the places where the Business is
now conducted and where the Purchased Assets are now owned or operated.
5.2. AUTHORITY.
(a) Seller has full power and authority to execute, deliver
and perform this Agreement and all agreements and transactions contemplated
hereby. The execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly authorized by Seller and, except
for the consent of the NRTC, DirecTv and the other Persons set forth on Schedule
5.2(b) attached hereto, no other action or proceeding on the part of any other
party is necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and constitutes, and each of the other agreements to be
executed by Seller pursuant to the terms hereof will constitute upon execution
and delivery, a legal, valid and binding obligation of Seller enforceable in
accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 5.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any document related hereto by Seller and the
consummation by Seller of all of the transactions contemplated hereby or thereby
will not (with or without the giving of notice or the lapse of time or both) (i)
violate or require any consent or approval under any applicable provision of any
judgement, order, writ, injunction, decree, rule, regulation or law; (ii)
require any consent under, conflict with, result in termination of, accelerate
the performance required by, result in a breach of, constitute a default under
or otherwise violate the terms of any agreements, instruments or other
obligations to which Seller is a party or by which Seller or any of the
Purchased Assets may be bound or affected; (iii) require any consent or approval
by, notice to or registration with any governmental authority or any other
Person; (iv) conflict with or violate any provision of Seller's organizational
documents; or (v) result in the creation of a Lien upon any of the Purchased
Assets howsoever arising.
5.3. TITLE TO THE PURCHASED ASSETS.
(a) Seller has good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) attached hereto.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Seller was conducting the Business in the
ordinary course prior to the Closing Date.
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5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.2 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Seller in the past, and no
currently needed repairs are reasonably likely to cost, either singularly or in
the aggregate with respect to all Fixed Assets, in excess of Five Thousand
Dollars ($5,000).
5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Attached hereto as Schedules 1.4, 1.5 and 1.6 are true and
complete copies of each of the NRTC/Member Agreement, the NRTC/Retail Agreement,
and the Other Assumed Agreements, if any, respectively, together with all
amendments, schedules and exhibits thereto. The NRTC/Member Agreement grants
Seller the exclusive right to distribute DBS Services in the Locations, except
as set forth in the NRTC/Member Agreement.
(b) Seller has paid all sums to NRTC or DirecTv, as
appropriate, required under the NRTC/Member Agreement such that Seller is
entitled to the marketing and sales revenues as provided therein.
(c) Seller is in full compliance in all material respects with
any and all membership, affiliation, licensing or other requirements or
arrangements as may have been established by NRTC or DirecTv pursuant to the
NRTC Agreements, or otherwise.
(d) Seller is not in breach of the NRTC Agreements, nor has
Seller failed to perform any material obligation under the NRTC Agreements.
Seller has not received notice of any such breach or non-performance at any time
of such NRTC Agreements. To the best of Seller's knowledge, no other party to
any of the NRTC Agreements is in default thereunder or has failed to perform any
material obligation thereunder.
5.6. INVENTORY. The Inventory will not, as of the Closing Date, include
any items below standard quality, obsolete or sub-prime. The Inventory shall
consist solely of undamaged, original units in original, sealed cartons. Seller
owns all of the Inventory free and clear of any and all Liens and has full power
and authority to transfer the Inventory to Purchaser.
5.7. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business and
none of the Accounts Receivable are subject to any counterclaim or setoff.
5.8. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
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5.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9 attached hereto and other than changes or events which have
affected the DBS industry in general, since December 31, 1995 to the best
knowledge, information and belief of Seller there has not been:
(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Seller which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Seller (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
other than obligations or liabilities incurred in the ordinary course of
business and consistent with past practices;
(c) any termination or waiver of any rights of Seller of
material value to the Business or to Seller;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) the adoption of any statute, rule, regulation or order
which adversely affects the Business or the Purchased Assets;
(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
5.10. LICENSES AND PERMITS. Attached hereto in Schedule 5.10 is a list
of all federal, state, local and foreign permits, certificates, licenses,
approvals and other authorizations necessary in the conduct of the Business. All
such licenses and permits of Seller are in full force and effect, and no
violations are or have been recorded in respect thereof, and no proceeding is
pending or threatened to revoke or limit any thereof. Seller and its conduct of
the Business is in compliance with all applicable laws, statutes, ordinances,
rules, regulations and order of any federal, foreign, state or local government
and any other government department or agency having regulatory jurisdiction
over Seller, and in any judgment, decision, decree or order of any court or such
governmental agency, department or authority.
5.11. TAX MATTERS.
(a) Seller has timely filed all federal, state and local tax
returns and tax reports required to be filed with respect to the Business with
the appropriate governmental agency in all jurisdictions in which such returns
and reports are required to be filed. All such returns and reports are true,
correct and complete, and all amounts shown as owing on them have been paid,
including all interest, penalties, deficiencies and assessments heretofore
levied or assessed against Seller. Seller has duly withheld, collected and
timely paid over, or holds for such payment, to the proper governmental
authorities all taxes required to be withheld or collected by it. There is no
agreement for extension of time of assessment or payment of any taxes of
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Seller. No waiver of any statute of limitations has been executed by Seller for
any tax year which remains open or unsettled. To the best knowledge, information
and belief of Seller, there is no examination or audit pending by the Internal
Revenue Service or by any state or local taxing authority with respect to the
tax matters of Seller. There is no liability for taxes or any tax deficiency or
the existence of any basis from which liability for taxes or tax deficiency,
including interest and penalties, might be asserted against Seller for any
period in excess of the applicable reserve for taxes, if any, and Seller has no
knowledge of any such liability or deficiency or the existence of any basis
therefor.
(b) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise and other taxes (including interest and
penalties), if any, payable by Seller or relating to or chargeable against the
Purchased Assets or chargeable against Seller's revenue or income have been
fully paid or are not past due and are fully disclosed and accrued on the books
and records of Seller and the proper amount of reserves exist for the payment
thereof.
5.12. DISCLOSURES. No representation or warranty made by Seller in this
Agreement, and no statement made in any Schedule, exhibit, certificate or other
writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
5.13. LITIGATION. Except as set forth in Schedule 5.13 attached hereto,
there are no actions, suits, proceedings, orders, investigations or claims
pending or, to the best of Seller's knowledge, any threats against or affecting
Seller, the Purchased Assets or the Business, at law or in equity, before any
court, arbitration panel, tribunal or governmental department, commission,
board, bureau, agency or instrumentality.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser hereby represents and warrants to
Seller as follows:
6.1. ORGANIZATION. Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Georgia, with all requisite power to own and operate its business as it is now
conducted.
6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding on the part of any
other party is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser, and constitutes, and each of the other
agreements to be executed pursuant to the terms hereof upon execution and
delivery will constitute, a legal, valid and
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binding obligation of Purchaser, enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other document related hereto by Purchaser
and the consummation by Purchaser of all of the transactions contemplated hereby
or thereby will not (with or without the giving of notice or the lapse of time
or both) (i) violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in the termination
of, accelerate the performance required by, result in the breach of, constitute
a default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Purchaser is a party; (iii) require any consent or
approval by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's Articles of
Organization or Operating Agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any Schedule, exhibit, certificate or
other writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Seller shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use its best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(d) maintain its Records in accordance with prior practice,
maintain the Purchased Assets and the Inventory in their present condition,
ordinary wear and tear excepted, consistent with past practice, and otherwise
use its best efforts to operate the Business as currently operated and in the
ordinary course in accordance with practices during the twelve (12) months
preceding the date of this Agreement;
(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets or Inventory, except for sales or
dispositions of Inventory in the ordinary course of business;
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(f) use its best efforts to preserve intact the current
business organization and relationships with employees, suppliers, advertisers,
Customers and other Persons having dealings with Seller relating to the
Business;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTv;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTv;
(i) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC Agreements, and (ii) copies of
all protests, complaints, challenges or other documents submitted to or filed
with the NRTC or DirecTv by third parties concerning the Business and, promptly
upon the filing or making thereof, copies of Seller's responses thereto; and
(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against Seller in any court, or any
action against Seller before any governmental agency, and notify Purchaser in
writing promptly upon receipt of any administrative or court order relating to
the Business. Without limiting the generality of the foregoing, Seller shall not
take any of the actions (over which Seller can exercise control) listed in
Section 5.9 herein.
7.2. ACCESS.
(a) Prior to March 31, 1997, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Seller, its Records and the Business as Purchaser deems
necessary or advisable and shall have full access to the auditors and attorneys
of Seller. Seller shall permit Purchaser and its employees, agents and
representatives, on reasonable notice, to have access during normal business
hours to its premises, personnel and Records. Seller shall cooperate to provide
access to its Customers, suppliers, lenders and such other parties as Purchaser
may reasonably request. Seller shall, and shall cause its officers, attorneys
and accountants to, furnish Purchaser with such financial and operating data and
other information as Purchaser from time to time shall reasonably request,
including, but not limited to, Seller's balance sheets for the Business as of
December 31, 1995 and September 30, 1996. No investigation by Purchaser shall in
any way affect or otherwise diminish the representations, warranties and
covenants of Seller hereunder; provided, however, that Purchaser shall advise
Seller as soon as practicable after it obtains knowledge of any breach or
nonperformance of the representations, warranties or covenants of Seller.
(b) Purchaser will hold, and will cause its authorized
representatives (including its investors and lending institutions) to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or official request or by other requirements of law, all documents and
information concerning Seller and the Business furnished to Purchaser in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
Purchaser, (ii) in the public
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domain through no fault of Purchaser, or (iii) later lawfully acquired by
Purchaser from other sources) and will not release or disclose such information
to any other Person, except its auditors, attorneys, financial advisors and
other consultants and advisors and lending institutions (including banks) in
connection with this Agreement, it being understood that such Persons shall be
informed by such party of the confidential nature of such information and shall
be directed by such party and shall have agreed to treat such information as
confidential. In the event that the transactions contemplated herein are not
consummated for any reason, Purchaser will, upon request by Seller, promptly
return to Seller all copies of any Schedules, statements, documents or other
written information obtained in connection herewith, without retaining any
copies or summaries thereof, and shall maintain such confidence except to the
extent such information comes into the public domain through no fault of
Purchaser.
7.3. CONSENT OF NRTC, DIRECTV AND OTHERS. Seller and Purchaser shall
join in and deliver the requests for the consent of the NRTC and DirecTv to the
transfer of the NRTC Agreements, and such other requests for consent that
Purchaser reasonably determines may be necessary or appropriate to consummate
the transactions contemplated hereby, and they will each diligently take all
steps necessary or desirable to obtain such consents. The failure of either of
the parties to timely file or diligently seek the consents, or to cooperate
fully with the other party with respect thereto, shall be deemed a material
breach of this Agreement.
7.4. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Seller and Purchaser shall
mutually agree in advance as to timing, form and content before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to reaching mutual agreement, except as may be
required by law, contractual relationship with an auditor, auditor requirements
or lender requirements; provided, however, that neither party shall disclose the
Purchase Price hereunder without the prior written consent of the other party.
In the event that prior to the Closing Date either party is required by law to
make a statement with respect to the transactions contemplated herein, such
party shall notify the other party in writing as to the timing, form and content
of such statements. Seller and Purchaser agree to maintain the confidentiality
of this Agreement and the terms hereof and any information exchanged by the
parties in connection with the consummation of the transaction contemplated
hereby.
7.5. BEST EFFORTS. Subject to the terms and conditions herein provided,
Seller and Purchaser agree to use their best efforts to take, execute,
acknowledge and deliver, or cause to be taken, executed, acknowledged and
delivered, all actions, deeds, assignments, documents, instruments, transfers,
conveyances, discharges, releases, assurances and consents, and to do, or cause
to be done, all things necessary, proper or advisable under this Agreement and
all applicable laws and regulations to consummate, confirm, perfect, evidence
and otherwise make effective the transactions contemplated by this Agreement,
including actions necessary to obtain all requisite assignments of agreements
and contracts, and to fulfill the requirements of Articles VIII and IX hereof on
or prior to the Closing Date.
7.6. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Seller will refrain, and will cause all of its
agents and employees to refrain, from taking, directly or indirectly, any action
to encourage, initiate, solicit or continue any discussions or negotiations
with, or any other offers from, any other Person concerning a merger, sale of
substantial stock or any similar transaction concerning Seller which would
affect the Business,
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<PAGE> 18
or the sale of the Purchased Assets or any portion thereof.
7.7. SUBSCRIBER LEASES. From and after the date hereof, Seller
covenants and agrees to use its best efforts to keep in full force and effect
all leases or rentals of Leased Subscriber Equipment between Seller and
Subscribers and shall refrain from taking, directly or indirectly, any action to
encourage any Subscribers to terminate such leases. Notwithstanding any other
provisions of this Agreement, the parties hereto agree that all accounts
receivable of Seller relating to the lease or rental of Leased Subscriber
Equipment prior to or after the Closing Date shall remain the property of Seller
and shall not be transferred hereunder. In the event that after the Closing Date
Purchaser collects any rental or lease payments from Subscribers of Leased
Subscriber Equipment, Purchaser shall remit to Seller such payments within
thirty (30) days after receipt thereof. At the request of Seller, Purchaser
shall provide to Seller an accounting of such accounts receivable and receipts.
7.8. NEW SERVICES. In the event that in the future new satellite
services become available to Purchaser as a result of its license with NRTC
(such as satellite meter reading or load management) which are useful to Seller
in the Electric Business, Purchaser will make such services available to Seller
or its affiliates at a price equal to Purchaser's cost plus a royalty not to
exceed 2% of such cost; provided that making such services available does not
interfere with Purchaser's ability to provide DBS services to its Subscribers.
7.9. SELLER AS AGENT. If Seller or its affiliates desire to become
agents of Purchaser, Purchaser will permit them to act as agents in their own
name and will compensate them at a rate no less than favorable than the rate
which Purchaser is paying to any of its agents in Georgia with respect to
contracts entered into by Purchaser with such agents (i.e. excluding contracts
which apply to the entire country or major portions thereof).
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Seller on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
8.3. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the financial condition, Business, assets, results of
operations or prospects of Seller or the Purchased Assets.
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<PAGE> 19
8.4. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.5. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Seller in connection with the Closing including, without limitation,
NRTC and DirecTv consent as provided for in Section 7.3 herein, shall have been
duly obtained by Seller and shall be in full force and effect without conditions
which are materially adverse to Purchaser.
8.6. SUBSCRIBERS. On the Closing Date, the Georgia DBS Sellers shall
collectively have at least 14,000 Subscribers.
8.7. REVIEW OF SELLER. Purchaser shall have completed its due diligence
investigation covering the Business as provided for in Section 7.2 herein and no
fact or circumstances shall have come to the attention of Purchaser as a result
of such investigation which in the exercise of Purchaser's reasonable judgement
materially or adversely affects the business, prospects or financial condition
of the Business.
8.8. CLOSING OF ACQUISITIONS OF THE GEORGIA DBS SELLERS. Purchaser
shall have consummated the transactions contemplated by the Asset Purchase
Agreements dated as of the date hereof between Purchaser, on the one hand, and
each of the Georgia DBS Sellers, on the other hand, relating to the acquisition
of all of the DBS assets with respect to NRTC System Nos. 0422, 1071, 0073 and
0120.
8.9. SELLER'S CLOSING DELIVERIES. Seller shall have delivered to
Purchaser the following at Closing:
(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) copies of the Records which Purchaser may reasonably
request;
(c) a certified copy of Resolutions of the Board of Directors
of Seller authorizing the execution, delivery and performance of this Agreement;
(d) a certificate of good standing of Seller from the
Secretary of State of Georgia;
(e) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or otherwise addressed to
Purchaser's satisfaction;
(f) a list of the Accounts Receivable from all Customers
(Reports 18A and 19A) and a list of the Unearned Revenue (Report 17), each as of
the last NRTC billing period
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<PAGE> 20
ending prior to the Closing Date;
(g) a certificate signed by Seller's president, dated the
Closing Date, to the effect that the conditions set forth in this Article VIII
have been satisfied;
(h) an opinion of James C. Brim, Jr., Esq., counsel to Seller,
in form and substance reasonably acceptable to Purchaser;
(i) a certificate signed by Seller's president, dated the
Closing Date, regarding the transfer of Seller's account at Huntington Bank;
(j) a Noncompetition Agreement with Seller substantially in
the form attached hereto as Schedule 8.9; and
(k) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Seller's satisfaction of each of its obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Seller's obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Seller), on or before the Closing Date, of each of the following conditions
precedent:
9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in Section 7.3 herein) shall have been
duly obtained by Purchaser and shall be in full force and effect without
conditions which are materially adverse to Seller.
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<PAGE> 21
9.5. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Seller the following at Closing:
(a) the Closing Payment;
(b) the Note;
(c) the Letter of Credit;
(d) a certified copy of Resolutions of the member of Purchaser
authorizing the execution, delivery and performance of this Agreement;
(e) a certificate signed by Purchaser's member, dated the
Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied;
(f) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Purchaser, in form and substance reasonably acceptable to Seller; and
(g) a certificate signed by Purchaser's member, dated the
Closing Date, regarding the transfer of Seller's account at Huntington Bank.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise specifically provided herein, each and every representation and
warranty contained in this Agreement shall expire with, and be terminated and
extinguished by the Closing or the termination of this Agreement pursuant to
Section 11.13 hereof, and thereafter, except and to the extent otherwise
specifically provided herein, neither Purchaser, Seller or any partner or
representative thereof shall be under any liability whatsoever with respect to
any such representation or warranty. The representations and warranties
hereunder shall not be affected or diminished by any investigation at any time
by or on behalf of the party for whose benefit such representations and
warranties were made. All statements contained herein or in any Schedule,
exhibit, certificate, list or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Seller and its representatives,
successors, and assigns shall indemnify, reimburse and hold Purchaser and each
of its partners, subsidiaries, affiliates, successors, assigns and agents
harmless from, against, for and in respect of any and all damages, losses,
settlement payments, obligations, liabilities, claims, demands, actions or
causes of action, judgments, encumbrances, costs and expenses (including
reasonable attorneys' fees) (collectively, the "Indemnifiable Damages") relating
to, resulting from or arising out of (i) any misrepresentation, untruth,
inaccuracy, breach or nonfulfillment of any representation, warranty, agreement
or covenant of Seller contained in or made in connection with this Agreement or
in any Schedule, exhibit, certificate or other document delivered pursuant
hereto, (ii) the failure of Seller to pay, perform or discharge promptly when
due any of its obligations,
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<PAGE> 22
liabilities and debts except as provided under this Agreement, (iii) any
liability or obligation relating to the operation of the Business prior to the
Closing Date, (iv) any breach or default prior to the Closing Date by Seller
under any of the NRTC Agreements, (v) any state or local sales, use, excise,
personal property or similar tax liability (including penalties and interest) of
Seller, (vi) any liability or obligation relating to the operation of the
Electric Business prior to or after the Closing Date, and (vii) any other
liabilities, obligations or claims, whether absolute or contingent, known or
unknown, matured or unmatured and not expressly assumed by Purchaser hereunder.
10.3. INDEMNIFICATION OF SELLER. Subject the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Seller and its
shareholders, subsidiaries, affiliates, officers and directors harmless from,
against, for and in respect of any and all Indemnifiable Damages (as defined in
Section 10.2 above) relating to, resulting from or arising out of (i) any
misrepresentation, untruth, inaccuracy, breach or nonfulfillment of any
representation, warranty, agreement or covenant of Purchaser contained in or
made in connection with this Agreement or in any Schedule, exhibit, certificate
or other document delivered pursuant hereto, (ii) the failure of Purchaser to
pay, perform or discharge promptly when due (a) its obligations set forth in
Section 4.3 herein, or (b) the Current Liabilities, (iii) the assertion against
Seller of any liability or obligation relating to Purchaser's operation of the
Business after the Closing Date, and (iv) any breach or default after the
Closing Date by Purchaser under the NRTC Agreements.
10.4. EXPIRATION OF INDEMNIFICATION OBLIGATIONS. The indemnification
obligations of Seller under Sections 10.2(i), (ii), (iii), (iv) and (vii) and
Purchaser under Section 10.3 above shall expire and terminate on the Survival
Termination Date, unless, prior to such termination, the party entitled to
indemnification hereunder (the "Indemnified Party") shall have provided written
notice to the other party hereto obligated to provide indemnification pursuant
to Sections 10.2 or 10.3 herein (the "Indemnifying Party") of an assertion by
the Indemnified Party of a right to indemnification under Sections 10.2 or 10.3
("Indemnification Claim").
10.5. RIGHT TO CONTEST.
(a) If the Indemnified Party receives notice or has knowledge
of any claim for which it believes the Indemnifying Party is obligated to
provide indemnification, the Indemnified Party shall provide the Indemnifying
Party with an Indemnification Claim within twenty (20) days of its receipt of
same, but in no event later than ten (10) days prior to the date a responsive
pleading with respect to such Indemnification Claim is due. The Indemnification
Claim shall set forth a brief description of the facts giving rise to such a
claim and the amount (or reasonable estimate) of the Indemnifiable Damages
suffered or which may be suffered by the Indemnified Party. The Indemnified
Party shall, at the expense of the Indemnifying Party, provide all information
regarding the contest or defense of the claim and cooperate fully with the
Indemnifying Party in the conduct of any such contest or defense. Before being
required to make any payment pursuant to Sections 10.2 or 10.3 herein, the
Indemnifying Party may, at its own expense, elect to undertake and control the
defense of, and take all necessary steps properly to contest any claim in
respect thereof involving third parties or to prosecute such claim to conclusion
or settlement satisfactory to the Indemnified Party. If the Indemnifying Party
makes the foregoing election, then the Indemnified Party shall have the right to
participate, at its own expense, in all proceedings but shall not admit any
liability, settle, compromise, pay or discharge the claim without the prior
written consent of the Indemnifying Party. If the
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<PAGE> 23
Indemnifying Party does not make such election, it shall be obligated to pay the
costs of defending or prosecuting such claim and shall be bound by whatever
result is obtained by the Indemnified Party respecting such claim.
(b) Except as otherwise specifically provided herein, the
remedies provided in this Agreement shall be cumulative and shall not preclude
assertion by any party of any other rights or the seeking of any other remedies
against any other party hereto.
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
To Purchaser: Digital Television Services of
Georgia, LLC
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Seller: Mitchell Electric Membership Corporation
P.O. Box 409
Camilla, Georgia 31730
Attn: Edward A. Pritchett, General Manager
with a copy to: James C. Brim, Jr., Esq.
P.O. Box 304
20 South Harvey Street
Camilla, Georgia 31730
11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
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11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Georgia, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns, if any, of the parties hereto. Except as
otherwise expressly provided herein, nothing expressed or implied herein is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto, any right or remedy hereunder or by reason hereof. This
Agreement may not be assigned by Purchaser (except to a party which, directly or
indirectly is controlled by, controls or is under common control with,
Purchaser) or Seller without the prior written consent of the other party.
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules
attached hereto constitute the entire agreement and understanding of the parties
in respect of the transactions contemplated hereby and supersede all prior
correspondence, conversations, agreements, arrangements, understandings and
other writings, including the Term Sheet dated December 13, 1996 between the
Georgia DBS Sellers and Columbia DBS Management, LLC. No promises, covenants or
representations of any character or nature other than those expressly stated
herein have been made to induce either party to enter into this Agreement. This
Agreement may be amended or modified only by a written instrument signed by
Purchaser and Seller.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives. Purchaser shall pay up to Five Thousand Dollars ($5,000) of any
transfer or similar fees due the NRTC and up to one hundred twenty percent
(120%) of the NRTC's costs and expenses incurred to complete the transfer and
assignment in connection with the transactions contemplated by this Agreement.
Seller shall pay any transfer fees due the NRTC in excess of the amounts
required to be paid by Purchaser pursuant to the immediately preceding sentence.
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<PAGE> 25
11.10. KNOWLEDGE OF SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Seller confirms that it has made or caused to be made due and diligent inquiry
as to the matters that are the subject of such representations and warranties.
11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Seller and Purchaser, (ii) either party
upon written notice to the other party if the Closing has not occurred on or
before the Termination Date, (iii) Seller, if Sections 9.1, 9.2 or 9.5 have not
been complied with or performed by Purchaser and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the sixtieth (60th) day
following written notice thereof from Seller; provided that Seller has not
defaulted in any material respect with respect to any of its obligations
hereunder, (iv) Purchaser, if the covenants and conditions set forth in Articles
VII and VIII (other than Section 8.7) required to be complied with and performed
by Seller have not been complied with or performed by Seller and such
noncompliance and nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Seller on or before the sixtieth
(60th) day following written notice thereof from Purchaser; provided that
Purchaser shall not have defaulted in any material respect with respect to any
of its obligations hereunder, or (v) Purchaser if the conditions set forth in
Section 8.7 required to be complied with and performed by Seller have not been
complied with or performed by Seller on or prior to March 31, 1997; provided
that Purchaser shall not have defaulted in any material respect with respect to
any of its obligations hereunder.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i) or (ii), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
(c) In the event of termination pursuant to Section 11.13(a)(iii),
Purchaser recognizes that Seller would be damaged, the extent to which is
extremely difficult and impractical to ascertain. The parties, therefore, agree
that if this Agreement is terminated pursuant to Section 11.13(a)(iii), Seller
shall be entitled to the sum equal to the Escrow Deposit. The parties agree that
this sum shall constitute liquidated damages and shall be in lieu of any and all
other relief to which Seller might otherwise be entitled due to Purchaser's
failure to consummate, or Purchaser's default under, this Agreement. In the
event the Escrow Deposit is held by the Escrow Agent at the time Seller becomes
entitled to the liquidated damages hereunder, Seller and Purchaser shall
instruct the Escrow Agent to pay the Escrow Deposit to Seller.
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<PAGE> 26
(d) In the event of termination pursuant to Section 11.13(a)(iv) or
(v), Purchaser shall be entitled to recover from Seller all damages, losses,
costs and expenses (including reasonable attorneys' fees) provided by law.
11.14. POWER OF ATTORNEY. Seller hereby appoints Purchaser, and all
agents, officers, and employees designated by Purchaser, irrevocably for six (6)
months from and after the Closing Date, as its true and lawful attorney-in-fact
and duly authorized agent to:
(i) open Seller's mail and endorse and collect any checks, notes,
drafts or any other items payable to Seller from Subscribers or
otherwise issued in connection with the Business, and deposit same to
the account of Purchaser in any depository institution;
(ii) sign receipts and other papers necessary for the collection of any
and all amounts due from Subscribers;
(iii) notify Subscribers that the accounts have been assigned to
Purchaser; and
(iv) direct such Subscribers to make all payments due from them
directly to Purchaser.
Purchaser shall furnish Seller with a copy of any notice issued pursuant to
Sections 11.14(iii) or (iv) above and Seller hereby agrees that any such notice,
in Purchaser's sole discretion, may be sent on Seller's stationary, in which
event Seller shall, upon demand, co-sign such notice with Purchaser. This Power
of Attorney shall not affect Seller's right to receive revenues from the Leased
Subscriber Equipment as provided for in Section 7.7 herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of Georgia, LLC
By: DTS Management, LLC
Its: Member
By:
----------------------------------
Douglas S. Holladay, Jr. President
and Manager
SELLER:
Mitchell Electric Membership Corporation
By:
---------------------------------------
Its:
----------------------------------
Each of the undersigned has duly executed this Agreement as of the date
first above written for the sole purpose of agreeing to the provisions of
Section 4.3 hereof.
Digital Television Services, LLC
By: DTS Management, LLC
Its: Manager
By:
----------------------------------
Douglas S. Holladay, Jr. President
and Manager
DTS Management, LLC
By:
---------------------------------------
Douglas S. Holladay, Jr. President and
Manager
25
<PAGE> 1
EXHIBIT 10.16(a)
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF FEBRUARY 19, 1997
BY AND BETWEEN
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC
AND
DIGICOM SERVICES, INC.
================================================================================
<PAGE> 2
LIST OF SCHEDULES
Schedule 1.1 Escrow Agreement
Schedule 1.2 Fixed Assets
Schedule 1.3 NRTC/Member Agreement
Schedule 1.4 NRTC/Retail Agreement
Schedule 1.5 Other Assumed Agreements
Schedule 2.1(a) Assignment and Assumption Agreement
Schedule 2.1(b) Bill of Sale
Schedule 4.3(c) Promissory Note
Schedule 4.3(d) Letter of Credit
Schedule 4.5 Allocation of Purchase Price
Schedule 5.2(b) Consent of Seller
Schedule 5.3(a) Liens
Schedule 5.4 Fixed Assets Needing Repairs
Schedule 5.9 Changes or Events
Schedule 5.10 Licenses and Permits
Schedule 5.13 Litigation
Schedule 6.2(b) Consent of Purchaser
Schedule 8.9 Noncompetition Agreement
[Schedules have been omitted but will be furnished upon request]
<PAGE> 3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 19th day of February, 1997, by and between Digital Television
Services of Georgia, LLC, a Georgia limited liability company ("Purchaser"), and
DigiCom Services, Inc., a Georgia corporation ("Seller").
RECITALS
1. Seller owns and operates the National Rural Telecommunications
Cooperative's System No. 1071 (the "System") for the exclusive distribution in
Lamar and Monroe Counties, Georgia (the "Locations") of DBS Services offered by
DirecTv (the "Business").
2. Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser all of Seller's rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations, any residual rights of Seller
as a member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements and certain of the assets used in
the Business, subject to the terms and conditions of this Agreement. Purchaser
acknowledges and agrees that it is not acquiring and Seller shall retain all
assets relating to its Electric Business, all Leased Subscriber Equipment and
all accounts receivable related thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, Seller and
Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Seller to the
NRTC as of the Closing Date relating to the Business; including, without
limitation, accounts payable to the NRTC with respect to wholesale bills,
equipment and other services.
"Accounts Receivable" shall mean all of the accounts receivable of
Seller as of the Closing Date for all Customers which are listed on Report 19A
(Accounts Receivable Summary) of the NRTC Central Billing Systems Reports, other
than accounts receivable of Seller relating to the rental or lease of Leased
Subscriber Equipment to Customers, whether arising prior to or after the Closing
Date.
<PAGE> 4
"Binder" shall mean the Eleven Thousand Five Hundred Forty Dollars
($11,540) of the Two Hundred Thousand Dollars ($200,000) Purchaser deposited
with Seller as agent for the Georgia DBS Sellers, on December 17, 1996 as a good
faith binder to proceed with the transactions contemplated by this Agreement.
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"Cash" shall mean all cash in Seller's bank accounts at Huntington Bank
as of the Closing Date.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Nelson Mullins Riley
& Scarborough, L.L.P., First Union Plaza, 999 Peachtree Street N.E., Suite 1400,
Atlanta, Georgia 30309 (i) at Purchaser's election, on the later of (a) the last
business day of the month in which all of the conditions precedent set forth in
Articles VIII and IX herein have been satisfied or waived, or (b) April 30,
1997; or (ii) such other date or at such other time or place (including via
mail, overnight courier or facsimile transmission) as the parties may mutually
agree upon in writing. The Closing shall be as effective as of the close of
business on the Closing Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Current Assets" shall mean Cash, Accounts Receivable, Inventory (if
purchased pursuant to Section 4.4(b) hereof) and Prepaid Expenses of Seller,
which will be acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Seller which will be assumed by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased DBS Services, or entered into a binding agreement to purchase DBS and
related services, from Seller at any time during the five (5) year period
immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTv" shall mean DirecTv, Inc., a California corporation, the
successor in interest and rights holder to Hughes Communications Galaxy, Inc.
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"Electric Business" shall mean the electric distribution system and
business of Seller operated in the State of Georgia and all assets related
thereto, including, without limitation, all real estate, motor vehicles, cash
and accounts receivable.
"Escrow Agent" shall mean Synovus Trust Company, a Georgia trust
company with offices in Albany, Georgia.
"Escrow Agreement" shall mean the Escrow Agreement dated as of the date
hereof among the Escrow Agent, Purchaser and the Georgia DBS Sellers which
Escrow Agreement shall be substantially in the form attached hereto as Schedule
1.1.
"Excluded Assets" shall mean (i) all Leased Subscriber Equipment, (ii)
all assets (including, but not limited to, real estate, motor vehicles, cash and
accounts receivable) of Seller relating to or used in connection with the
Electric Business, and (iii) all Patronage Capital and capital credits.
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, any MTE terminals and demonstration units owned
by Seller and used or useable in connection with the Business, which equipment
and tangible assets are listed on Schedule 1.2 attached hereto.
"Franchise" shall mean any residual rights of Seller, if any, as a
member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Georgia DBS Sellers" shall mean Seller, Mitchell Electric Membership
Corporation, Washington Electric Membership Corporation and Planters Electric
Membership Corporation.
"Inventory" shall mean any DSS(TM) subscriber equipment of Seller held
for resale, other than Leased Subscriber Equipment, which Purchaser notifies
Seller pursuant to Section 4.4(b) hereof it desires to purchase pursuant to this
Agreement, which Inventory shall be valued at the lesser of each item's (i)
actual cost and (ii) current wholesale value.
"Leased Subscriber Equipment" shall mean all DSS(TM) subscriber
equipment of Seller leased or rented to Subscribers, all accounts receivable
arising therefrom and all records associated therewith.
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
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"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated October 11, 1993 by and between
the NRTC and Seller, as amended by that certain Amendment as of March 25, 1994
and as may be further amended from time to time, together with all schedules and
exhibits thereto, a copy of which is attached as Schedule 1.3.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement dated September 28, 1993 by and between the NRTC and Seller, as
amended from time to time, together with all schedules and exhibits thereto, a
copy of which is attached hereto as Schedule 1.4.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.5 attached hereto, including any contracts and
agreements with DirecTv, copies of which are attached to such Schedule.
"Patronage Capital" shall mean the amount of patronage capital
dividends credited to the account of Seller at the NRTC for the period through
the Closing Date pursuant to Article XII of the NRTC Bylaws, as amended.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
"Prepaid Expenses" shall mean (i) Two Hundred Seventy-Five Dollars
($275) for each activation of a new Subscriber in the Locations to a Total
Choice Package (or its equivalent) from the date hereof to the Closing Date;
(ii) One Hundred Twenty-Five Dollars ($125) for each activation of a new
Subscriber to an Economy Choice Package (or its equivalent) from the date hereof
to the Closing Date; and (iii) all prepaid property taxes, prepaid supplies,
advances, deposits, deferred charges and other prepaid expenses (other than
prepaid insurance) shown on Seller's books and records as of the Closing Date
relating to the Business which Prepaid Expenses can be credited to Purchaser's
account after the Closing Date, as determined in accordance with GAAP.
"Programming" shall mean Cable Programming and any programming provided
DirecTv pursuant to the NRTC Agreements.
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
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<PAGE> 7
"Purchased Assets" shall mean only (i) the NRTC Agreements, (ii)
Franchise, (iii) Current Assets, (iv) relationships, contracts and accounts with
Customers, (v) Fixed Assets, (vi) Records, and (vii) all other assets of Seller,
whether tangible or intangible, used in connection with the Business, and shall
specifically exclude the Excluded Assets.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Seller in the Locations, including, without
limitation, copies of Customer and prospective customer lists, computer
programs, tapes and electronic data processing software, accounting journals and
ledgers, accounts receivable records, and all NRTC reports, correspondence and
other documents relating to the NRTC Agreements and Other Assumed Agreements and
compliance therewith, other than the books and records associated with the
Leased Subscriber Equipment.
"Signing Deposit" shall mean Twenty-Three Thousand Eighty Dollars
($23,080) of the Four Hundred Thousand Dollars ($400,000) to be deposited by
Purchaser with the Escrow Agent on the date hereof.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i) is an active subscriber subscribing to a package of basic services, (ii) on
the last day of the calendar month prior to such date, whose account is not more
than sixty (60) days past due from the date payment is due, (iii) is not an
employee or agent of the service provider or charged a fee that is nominal
(e.g., demonstration unit) or substantially below the service provider's
published rates, and (iv) has not given notice of intent to discontinue service.
"Survival Termination Date" shall mean the last day of the eighteenth
(18th) month after the Closing Date.
"Termination Date" shall mean May 31, 1997.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Seller as of the
Closing Date which are listed on Report 17 (Unearned Revenue Report) of the NRTC
Central Billing System Reports.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Seller all of Seller's right, title and interest in and to the Purchased Assets,
free and clear of any and all Liens, on the Closing Date for the consideration
set forth in this Agreement. The sale, transfer, assignment and conveyance of
the Purchased Assets shall be made by the execution and delivery at Closing of
(i) an Assignment and Assumption Agreement substantially in the form attached
hereto as Schedule 2.1(a) (the "Assignment"), and (ii) a bill of sale
substantially in the form attached hereto as Schedule 2.1(b) (the "Bill of
Sale"), and (iii) such other recordable instruments of assignment, transfer and
conveyance as Purchaser shall reasonably request.
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<PAGE> 8
ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLER. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Seller with respect to the following:
(a) the NRTC Agreements to the extent the obligations therein
arise out of the provision of DBS Services to Customers and accrue on or after
the Closing Date; and
(b) all Current Liabilities as of the Closing Date and all
services to Customers associated with the Unearned Revenue.
Anything in this Agreement to the contrary notwithstanding,
except for the liabilities specifically set forth in this Section 3.1, Purchaser
shall not assume or be deemed to have assumed under this Agreement, by reason of
the transactions contemplated by this Agreement, or otherwise, any other trade
or other accounts payable, accrued expenses, debts, liabilities, obligations or
commitments of Seller of any nature whatsoever, known or unknown, and the
execution, delivery and performance of this Agreement shall not render Purchaser
liable for any such debt, liability, obligation or commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Seller are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Seller under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Seller with or
for the benefit of any employee of Seller; and
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Seller,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution, sale or provision
of any services of Seller, or (ii) any failure or alleged failure to comply with
any federal, state or local law, rule or regulation applicable to Seller or the
Business.
Purchaser agrees to promptly notify Seller of any claims which Purchaser obtains
knowledge of which arise out of or result from liabilities of Seller not assumed
by Purchaser pursuant to this Agreement.
ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be One Million Two Hundred Twenty-One Thousand Five
Hundred Twenty-Two Dollars ($1,221,522), subject to adjustment as provided in
Section 4.4 herein.
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<PAGE> 9
4.2. ESCROW DEPOSIT. Contemporaneously with the execution of this
Agreement, Purchaser has delivered to the Escrow Agent the Signing Deposit and
Seller has delivered to the Escrow Agent the Binder (collectively, the "Escrow
Deposit") to be held by the Escrow Agent pursuant to the Escrow Agreement.
4.3. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Seller as follows:
(a) The Escrow Deposit shall continue to be held by the Escrow
Agent pursuant to the Escrow Agreement. Purchaser shall also deposit with the
Escrow Agent Twenty-Three Thousand One Hundred Eighty Dollars ($23,180) to be
held by the Escrow Agent pursuant to the Escrow Agreement (the "Additional
Deposit").
(b) An aggregate amount not to exceed One Million One Hundred
Sixty-Three Thousand Seven Hundred Twenty-Two Dollars ($1,163,722), subject to
adjustment as provided for in Section 4.4 herein, by certified or cashier's
check, or by wire transfer of immediately available funds to an account or
accounts designated in writing by Seller (together with the Escrow Deposit and
the Additional Deposit, the "Closing Payment"). Seller shall notify Purchaser no
later than thirty (30) days prior to the Closing Date of the actual amount of
the Closing Payment.
(c) The balance of the Purchase Price by the delivery of a
Promissory Note substantially in the form attached hereto as Schedule 4.3(c)
(the "Note"). The Note will be secured by an irrevocable standby letter of
credit substantially in the form attached hereto as Schedule 4.3(d) (the "Letter
of Credit"). The Letter of Credit shall be issued by a financial institution
with offices in, and with authority to transact business in, the United States
and which has capital surplus and undivided profits aggregating at least $500
million. The Letter of Credit, by its terms, shall not expire or be released
until all amounts due Seller under the Note have been paid. Purchaser shall have
the right to replace the Letter of Credit with a Letter of Credit issued by a
financial institution meeting the requirements set forth above (the "Substitute
Letter of Credit"); provided that the Substitute Letter of Credit shall be in an
amount equal to the principal amount of the Note at the time of such
substitution; and provided further that the written consent of Seller is
required prior to the issuance of a Substitute Letter of Credit, which consent
shall not be unreasonably withheld.
4.4. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the Current Assets of Seller and decreased by the
parties' good faith estimate of the Current Liabilities of Seller as of the
Closing Date (the "Closing Adjustment"), which adjustment shall be subject to
final adjustment as provided for in paragraph (c) below.
(b) No later than sixty (60) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Purchaser shall make and
deliver to Seller a balance sheet reflecting the Current Assets and Current
Liabilities of Seller as of the Closing Date (the "Closing Date Balance Sheet"),
prepared on a basis consistent with GAAP. For purposes of the Closing Adjustment
and the Final Closing Adjustment (as hereinafter defined), the amount of
Accounts
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Receivable of Seller to be included in the Closing Date Balance Sheet shall
include only Accounts Receivable of Subscribers as reflected on Report 18A
(Subscriber Accounts Receivable Aging By Account) of the NRTC Central Billing
System Reports less a reserve of six percent (6%) for Accounts Receivable which
are not collectible. In addition, the Closing Date Balance Sheet and the Final
Closing Adjustment shall not include as a Current Asset any accounts receivable
arising from Leased Subscriber Equipment. Purchaser may, by providing Seller
with written notice at least five (5) days prior to the Closing, elect to
purchase all, or certain of, the DSS(TM) subscriber equipment owned by Seller
(other than Leased Subscriber Equipment) on the Closing Date; provided, however,
Purchaser shall not have the right to acquire any assets attributable to
Seller's Electric Business. Any such equipment which is purchased by Purchaser
shall be included as Inventory in the Closing Date Balance Sheet. Except as set
forth in this Section 4.4(b), no other assets or liabilities shall be included
in the Closing Date Balance Sheet. Seller shall make available to Purchaser such
documentation, back-up, invoices, and books and records of Seller as Purchaser
may reasonably request.
(c) Seller and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Seller and Purchaser are unable to
reconcile such discrepancies, Seller shall have fifteen (15) days from
presentment of the Closing Date Balance Sheet by Purchaser to notify Purchaser
if Seller wishes to have Purchaser's determination examined. If Seller elects to
have Purchaser's determination examined, it shall be submitted to the
determination in Atlanta, Georgia, by the Certified Public Accounting firm of
KMPG Peat Marwick (or any other independent Certified Public Accounting firm
mutually acceptable to Seller and Purchaser), the cost of such examination to be
paid fifty percent (50%) by Seller and fifty percent (50%) by Purchaser. The
determination by Purchaser shall be final and binding on the parties unless
Seller elects to have an examination as provided herein, in which case the
results of the examination shall be made within thirty (30) days of such
referral, and shall be final and binding on the parties (the "Final Closing
Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Seller shall pay the difference in cash to Purchaser
within five (5) days after the final determination. In the event the Final
Closing Adjustment is greater than the Closing Adjustment, Purchaser shall pay
such excess in cash to Seller within five (5) days after the final
determination. If, following any payment pursuant to this Section 4.4(d), an
error (in billing or reporting by NRTC or otherwise) is thereafter discovered
which would have affected the Final Closing Adjustment, the party in whose favor
the error was made shall immediately pay in cash the amount of such error to the
other party.
4.5. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.5 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
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ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller hereby represents and warrants to
Purchaser as follows:
5.1. ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia, with all
requisite power and authority to own and operate the Business as it is now
conducted and to own the Purchased Assets in the places where the Business is
now conducted and where the Purchased Assets are now owned or operated.
5.2. AUTHORITY.
(a) Seller has full power and authority to execute, deliver
and perform this Agreement and all agreements and transactions contemplated
hereby. The execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly authorized by Seller and, except
for the consent of the NRTC, DirecTv and the other Persons set forth on Schedule
5.2(b) attached hereto, no other action or proceeding on the part of any other
party is necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and constitutes, and each of the other agreements to be
executed by Seller pursuant to the terms hereof will constitute upon execution
and delivery, a legal, valid and binding obligation of Seller enforceable in
accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 5.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any document related hereto by Seller and the
consummation by Seller of all of the transactions contemplated hereby or thereby
will not (with or without the giving of notice or the lapse of time or both) (i)
violate or require any consent or approval under any applicable provision of any
judgement, order, writ, injunction, decree, rule, regulation or law; (ii)
require any consent under, conflict with, result in termination of, accelerate
the performance required by, result in a breach of, constitute a default under
or otherwise violate the terms of any agreements, instruments or other
obligations to which Seller is a party or by which Seller or any of the
Purchased Assets may be bound or affected; (iii) require any consent or approval
by, notice to or registration with any governmental authority or any other
Person; (iv) conflict with or violate any provision of Seller's organizational
documents; or (v) result in the creation of a Lien upon any of the Purchased
Assets howsoever arising.
5.3. TITLE TO THE PURCHASED ASSETS.
(a) Seller has good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) attached hereto.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Seller was conducting the Business in the
ordinary course prior to the Closing Date.
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5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.2 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Seller in the past, and no
currently needed repairs are reasonably likely to cost, either singularly or in
the aggregate with respect to all Fixed Assets, in excess of Five Thousand
Dollars ($5,000).
5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Attached hereto as Schedules 1.3, 1.4 and 1.5 are true and
complete copies of each of the NRTC/Member Agreement, the NRTC/Retail Agreement,
and the Other Assumed Agreements, if any, respectively, together with all
amendments, schedules and exhibits thereto. The NRTC/Member Agreement grants
Seller the exclusive right to distribute DBS Services in the Locations, except
as set forth in the NRTC/Member Agreement.
(b) Seller has paid all sums to NRTC or DirecTv, as
appropriate, required under the NRTC/Member Agreement such that Seller is
entitled to the marketing and sales revenues as provided therein.
(c) Seller is in full compliance in all material respects with
any and all membership, affiliation, licensing or other requirements or
arrangements as may have been established by NRTC or DirecTv pursuant to the
NRTC Agreements, or otherwise.
(d) Seller is not in breach of the NRTC Agreements, nor has
Seller failed to perform any material obligation under the NRTC Agreements.
Seller has not received notice of any such breach or non-performance at any time
of such NRTC Agreements. To the best of Seller's knowledge, no other party to
any of the NRTC Agreements is in default thereunder or has failed to perform any
material obligation thereunder.
5.6. INVENTORY. The Inventory will not, as of the Closing Date, include
any items below standard quality, obsolete or sub-prime. The Inventory shall
consist solely of undamaged, original units in original, sealed cartons. Seller
owns all of the Inventory free and clear of any and all Liens and has full power
and authority to transfer the Inventory to Purchaser.
5.7. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business and
none of the Accounts Receivable are subject to any counterclaim or setoff.
5.8. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
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5.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9 attached hereto and other than changes or events which have
affected the DBS industry in general, since December 31, 1995 to the best
knowledge, information and belief of Seller there has not been:
(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Seller which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Seller (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
other than obligations or liabilities incurred in the ordinary course of
business and consistent with past practices;
(c) any termination or waiver of any rights of Seller of
material value to the Business or to Seller;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) the adoption of any statute, rule, regulation or order
which adversely affects the Business or the Purchased Assets;
(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
5.10. LICENSES AND PERMITS. Attached hereto in Schedule 5.10 is a list
of all federal, state, local and foreign permits, certificates, licenses,
approvals and other authorizations necessary in the conduct of the Business. All
such licenses and permits of Seller are in full force and effect, and no
violations are or have been recorded in respect thereof, and no proceeding is
pending or threatened to revoke or limit any thereof. Seller and its conduct of
the Business is in compliance with all applicable laws, statutes, ordinances,
rules, regulations and order of any federal, foreign, state or local government
and any other government department or agency having regulatory jurisdiction
over Seller, and in any judgment, decision, decree or order of any court or such
governmental agency, department or authority.
5.11. TAX MATTERS.
(a) Seller has timely filed all federal, state and local tax
returns and tax reports required to be filed with respect to the Business with
the appropriate governmental agency in all jurisdictions in which such returns
and reports are required to be filed. All such returns and reports are true,
correct and complete, and all amounts shown as owing on them have been paid,
including all interest, penalties, deficiencies and assessments heretofore
levied or assessed against Seller. Seller has duly withheld, collected and
timely paid over, or holds for such payment, to the proper governmental
authorities all taxes required to be withheld or collected by it. There is no
agreement for extension of time of assessment or payment of any taxes of
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Seller. No waiver of any statute of limitations has been executed by Seller for
any tax year which remains open or unsettled. To the best knowledge, information
and belief of Seller, there is no examination or audit pending by the Internal
Revenue Service or by any state or local taxing authority with respect to the
tax matters of Seller. There is no liability for taxes or any tax deficiency or
the existence of any basis from which liability for taxes or tax deficiency,
including interest and penalties, might be asserted against Seller for any
period in excess of the applicable reserve for taxes, if any, and Seller has no
knowledge of any such liability or deficiency or the existence of any basis
therefor.
(b) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise and other taxes (including interest and
penalties), if any, payable by Seller or relating to or chargeable against the
Purchased Assets or chargeable against Seller's revenue or income have been
fully paid or are not past due and are fully disclosed and accrued on the books
and records of Seller and the proper amount of reserves exist for the payment
thereof.
5.12. DISCLOSURES. No representation or warranty made by Seller in this
Agreement, and no statement made in any Schedule, exhibit, certificate or other
writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
5.13. LITIGATION. Except as set forth in Schedule 5.13 attached hereto,
there are no actions, suits, proceedings, orders, investigations or claims
pending or, to the best of Seller's knowledge, any threats against or affecting
Seller, the Purchased Assets or the Business, at law or in equity, before any
court, arbitration panel, tribunal or governmental department, commission,
board, bureau, agency or instrumentality.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser hereby represents and warrants to
Seller as follows:
6.1. ORGANIZATION. Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Georgia, with all requisite power to own and operate its business as it is now
conducted.
6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding on the part of any
other party is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser, and constitutes, and each of the other
agreements to be executed pursuant to the terms hereof upon execution and
delivery will constitute, a legal, valid and
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binding obligation of Purchaser, enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other document related hereto by Purchaser
and the consummation by Purchaser of all of the transactions contemplated hereby
or thereby will not (with or without the giving of notice or the lapse of time
or both) (i) violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in the termination
of, accelerate the performance required by, result in the breach of, constitute
a default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Purchaser is a party; (iii) require any consent or
approval by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's Articles of
Organization or Operating Agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any Schedule, exhibit, certificate or
other writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Seller shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use its best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(d) maintain its Records in accordance with prior practice,
maintain the Purchased Assets and the Inventory in their present condition,
ordinary wear and tear excepted, consistent with past practice, and otherwise
use its best efforts to operate the Business as currently operated and in the
ordinary course in accordance with practices during the twelve (12) months
preceding the date of this Agreement;
(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets or Inventory, except for sales or
dispositions of Inventory in the ordinary course of business;
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(f) use its best efforts to preserve intact the current
business organization and relationships with employees, suppliers, advertisers,
Customers and other Persons having dealings with Seller relating to the
Business;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTv;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTv;
(i) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC Agreements, and (ii) copies of
all protests, complaints, challenges or other documents submitted to or filed
with the NRTC or DirecTv by third parties concerning the Business and, promptly
upon the filing or making thereof, copies of Seller's responses thereto; and
(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against Seller in any court, or any
action against Seller before any governmental agency, and notify Purchaser in
writing promptly upon receipt of any administrative or court order relating to
the Business. Without limiting the generality of the foregoing, Seller shall not
take any of the actions (over which Seller can exercise control) listed in
Section 5.9 herein.
7.2. ACCESS.
(a) Prior to March 31, 1997, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Seller, its Records and the Business as Purchaser deems
necessary or advisable and shall have full access to the auditors and attorneys
of Seller. Seller shall permit Purchaser and its employees, agents and
representatives, on reasonable notice, to have access during normal business
hours to its premises, personnel and Records. Seller shall cooperate to provide
access to its Customers, suppliers, lenders and such other parties as Purchaser
may reasonably request. Seller shall, and shall cause its officers, attorneys
and accountants to, furnish Purchaser with such financial and operating data and
other information as Purchaser from time to time shall reasonably request,
including, but not limited to, Seller's balance sheets for the Business as of
December 31, 1995 and September 30, 1996. No investigation by Purchaser shall in
any way affect or otherwise diminish the representations, warranties and
covenants of Seller hereunder; provided, however, that Purchaser shall advise
Seller as soon as practicable after it obtains knowledge of any breach or
nonperformance of the representations, warranties or covenants of Seller.
(b) Purchaser will hold, and will cause its authorized
representatives (including its investors and lending institutions) to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or official request or by other requirements of law, all documents and
information concerning Seller and the Business furnished to Purchaser in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
Purchaser, (ii) in the public
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domain through no fault of Purchaser, or (iii) later lawfully acquired by
Purchaser from other sources) and will not release or disclose such information
to any other Person, except its auditors, attorneys, financial advisors and
other consultants and advisors and lending institutions (including banks) in
connection with this Agreement, it being understood that such Persons shall be
informed by such party of the confidential nature of such information and shall
be directed by such party and shall have agreed to treat such information as
confidential. In the event that the transactions contemplated herein are not
consummated for any reason, Purchaser will, upon request by Seller, promptly
return to Seller all copies of any Schedules, statements, documents or other
written information obtained in connection herewith, without retaining any
copies or summaries thereof, and shall maintain such confidence except to the
extent such information comes into the public domain through no fault of
Purchaser.
7.3. CONSENT OF NRTC, DIRECTV AND OTHERS. Seller and Purchaser shall
join in and deliver the requests for the consent of the NRTC and DirecTv to the
transfer of the NRTC Agreements, and such other requests for consent that
Purchaser reasonably determines may be necessary or appropriate to consummate
the transactions contemplated hereby, and they will each diligently take all
steps necessary or desirable to obtain such consents. The failure of either of
the parties to timely file or diligently seek the consents, or to cooperate
fully with the other party with respect thereto, shall be deemed a material
breach of this Agreement.
7.4. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Seller and Purchaser shall
mutually agree in advance as to timing, form and content before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to reaching mutual agreement, except as may be
required by law, contractual relationship with an auditor, auditor requirements
or lender requirements; provided, however, that neither party shall disclose the
Purchase Price hereunder without the prior written consent of the other party.
In the event that prior to the Closing Date either party is required by law to
make a statement with respect to the transactions contemplated herein, such
party shall notify the other party in writing as to the timing, form and content
of such statements. Seller and Purchaser agree to maintain the confidentiality
of this Agreement and the terms hereof and any information exchanged by the
parties in connection with the consummation of the transaction contemplated
hereby.
7.5. BEST EFFORTS. Subject to the terms and conditions herein provided,
Seller and Purchaser agree to use their best efforts to take, execute,
acknowledge and deliver, or cause to be taken, executed, acknowledged and
delivered, all actions, deeds, assignments, documents, instruments, transfers,
conveyances, discharges, releases, assurances and consents, and to do, or cause
to be done, all things necessary, proper or advisable under this Agreement and
all applicable laws and regulations to consummate, confirm, perfect, evidence
and otherwise make effective the transactions contemplated by this Agreement,
including actions necessary to obtain all requisite assignments of agreements
and contracts, and to fulfill the requirements of Articles VIII and IX hereof on
or prior to the Closing Date.
7.6. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Seller will refrain, and will cause all of its
agents and employees to refrain, from taking, directly or indirectly, any action
to encourage, initiate, solicit or continue any discussions or negotiations
with, or any other offers from, any other Person concerning a merger, sale of
substantial stock or any similar transaction concerning Seller which would
affect the Business,
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or the sale of the Purchased Assets or any portion thereof.
7.7. SUBSCRIBER LEASES. From and after the date hereof, Seller
covenants and agrees to use its best efforts to keep in full force and effect
all leases or rentals of Leased Subscriber Equipment between Seller and
Subscribers and shall refrain from taking, directly or indirectly, any action to
encourage any Subscribers to terminate such leases. Notwithstanding any other
provisions of this Agreement, the parties hereto agree that all accounts
receivable of Seller relating to the lease or rental of Leased Subscriber
Equipment prior to or after the Closing Date shall remain the property of Seller
and shall not be transferred hereunder. In the event that after the Closing Date
Purchaser collects any rental or lease payments from Subscribers of Leased
Subscriber Equipment, Purchaser shall remit to Seller such payments within
thirty (30) days after receipt thereof. At the request of Seller, Purchaser
shall provide to Seller an accounting of such accounts receivable and receipts.
7.8. NEW SERVICES. In the event that in the future new satellite
services become available to Purchaser as a result of its license with NRTC
(such as satellite meter reading or load management) which are useful to Seller
in the Electric Business, Purchaser will make such services available to Seller
or its affiliates at a price equal to Purchaser's cost plus a royalty not to
exceed 2% of such cost; provided that making such services available does not
interfere with Purchaser's ability to provide DBS services to its Subscribers.
7.9. SELLER AS AGENT. If Seller or its affiliates desire to become
agents of Purchaser, Purchaser will permit them to act as agents in their own
name and will compensate them at a rate no less than favorable than the rate
which Purchaser is paying to any of its agents in Georgia with respect to
contracts entered into by Purchaser with such agents (i.e. excluding contracts
which apply to the entire country or major portions thereof).
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Seller on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
8.3. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the financial condition, Business, assets, results of
operations or prospects of Seller or the Purchased
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Assets.
8.4. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.5. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Seller in connection with the Closing including, without limitation,
NRTC and DirecTv consent as provided for in Section 7.3 herein, shall have been
duly obtained by Seller and shall be in full force and effect without conditions
which are materially adverse to Purchaser.
8.6. SUBSCRIBERS. On the Closing Date, the Georgia DBS Sellers shall
collectively have at least 14,000 Subscribers.
8.7. REVIEW OF SELLER. Purchaser shall have completed its due diligence
investigation covering the Business as provided for in Section 7.2 herein and no
fact or circumstances shall have come to the attention of Purchaser as a result
of such investigation which in the exercise of Purchaser's reasonable judgement
materially or adversely affects the business, prospects or financial condition
of the Business.
8.8. CLOSING OF ACQUISITIONS OF THE GEORGIA DBS SELLERS. Purchaser
shall have consummated the transactions contemplated by the Asset Purchase
Agreements dated as of the date hereof between Purchaser, on the one hand, and
each of the Georgia DBS Sellers, on the other hand, relating to the acquisition
of all of the DBS assets with respect to NRTC System Nos. 1071, 0422, 0073 and
0120.
8.9. SELLER'S CLOSING DELIVERIES. Seller shall have delivered to
Purchaser the following at Closing:
(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) copies of the Records which Purchaser may reasonably
request;
(c) a certified copy of Resolutions of the Board of Directors
of Seller authorizing the execution, delivery and performance of this Agreement;
(d) a certificate of good standing of Seller from the
Secretary of State of Georgia;
(e) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or otherwise addressed to
Purchaser's satisfaction;
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(f) a list of the Accounts Receivable from all Customers
(Reports 18A and 19A) and a list of the Unearned Revenue (Report 17), each as of
the last NRTC billing period ending prior to the Closing Date;
(g) a certificate signed by Seller's president, dated the
Closing Date, to the effect that the conditions set forth in this Article VIII
have been satisfied;
(h) an opinion of James C. Brim, Jr., Esq., counsel to Seller,
in form and substance reasonably acceptable to Purchaser;
(i) a certificate signed by Seller's president, dated the
Closing Date, regarding the transfer of Seller's account at Huntington Bank;
(j) a Noncompetition Agreement with Seller substantially in
the form attached hereto as Schedule 8.9; and
(k) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Seller's satisfaction of each of its obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Seller's obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Seller), on or before the Closing Date, of each of the following conditions
precedent:
9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in
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Section 7.3 herein) shall have been duly obtained by Purchaser and shall be in
full force and effect without conditions which are materially adverse to Seller.
9.5. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Seller the following at Closing:
(a) the Closing Payment;
(b) the Note;
(c) the Letter of Credit;
(d) a certified copy of Resolutions of the member of Purchaser
authorizing the execution, delivery and performance of this Agreement;
(e) a certificate signed by Purchaser's member, dated the
Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied;
(f) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Purchaser, in form and substance reasonably acceptable to Seller; and
(g) a certificate signed by Purchaser's member, dated the
Closing Date, regarding the transfer of Seller's account at Huntington Bank.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise specifically provided herein, each and every representation and
warranty contained in this Agreement shall expire with, and be terminated and
extinguished by the Closing or the termination of this Agreement pursuant to
Section 11.13 hereof, and thereafter, except and to the extent otherwise
specifically provided herein, neither Purchaser, Seller or any partner or
representative thereof shall be under any liability whatsoever with respect to
any such representation or warranty. The representations and warranties
hereunder shall not be affected or diminished by any investigation at any time
by or on behalf of the party for whose benefit such representations and
warranties were made. All statements contained herein or in any Schedule,
exhibit, certificate, list or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Seller and its representatives,
successors, and assigns shall indemnify, reimburse and hold Purchaser and each
of its partners, subsidiaries, affiliates, successors, assigns and agents
harmless from, against, for and in respect of any and all damages, losses,
settlement payments, obligations, liabilities, claims, demands, actions or
causes of action, judgments, encumbrances, costs and expenses (including
reasonable attorneys' fees) (collectively, the "Indemnifiable Damages") relating
to, resulting from or arising out of (i) any misrepresentation, untruth,
inaccuracy, breach or nonfulfillment of any representation,
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warranty, agreement or covenant of Seller contained in or made in connection
with this Agreement or in any Schedule, exhibit, certificate or other document
delivered pursuant hereto, (ii) the failure of Seller to pay, perform or
discharge promptly when due any of its obligations, liabilities and debts except
as provided under this Agreement, (iii) any liability or obligation relating to
the operation of the Business prior to the Closing Date, (iv) any breach or
default prior to the Closing Date by Seller under any of the NRTC Agreements,
(v) any state or local sales, use, excise, personal property or similar tax
liability (including penalties and interest) of Seller, (vi) any liability or
obligation relating to the operation of the Electric Business prior to or after
the Closing Date, and (vii) any other liabilities, obligations or claims,
whether absolute or contingent, known or unknown, matured or unmatured and not
expressly assumed by Purchaser hereunder.
10.3. INDEMNIFICATION OF SELLER. Subject the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Seller and its
shareholders, subsidiaries, affiliates, officers and directors harmless from,
against, for and in respect of any and all Indemnifiable Damages (as defined in
Section 10.2 above) relating to, resulting from or arising out of (i) any
misrepresentation, untruth, inaccuracy, breach or nonfulfillment of any
representation, warranty, agreement or covenant of Purchaser contained in or
made in connection with this Agreement or in any Schedule, exhibit, certificate
or other document delivered pursuant hereto, (ii) the failure of Purchaser to
pay, perform or discharge promptly when due (a) its obligations set forth in
Section 4.3 herein, or (b) the Current Liabilities, (iii) the assertion against
Seller of any liability or obligation relating to Purchaser's operation of the
Business after the Closing Date, and (iv) any breach or default after the
Closing Date by Purchaser under the NRTC Agreements.
10.4. EXPIRATION OF INDEMNIFICATION OBLIGATIONS. The indemnification
obligations of Seller under Sections 10.2(i), (ii), (iii), (iv) and (vii) and
Purchaser under Section 10.3 above shall expire and terminate on the Survival
Termination Date, unless, prior to such termination, the party entitled to
indemnification hereunder (the "Indemnified Party") shall have provided written
notice to the other party hereto obligated to provide indemnification pursuant
to Sections 10.2 or 10.3 herein (the "Indemnifying Party") of an assertion by
the Indemnified Party of a right to indemnification under Sections 10.2 or 10.3
("Indemnification Claim").
10.5. RIGHT TO CONTEST.
(a) If the Indemnified Party receives notice or has knowledge
of any claim for which it believes the Indemnifying Party is obligated to
provide indemnification, the Indemnified Party shall provide the Indemnifying
Party with an Indemnification Claim within twenty (20) days of its receipt of
same, but in no event later than ten (10) days prior to the date a responsive
pleading with respect to such Indemnification Claim is due. The Indemnification
Claim shall set forth a brief description of the facts giving rise to such a
claim and the amount (or reasonable estimate) of the Indemnifiable Damages
suffered or which may be suffered by the Indemnified Party. The Indemnified
Party shall, at the expense of the Indemnifying Party, provide all information
regarding the contest or defense of the claim and cooperate fully with the
Indemnifying Party in the conduct of any such contest or defense. Before being
required to make any payment pursuant to Sections 10.2 or 10.3 herein, the
Indemnifying Party may, at its own expense, elect to undertake and control the
defense of, and take all necessary steps properly to contest any claim in
respect thereof involving third parties or to prosecute such claim to conclusion
or settlement satisfactory to the Indemnified Party. If the Indemnifying Party
makes
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the foregoing election, then the Indemnified Party shall have the right to
participate, at its own expense, in all proceedings but shall not admit any
liability, settle, compromise, pay or discharge the claim without the prior
written consent of the Indemnifying Party. If the Indemnifying Party does not
make such election, it shall be obligated to pay the costs of defending or
prosecuting such claim and shall be bound by whatever result is obtained by the
Indemnified Party respecting such claim.
(b) Except as otherwise specifically provided herein, the
remedies provided in this Agreement shall be cumulative and shall not preclude
assertion by any party of any other rights or the seeking of any other remedies
against any other party hereto.
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
To Purchaser: Digital Television Services of
Georgia, LLC
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Seller: DigiCom Services, Inc.
P.O. Box 1093
128 North Lee Street
Forsyth, Georgia 31029
Attn: Jonathan W. Moore
with a copy to: James C. Brim, Jr., Esq.
P.O. Box 304
20 South Harvey Street
Camilla, Georgia 31730
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11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Georgia, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns, if any, of the parties hereto. Except as
otherwise expressly provided herein, nothing expressed or implied herein is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto, any right or remedy hereunder or by reason hereof. This
Agreement may not be assigned by Purchaser (except to a party which, directly or
indirectly is controlled by, controls or is under common control with,
Purchaser) or Seller without the prior written consent of the other party.
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules
attached hereto constitute the entire agreement and understanding of the parties
in respect of the transactions contemplated hereby and supersede all prior
correspondence, conversations, agreements, arrangements, understandings and
other writings, including the Term Sheet dated December 13, 1996 between the
Georgia DBS Sellers and Columbia DBS Management, LLC. No promises, covenants or
representations of any character or nature other than those expressly stated
herein have been made to induce either party to enter into this Agreement. This
Agreement may be amended or modified only by a written instrument signed by
Purchaser and Seller.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives. Purchaser shall pay up to Five Thousand Dollars ($5,000) of any
transfer or similar fees due the NRTC and up to one hundred twenty percent
(120%) of the NRTC's costs and expenses incurred to complete the transfer and
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assignment in connection with the transactions contemplated by this Agreement.
Seller shall pay any transfer fees due the NRTC in excess of the amounts
required to be paid by Purchaser pursuant to the immediately preceding sentence.
11.10. KNOWLEDGE OF SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Seller confirms that it has made or caused to be made due and diligent inquiry
as to the matters that are the subject of such representations and warranties.
11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Seller and Purchaser, (ii) either party
upon written notice to the other party if the Closing has not occurred on or
before the Termination Date, (iii) Seller, if Sections 9.1, 9.2 or 9.5 have not
been complied with or performed by Purchaser and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the sixtieth (60th) day
following written notice thereof from Seller; provided that Seller has not
defaulted in any material respect with respect to any of its obligations
hereunder, (iv) Purchaser, if the covenants and conditions set forth in Articles
VII and VIII (other than Section 8.7) required to be complied with and performed
by Seller have not been complied with or performed by Seller and such
noncompliance and nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Seller on or before the sixtieth
(60th) day following written notice thereof from Purchaser; provided that
Purchaser shall not have defaulted in any material respect with respect to any
of its obligations hereunder, or (v) Purchaser if the conditions set forth in
Section 8.7 required to be complied with and performed by Seller have not been
complied with or performed by Seller on or prior to March 31, 1997; provided
that Purchaser shall not have defaulted in any material respect with respect to
any of its obligations hereunder.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i) or (ii), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
(c) In the event of termination pursuant to Section 11.13(a)(iii),
Purchaser recognizes that Seller would be damaged, the extent to which is
extremely difficult and impractical to ascertain. The parties, therefore, agree
that if this Agreement is terminated pursuant to Section 11.13(a)(iii), Seller
shall be entitled to the sum equal to the Escrow Deposit. The parties agree that
this sum shall constitute liquidated damages and shall be in lieu of any and all
other relief to which Seller might otherwise be entitled due to Purchaser's
failure to consummate, or
23
<PAGE> 26
Purchaser's default under, this Agreement. In the event the Escrow Deposit is
held by the Escrow Agent at the time Seller becomes entitled to the liquidated
damages hereunder, Seller and Purchaser shall instruct the Escrow Agent to pay
the Escrow Deposit to Seller.
(d) In the event of termination pursuant to Section 11.13(a)(iv) or
(v), Purchaser shall be entitled to recover from Seller all damages, losses,
costs and expenses (including reasonable attorneys' fees) provided by law.
11.14. POWER OF ATTORNEY. Seller hereby appoints Purchaser, and all
agents, officers, and employees designated by Purchaser, irrevocably for six (6)
months from and after the Closing Date, as its true and lawful attorney-in-fact
and duly authorized agent to:
(i) open Seller's mail and endorse and collect any checks,
notes, drafts or any other items payable to Seller from Subscribers or
otherwise issued in connection with the Business, and deposit same to
the account of Purchaser in any depository institution;
(ii) sign receipts and other papers necessary for the
collection of any and all amounts due from Subscribers;
(iii) notify Subscribers that the accounts have been assigned
to Purchaser; and
(iv) direct such Subscribers to make all payments due from
them directly to Purchaser.
Purchaser shall furnish Seller with a copy of any notice issued pursuant to
Sections 11.14(iii) or (iv) above and Seller hereby agrees that any such notice,
in Purchaser's sole discretion, may be sent on Seller's stationary, in which
event Seller shall, upon demand, co-sign such notice with Purchaser. This Power
of Attorney shall not affect Seller's right to receive revenues from the Leased
Subscriber Equipment as provided for in Section 7.7 herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of Georgia, LLC
By: DTS Management, LLC
Its: Member
By:
----------------------------------
Douglas S. Holladay, Jr. President
and Manager
SELLER:
DigiCom Services, Inc.
By:
---------------------------------------
Its:
----------------------------------
Each of the undersigned has duly executed this Agreement as of the date
first above written for the sole purpose of agreeing to the provisions of
Section 4.3 hereof.
Digital Television Services, LLC
By: DTS Management, LLC
Its: Manager
By:
----------------------------------
Douglas S. Holladay, Jr. President
and Manager
DTS Management, LLC
By:
--------------------------------------
Douglas S. Holladay, Jr. President and
Manager
25
<PAGE> 1
EXHIBIT 10.16(b)
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this
"Amendment") is made as of April 15, 1997 by and between Digital Television
Services of Georgia, LLC, a Georgia limited liability company ("Purchaser") and
DigiCom Services, Inc., a Georgia corporation ("Seller").
RECITALS
Purchaser and Seller entered into an Asset Purchase Agreement dated as
of February 19, 1997 (the "Agreement"). Capitalized terms used herein which are
not otherwise defined shall have the meaning set forth in the Agreement.
Purchaser and Seller have determined that it is in their mutual best interest to
amend the Agreement in accordance with Section 11.8 thereof.
TERMS OF AMENDMENT
Purchaser and Seller agree as follows:
1. AMENDMENT TO SECTION 4.1. Section 4.1 shall be deleted in its
entirety and the following new Section 4.1 shall be inserted in lieu thereof:
"4.1. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be Nine Hundred Twenty-One Thousand Five Hundred
Twenty-Two Dollars ($921,522), subject to adjustment as provided in Section 4.4
herein."
2. AMENDMENT TO SECTION 4.3(b). Section 4.3(b) shall be deleted in its
entirety and the following new Section 4.3(b) shall be inserted in lieu thereof:
"(b) An aggregate amount not to exceed Eight Hundred
Sixty-Three Thousand Seven Hundred Twenty-Two Dollars ($863,722), subject to
adjustment as provided for in Section 4.4 herein, by certified or cashier's
check, or by wire transfer of immediately available funds to an account or
accounts designated in writing by Seller (together with the Escrow Deposit and
the Additional Deposit, the "Closing Payment"). Seller shall notify Purchaser no
later than thirty (30) days prior to the Closing Date of the actual amount of
the Closing Payment."
3. AMENDMENT TO SECTION 8.9(j). Section 8.9(j) shall be deleted in its
entirety and the following new Section 8.9(j) shall be inserted in lieu thereof:
"(j) Noncompetition Agreement with each of Seller, Jonathan W.
Moore and Robert S. Moore substantially in the forms attached hereto as Schedule
8.9(a), 8.9(b) and 8.9(c); and"
<PAGE> 2
4. AMENDMENT OF SCHEDULE 8.9. Schedule 8.9 shall be deleted in its
entirety and Schedule 8.9(a), Schedule 8.9(b) and Schedule 8.9(c) attached
hereto shall be inserted in lieu thereof.
5. MODIFICATION. Except as modified hereby, the terms and conditions of
the Agreement shall remain in full force and effect.
6. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia, without regard to the choice
of law provisions thereof.
7. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one in the same Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 3
IN WITNESS WHEREOF, Purchaser and Seller have executed this Amendment
as of this date first set forth above.
PURCHASER:
Digital Television Services of Georgia, LLC
By: DTS Management, LLC
Its: Member
By:
-----------------------------------
Douglas S. Holladay, Jr., President
and Manager
SELLER:
DigiCom Services, Inc.
By:
----------------------------------------
Jonathan W. Moore, President
3
<PAGE> 1
EXHIBIT 10.17
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF FEBRUARY 19, 1997
BY AND BETWEEN
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC
AND
PLANTERS ELECTRIC MEMBERSHIP CORPORATION
================================================================================
<PAGE> 2
LIST OF SCHEDULES
Schedule 1.1 Escrow Agreement
Schedule 1.2 Fixed Assets
Schedule 1.3 NRTC/Member Agreement
Schedule 1.4 NRTC/Retail Agreement
Schedule 1.5 Other Assumed Agreements
Schedule 2.1(a) Assignment and Assumption Agreement
Schedule 2.1(b) Bill of Sale
Schedule 4.3(c) Promissory Note
Schedule 4.3(d) Letter of Credit
Schedule 4.5 Allocation of Purchase Price
Schedule 5.2(b) Consent of Seller
Schedule 5.3(a) Liens
Schedule 5.4 Fixed Assets Needing Repairs
Schedule 5.9 Changes or Events
Schedule 5.10 Licenses and Permits
Schedule 5.13 Litigation
Schedule 6.2(b) Consent of Purchaser
Schedule 8.9 Noncompetition Agreement
[Schedules have been omitted but will be furnished upon request]
<PAGE> 3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 19th day of February, 1997, by and between Digital Television
Services of Georgia, LLC, a Georgia limited liability company ("Purchaser"), and
Planters Electric Membership Corporation, a nonprofit Georgia electric
membership corporation ("Seller").
RECITALS
1. Seller owns and operates the National Rural Telecommunications
Cooperative's System No. 0120 (the "System") for the exclusive distribution in
Burke, Jenkins and Screven Counties, Georgia (the "Locations") of DBS Services
offered by DirecTv (the "Business").
2. Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser all of Seller's rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations, any residual rights of Seller
as a member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements and certain of the assets used in
the Business, subject to the terms and conditions of this Agreement. Purchaser
acknowledges and agrees that it is not acquiring and Seller shall retain all
assets relating to its Electric Business, all Leased Subscriber Equipment and
all accounts receivable related thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, Seller and
Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Seller to the
NRTC as of the Closing Date relating to the Business; including, without
limitation, accounts payable to the NRTC with respect to wholesale bills,
equipment and other services.
"Accounts Receivable" shall mean all of the accounts receivable of
Seller as of the Closing Date for all Customers which are listed on Report 19A
(Accounts Receivable Summary) of the NRTC Central Billing Systems Reports, other
than accounts receivable of Seller relating to the rental or lease of Leased
Subscriber Equipment to Customers, whether arising prior to or after the Closing
Date.
<PAGE> 4
"Binder" shall mean the Nineteen Thousand Two Hundred Forty Dollars
($19,240) of the Two Hundred Thousand Dollars ($200,000) Purchaser deposited
with Seller as agent for the Georgia DBS Sellers, on December 17, 1996 as a good
faith binder to proceed with the transactions contemplated by this Agreement.
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"Cash" shall mean all cash in Seller's bank accounts at Huntington Bank
as of the Closing Date.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Nelson Mullins Riley
& Scarborough, L.L.P., First Union Plaza, 999 Peachtree Street N.E., Suite 1400,
Atlanta, Georgia 30309 (i) at Purchaser's election, on the later of (a) the last
business day of the month in which all of the conditions precedent set forth in
Articles VIII and IX herein have been satisfied or waived, or (b) April 30,
1997; or (ii) such other date or at such other time or place (including via
mail, overnight courier or facsimile transmission) as the parties may mutually
agree upon in writing. The Closing shall be as effective as of the close of
business on the Closing Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Current Assets" shall mean Cash, Accounts Receivable, Inventory (if
purchased pursuant to Section 4.4(b) hereof) and Prepaid Expenses of Seller,
which will be acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Seller which will be assumed by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased DBS Services, or entered into a binding agreement to purchase DBS and
related services, from Seller at any time during the five (5) year period
immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTv" shall mean DirecTv, Inc., a California corporation, the
successor in interest and rights holder to Hughes Communications Galaxy, Inc.
2
<PAGE> 5
"Electric Business" shall mean the electric distribution system and
business of Seller operated in the State of Georgia and all assets related
thereto, including, without limitation, all real estate, motor vehicles, cash
and accounts receivable.
"Escrow Agent" shall mean Synovus Trust Company, a Georgia trust
company with offices in Albany, Georgia.
"Escrow Agreement" shall mean the Escrow Agreement dated as of the date
hereof among the Escrow Agent, Purchaser and the Georgia DBS Sellers which
Escrow Agreement shall be substantially in the form attached hereto as Schedule
1.1.
"Excluded Assets" shall mean (i) all Leased Subscriber Equipment, (ii)
all assets (including, but not limited to, real estate, motor vehicles, cash and
accounts receivable) of Seller relating to or used in connection with the
Electric Business, and (iii) all Patronage Capital and capital credits.
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, any MTE terminals and demonstration units owned
by Seller and used or useable in connection with the Business, which equipment
and tangible assets are listed on Schedule 1.2 attached hereto.
"Franchise" shall mean any residual rights of Seller, if any, as a
member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Georgia DBS Sellers" shall mean Seller, Mitchell Electric Membership
Corporation, Washington Electric Membership Corporation and DigiCom Services,
Inc.
"Inventory" shall mean any DSS(TM) subscriber equipment of Seller held
for resale, other than Leased Subscriber Equipment, which Purchaser notifies
Seller pursuant to Section 4.4(b) hereof it desires to purchase pursuant to this
Agreement, which Inventory shall be valued at the lesser of each item's (i)
actual cost and (ii) current wholesale value.
"Leased Subscriber Equipment" shall mean all DSS(TM) subscriber
equipment of Seller leased or rented to Subscribers, all accounts receivable
arising therefrom and all records associated therewith.
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
3
<PAGE> 6
"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated June 4, 1992 by and between the
NRTC and Seller, as amended by that certain Amendment as of March 25, 1994 and
as may be further amended from time to time, together with all schedules and
exhibits thereto, a copy of which is attached as Schedule 1.3.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement dated October 4, 1993 by and between the NRTC and Seller, as amended
by that certain Sony Amendment to Retail Agreement as of August 28, 1995 and as
may be further amended from time to time, together with all schedules and
exhibits thereto, a copy of which is attached hereto as Schedule 1.4.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.5 attached hereto, including any contracts and
agreements with DirecTv, copies of which are attached to such Schedule.
"Patronage Capital" shall mean the amount of patronage capital
dividends credited to the account of Seller at the NRTC for the period through
the Closing Date pursuant to Article XII of the NRTC Bylaws, as amended.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
"Prepaid Expenses" shall mean (i) Two Hundred Seventy-Five Dollars
($275) for each activation of a new Subscriber in the Locations to a Total
Choice Package (or its equivalent) from the date hereof to the Closing Date;
(ii) One Hundred Twenty-Five Dollars ($125) for each activation of a new
Subscriber to an Economy Choice Package (or its equivalent) from the date hereof
to the Closing Date; and (iii) all prepaid property taxes, prepaid supplies,
advances, deposits, deferred charges and other prepaid expenses (other than
prepaid insurance) shown on Seller's books and records as of the Closing Date
relating to the Business which Prepaid Expenses can be credited to Purchaser's
account after the Closing Date, as determined in accordance with GAAP.
"Programming" shall mean Cable Programming and any programming provided
DirecTv pursuant to the NRTC Agreements.
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
4
<PAGE> 7
"Purchased Assets" shall mean only (i) the NRTC Agreements, (ii)
Franchise, (iii) Current Assets, (iv) relationships, contracts and accounts with
Customers, (v) Fixed Assets, (vi) Records, and (vii) all other assets of Seller,
whether tangible or intangible, used in connection with the Business, and shall
specifically exclude the Excluded Assets.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Seller in the Locations, including, without
limitation, copies of Customer and prospective customer lists, computer
programs, tapes and electronic data processing software, accounting journals and
ledgers, accounts receivable records, and all NRTC reports, correspondence and
other documents relating to the NRTC Agreements and Other Assumed Agreements and
compliance therewith, other than the books and records associated with the
Leased Subscriber Equipment.
"Signing Deposit" shall mean Thirty-Eight Thousand Four Hundred Eighty
Dollars ($38,480) of the Four Hundred Thousand Dollars ($400,000) to be
deposited by Purchaser with the Escrow Agent on the date hereof.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i) is an active subscriber subscribing to a package of basic services, (ii) on
the last day of the calendar month prior to such date, whose account is not more
than sixty (60) days past due from the date payment is due, (iii) is not an
employee or agent of the service provider or charged a fee that is nominal
(e.g., demonstration unit) or substantially below the service provider's
published rates, and (iv) has not given notice of intent to discontinue service.
"Survival Termination Date" shall mean the last day of the eighteenth
(18th) month after the Closing Date.
"Termination Date" shall mean May 31, 1997.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Seller as of the
Closing Date which are listed on Report 17 (Unearned Revenue Report) of the NRTC
Central Billing System Reports.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Seller all of Seller's right, title and interest in and to the Purchased Assets,
free and clear of any and all Liens, on the Closing Date for the consideration
set forth in this Agreement. The sale, transfer, assignment and conveyance of
the Purchased Assets shall be made by the execution and delivery at Closing of
(i) an Assignment and Assumption Agreement substantially in the form attached
hereto as Schedule 2.1(a) (the "Assignment"), and (ii) a bill of sale
substantially in the form attached hereto as Schedule 2.1(b) (the "Bill of
Sale"), and (iii) such other recordable instruments of assignment, transfer and
conveyance as Purchaser shall reasonably request.
5
<PAGE> 8
ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLER. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Seller with respect to the following:
(a) the NRTC Agreements to the extent the obligations therein
arise out of the provision of DBS Services to Customers and accrue on or after
the Closing Date; and
(b) all Current Liabilities as of the Closing Date and all
services to Customers associated with the Unearned Revenue.
Anything in this Agreement to the contrary notwithstanding,
except for the liabilities specifically set forth in this Section 3.1, Purchaser
shall not assume or be deemed to have assumed under this Agreement, by reason of
the transactions contemplated by this Agreement, or otherwise, any other trade
or other accounts payable, accrued expenses, debts, liabilities, obligations or
commitments of Seller of any nature whatsoever, known or unknown, and the
execution, delivery and performance of this Agreement shall not render Purchaser
liable for any such debt, liability, obligation or commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Seller are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Seller under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Seller with or
for the benefit of any employee of Seller; and
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Seller,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution, sale or provision
of any services of Seller, or (ii) any failure or alleged failure to comply with
any federal, state or local law, rule or regulation applicable to Seller or the
Business.
Purchaser agrees to promptly notify Seller of any claims which Purchaser obtains
knowledge of which arise out of or result from liabilities of Seller not assumed
by Purchaser pursuant to this Agreement.
ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be Two Million Thirty-Five Thousand Four Hundred
Twenty-Four Dollars ($2,035,424), subject to adjustment as provided in Section
4.4 herein.
6
<PAGE> 9
4.2. ESCROW DEPOSIT. Contemporaneously with the execution of this
Agreement, Purchaser has delivered to the Escrow Agent the Signing Deposit and
Seller has delivered to the Escrow Agent the Binder (collectively, the "Escrow
Deposit") to be held by the Escrow Agent pursuant to the Escrow Agreement.
4.3. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Seller as follows:
(a) The Escrow Deposit shall continue to be held by the Escrow
Agent pursuant to the Escrow Agreement. Purchaser shall also deposit with the
Escrow Agent Thirty-Eight Thousand Four Hundred Eighty Dollars ($38,480) to be
held by the Escrow Agent pursuant to the Escrow Agreement (the "Additional
Deposit").
(b) An aggregate amount not to exceed One Million Nine Hundred
Thirty-Nine Thousand Two Hundred Twenty-Four Dollars ($1,939,224), subject to
adjustment as provided for in Section 4.4 herein, by certified or cashier's
check, or by wire transfer of immediately available funds to an account or
accounts designated in writing by Seller (together with the Escrow Deposit and
the Additional Deposit, the "Closing Payment"). Seller shall notify Purchaser no
later than thirty (30) days prior to the Closing Date of the actual amount of
the Closing Payment.
(c) The balance of the Purchase Price by the delivery of a
Promissory Note substantially in the form attached hereto as Schedule 4.3(c)
(the "Note"). The Note will be secured by an irrevocable standby letter of
credit substantially in the form attached hereto as Schedule 4.3(d) (the "Letter
of Credit"). The Letter of Credit shall be issued by a financial institution
with offices in, and with authority to transact business in, the United States
and which has capital surplus and undivided profits aggregating at least $500
million. The Letter of Credit, by its terms, shall not expire or be released
until all amounts due Seller under the Note have been paid. Purchaser shall have
the right to replace the Letter of Credit with a Letter of Credit issued by a
financial institution meeting the requirements set forth above (the "Substitute
Letter of Credit"); provided that the Substitute Letter of Credit shall be in an
amount equal to the principal amount of the Note at the time of such
substitution; and provided further that the written consent of Seller is
required prior to the issuance of a Substitute Letter of Credit, which consent
shall not be unreasonably withheld.
4.4. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the Current Assets of Seller and decreased by the
parties' good faith estimate of the Current Liabilities of Seller as of the
Closing Date (the "Closing Adjustment"), which adjustment shall be subject to
final adjustment as provided for in paragraph (c) below.
(b) No later than sixty (60) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Purchaser shall make and
deliver to Seller a balance sheet reflecting the Current Assets and Current
Liabilities of Seller as of the Closing Date (the "Closing Date Balance Sheet"),
prepared on a basis consistent with GAAP. For purposes of the Closing Adjustment
and the Final Closing Adjustment (as hereinafter defined), the amount of
Accounts
7
<PAGE> 10
Receivable of Seller to be included in the Closing Date Balance Sheet shall
include only Accounts Receivable of Subscribers as reflected on Report 18A
(Subscriber Accounts Receivable Aging By Account) of the NRTC Central Billing
System Reports less a reserve of six percent (6%) for Accounts Receivable which
are not collectible. In addition, the Closing Date Balance Sheet and the Final
Closing Adjustment shall not include as a Current Asset any accounts receivable
arising from Leased Subscriber Equipment. Purchaser may, by providing Seller
with written notice at least five (5) days prior to the Closing, elect to
purchase all, or certain of, the DSS(TM) subscriber equipment owned by Seller
(other than Leased Subscriber Equipment) on the Closing Date; provided, however,
Purchaser shall not have the right to acquire any assets attributable to
Seller's Electric Business. Any such equipment which is purchased by Purchaser
shall be included as Inventory in the Closing Date Balance Sheet. Except as set
forth in this Section 4.4(b), no other assets or liabilities shall be included
in the Closing Date Balance Sheet. Seller shall make available to Purchaser such
documentation, back-up, invoices, and books and records of Seller as Purchaser
may reasonably request.
(c) Seller and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Seller and Purchaser are unable to
reconcile such discrepancies, Seller shall have fifteen (15) days from
presentment of the Closing Date Balance Sheet by Purchaser to notify Purchaser
if Seller wishes to have Purchaser's determination examined. If Seller elects to
have Purchaser's determination examined, it shall be submitted to the
determination in Atlanta, Georgia, by the Certified Public Accounting firm of
KMPG Peat Marwick (or any other independent Certified Public Accounting firm
mutually acceptable to Seller and Purchaser), the cost of such examination to be
paid fifty percent (50%) by Seller and fifty percent (50%) by Purchaser. The
determination by Purchaser shall be final and binding on the parties unless
Seller elects to have an examination as provided herein, in which case the
results of the examination shall be made within thirty (30) days of such
referral, and shall be final and binding on the parties (the "Final Closing
Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Seller shall pay the difference in cash to Purchaser
within five (5) days after the final determination. In the event the Final
Closing Adjustment is greater than the Closing Adjustment, Purchaser shall pay
such excess in cash to Seller within five (5) days after the final
determination. If, following any payment pursuant to this Section 4.4(d), an
error (in billing or reporting by NRTC or otherwise) is thereafter discovered
which would have affected the Final Closing Adjustment, the party in whose favor
the error was made shall immediately pay in cash the amount of such error to the
other party.
4.5. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.5 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
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ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller hereby represents and warrants to
Purchaser as follows:
5.1. ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia, with all
requisite power and authority to own and operate the Business as it is now
conducted and to own the Purchased Assets in the places where the Business is
now conducted and where the Purchased Assets are now owned or operated.
5.2. AUTHORITY.
(a) Seller has full power and authority to execute, deliver
and perform this Agreement and all agreements and transactions contemplated
hereby. The execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly authorized by Seller and, except
for the consent of the NRTC, DirecTv and the other Persons set forth on Schedule
5.2(b) attached hereto, no other action or proceeding on the part of any other
party is necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and constitutes, and each of the other agreements to be
executed by Seller pursuant to the terms hereof will constitute upon execution
and delivery, a legal, valid and binding obligation of Seller enforceable in
accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 5.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any document related hereto by Seller and the
consummation by Seller of all of the transactions contemplated hereby or thereby
will not (with or without the giving of notice or the lapse of time or both) (i)
violate or require any consent or approval under any applicable provision of any
judgement, order, writ, injunction, decree, rule, regulation or law; (ii)
require any consent under, conflict with, result in termination of, accelerate
the performance required by, result in a breach of, constitute a default under
or otherwise violate the terms of any agreements, instruments or other
obligations to which Seller is a party or by which Seller or any of the
Purchased Assets may be bound or affected; (iii) require any consent or approval
by, notice to or registration with any governmental authority or any other
Person; (iv) conflict with or violate any provision of Seller's organizational
documents; or (v) result in the creation of a Lien upon any of the Purchased
Assets howsoever arising.
5.3. TITLE TO THE PURCHASED ASSETS.
(a) Seller has good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) attached hereto.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Seller was conducting the Business in the
ordinary course prior to the Closing Date.
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5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.2 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Seller in the past, and no
currently needed repairs are reasonably likely to cost, either singularly or in
the aggregate with respect to all Fixed Assets, in excess of Five Thousand
Dollars ($5,000).
5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Attached hereto as Schedules 1.3, 1.4 and 1.5 are true and
complete copies of each of the NRTC/Member Agreement, the NRTC/Retail Agreement,
and the Other Assumed Agreements, if any, respectively, together with all
amendments, schedules and exhibits thereto. The NRTC/Member Agreement grants
Seller the exclusive right to distribute DBS Services in the Locations, except
as set forth in the NRTC/Member Agreement.
(b) Seller has paid all sums to NRTC or DirecTv, as
appropriate, required under the NRTC/Member Agreement such that Seller is
entitled to the marketing and sales revenues as provided therein.
(c) Seller is in full compliance in all material respects with
any and all membership, affiliation, licensing or other requirements or
arrangements as may have been established by NRTC or DirecTv pursuant to the
NRTC Agreements, or otherwise.
(d) Seller is not in breach of the NRTC Agreements, nor has
Seller failed to perform any material obligation under the NRTC Agreements.
Seller has not received notice of any such breach or non-performance at any time
of such NRTC Agreements. To the best of Seller's knowledge, no other party to
any of the NRTC Agreements is in default thereunder or has failed to perform any
material obligation thereunder.
5.6. INVENTORY. The Inventory will not, as of the Closing Date, include
any items below standard quality, obsolete or sub-prime. The Inventory shall
consist solely of undamaged, original units in original, sealed cartons. Seller
owns all of the Inventory free and clear of any and all Liens and has full power
and authority to transfer the Inventory to Purchaser.
5.7. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business and
none of the Accounts Receivable are subject to any counterclaim or setoff.
5.8. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
5.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9 attached hereto and other than changes or events which have
affected the DBS industry in
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general, since December 31, 1995 to the best knowledge, information and belief
of Seller there has not been:
(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Seller which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Seller (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
other than obligations or liabilities incurred in the ordinary course of
business and consistent with past practices;
(c) any termination or waiver of any rights of Seller of
material value to the Business or to Seller;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) the adoption of any statute, rule, regulation or order
which adversely affects the Business or the Purchased Assets;
(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
5.10. LICENSES AND PERMITS. Attached hereto in Schedule 5.10 is a list
of all federal, state, local and foreign permits, certificates, licenses,
approvals and other authorizations necessary in the conduct of the Business. All
such licenses and permits of Seller are in full force and effect, and no
violations are or have been recorded in respect thereof, and no proceeding is
pending or threatened to revoke or limit any thereof. Seller and its conduct of
the Business is in compliance with all applicable laws, statutes, ordinances,
rules, regulations and order of any federal, foreign, state or local government
and any other government department or agency having regulatory jurisdiction
over Seller, and in any judgment, decision, decree or order of any court or such
governmental agency, department or authority.
5.11. TAX MATTERS.
(a) Seller has timely filed all federal, state and local tax
returns and tax reports required to be filed with respect to the Business with
the appropriate governmental agency in all jurisdictions in which such returns
and reports are required to be filed. All such returns and reports are true,
correct and complete, and all amounts shown as owing on them have been paid,
including all interest, penalties, deficiencies and assessments heretofore
levied or assessed against Seller. Seller has duly withheld, collected and
timely paid over, or holds for such payment, to the proper governmental
authorities all taxes required to be withheld or collected by it. There is no
agreement for extension of time of assessment or payment of any taxes of Seller.
No waiver of any statute of limitations has been executed by Seller for any tax
year which remains open or unsettled. To the best knowledge, information and
belief of Seller, there
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is no examination or audit pending by the Internal Revenue Service or by any
state or local taxing authority with respect to the tax matters of Seller. There
is no liability for taxes or any tax deficiency or the existence of any basis
from which liability for taxes or tax deficiency, including interest and
penalties, might be asserted against Seller for any period in excess of the
applicable reserve for taxes, if any, and Seller has no knowledge of any such
liability or deficiency or the existence of any basis therefor.
(b) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise and other taxes (including interest and
penalties), if any, payable by Seller or relating to or chargeable against the
Purchased Assets or chargeable against Seller's revenue or income have been
fully paid or are not past due and are fully disclosed and accrued on the books
and records of Seller and the proper amount of reserves exist for the payment
thereof.
5.12. DISCLOSURES. No representation or warranty made by Seller in this
Agreement, and no statement made in any Schedule, exhibit, certificate or other
writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
5.13. LITIGATION. Except as set forth in Schedule 5.13 attached hereto,
there are no actions, suits, proceedings, orders, investigations or claims
pending or, to the best of Seller's knowledge, any threats against or affecting
Seller, the Purchased Assets or the Business, at law or in equity, before any
court, arbitration panel, tribunal or governmental department, commission,
board, bureau, agency or instrumentality.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser hereby represents and warrants to
Seller as follows:
6.1. ORGANIZATION. Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Georgia, with all requisite power to own and operate its business as it is now
conducted.
6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding on the part of any
other party is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser, and constitutes, and each of the other
agreements to be executed pursuant to the terms hereof upon execution and
delivery will constitute, a legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
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(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other document related hereto by Purchaser
and the consummation by Purchaser of all of the transactions contemplated hereby
or thereby will not (with or without the giving of notice or the lapse of time
or both) (i) violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in the termination
of, accelerate the performance required by, result in the breach of, constitute
a default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Purchaser is a party; (iii) require any consent or
approval by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's Articles of
Organization or Operating Agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any Schedule, exhibit, certificate or
other writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Seller shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use its best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(d) maintain its Records in accordance with prior practice,
maintain the Purchased Assets and the Inventory in their present condition,
ordinary wear and tear excepted, consistent with past practice, and otherwise
use its best efforts to operate the Business as currently operated and in the
ordinary course in accordance with practices during the twelve (12) months
preceding the date of this Agreement;
(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets or Inventory, except for sales or
dispositions of Inventory in the ordinary course of business;
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(f) use its best efforts to preserve intact the current
business organization and relationships with employees, suppliers, advertisers,
Customers and other Persons having dealings with Seller relating to the
Business;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTv;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTv;
(i) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC Agreements, and (ii) copies of
all protests, complaints, challenges or other documents submitted to or filed
with the NRTC or DirecTv by third parties concerning the Business and, promptly
upon the filing or making thereof, copies of Seller's responses thereto; and
(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against Seller in any court, or any
action against Seller before any governmental agency, and notify Purchaser in
writing promptly upon receipt of any administrative or court order relating to
the Business. Without limiting the generality of the foregoing, Seller shall not
take any of the actions (over which Seller can exercise control) listed in
Section 5.9 herein.
7.2. ACCESS.
(a) Prior to March 31, 1997, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Seller, its Records and the Business as Purchaser deems
necessary or advisable and shall have full access to the auditors and attorneys
of Seller. Seller shall permit Purchaser and its employees, agents and
representatives, on reasonable notice, to have access during normal business
hours to its premises, personnel and Records. Seller shall cooperate to provide
access to its Customers, suppliers, lenders and such other parties as Purchaser
may reasonably request. Seller shall, and shall cause its officers, attorneys
and accountants to, furnish Purchaser with such financial and operating data and
other information as Purchaser from time to time shall reasonably request,
including, but not limited to, Seller's balance sheets for the Business as of
December 31, 1995 and September 30, 1996. No investigation by Purchaser shall in
any way affect or otherwise diminish the representations, warranties and
covenants of Seller hereunder; provided, however, that Purchaser shall advise
Seller as soon as practicable after it obtains knowledge of any breach or
nonperformance of the representations, warranties or covenants of Seller.
(b) Purchaser will hold, and will cause its authorized
representatives (including its investors and lending institutions) to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or official request or by other requirements of law, all documents and
information concerning Seller and the Business furnished to Purchaser in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
Purchaser, (ii) in the public
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domain through no fault of Purchaser, or (iii) later lawfully acquired by
Purchaser from other sources) and will not release or disclose such information
to any other Person, except its auditors, attorneys, financial advisors and
other consultants and advisors and lending institutions (including banks) in
connection with this Agreement, it being understood that such Persons shall be
informed by such party of the confidential nature of such information and shall
be directed by such party and shall have agreed to treat such information as
confidential. In the event that the transactions contemplated herein are not
consummated for any reason, Purchaser will, upon request by Seller, promptly
return to Seller all copies of any Schedules, statements, documents or other
written information obtained in connection herewith, without retaining any
copies or summaries thereof, and shall maintain such confidence except to the
extent such information comes into the public domain through no fault of
Purchaser.
7.3. CONSENT OF NRTC, DIRECTV AND OTHERS. Seller and Purchaser shall
join in and deliver the requests for the consent of the NRTC and DirecTv to the
transfer of the NRTC Agreements, and such other requests for consent that
Purchaser reasonably determines may be necessary or appropriate to consummate
the transactions contemplated hereby, and they will each diligently take all
steps necessary or desirable to obtain such consents. The failure of either of
the parties to timely file or diligently seek the consents, or to cooperate
fully with the other party with respect thereto, shall be deemed a material
breach of this Agreement.
7.4. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Seller and Purchaser shall
mutually agree in advance as to timing, form and content before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to reaching mutual agreement, except as may be
required by law, contractual relationship with an auditor, auditor requirements
or lender requirements; provided, however, that neither party shall disclose the
Purchase Price hereunder without the prior written consent of the other party.
In the event that prior to the Closing Date either party is required by law to
make a statement with respect to the transactions contemplated herein, such
party shall notify the other party in writing as to the timing, form and content
of such statements. Seller and Purchaser agree to maintain the confidentiality
of this Agreement and the terms hereof and any information exchanged by the
parties in connection with the consummation of the transaction contemplated
hereby.
7.5. BEST EFFORTS. Subject to the terms and conditions herein provided,
Seller and Purchaser agree to use their best efforts to take, execute,
acknowledge and deliver, or cause to be taken, executed, acknowledged and
delivered, all actions, deeds, assignments, documents, instruments, transfers,
conveyances, discharges, releases, assurances and consents, and to do, or cause
to be done, all things necessary, proper or advisable under this Agreement and
all applicable laws and regulations to consummate, confirm, perfect, evidence
and otherwise make effective the transactions contemplated by this Agreement,
including actions necessary to obtain all requisite assignments of agreements
and contracts, and to fulfill the requirements of Articles VIII and IX hereof on
or prior to the Closing Date.
7.6. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Seller will refrain, and will cause all of its
agents and employees to refrain, from taking, directly or indirectly, any action
to encourage, initiate, solicit or continue any discussions or negotiations
with, or any other offers from, any other Person concerning a merger, sale of
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substantial stock or any similar transaction concerning Seller which would
affect the Business, or the sale of the Purchased Assets or any portion thereof.
7.7. SUBSCRIBER LEASES. From and after the date hereof, Seller
covenants and agrees to use its best efforts to keep in full force and effect
all leases or rentals of Leased Subscriber Equipment between Seller and
Subscribers and shall refrain from taking, directly or indirectly, any action to
encourage any Subscribers to terminate such leases. Notwithstanding any other
provisions of this Agreement, the parties hereto agree that all accounts
receivable of Seller relating to the lease or rental of Leased Subscriber
Equipment prior to or after the Closing Date shall remain the property of Seller
and shall not be transferred hereunder. In the event that after the Closing Date
Purchaser collects any rental or lease payments from Subscribers of Leased
Subscriber Equipment, Purchaser shall remit to Seller such payments within
thirty (30) days after receipt thereof. At the request of Seller, Purchaser
shall provide to Seller an accounting of such accounts receivable and receipts.
7.8. NEW SERVICES. In the event that in the future new satellite
services become available to Purchaser as a result of its license with NRTC
(such as satellite meter reading or load management) which are useful to Seller
in the Electric Business, Purchaser will make such services available to Seller
or its affiliates at a price equal to Purchaser's cost plus a royalty not to
exceed 2% of such cost; provided that making such services available does not
interfere with Purchaser's ability to provide DBS services to its Subscribers.
7.9. SELLER AS AGENT. If Seller or its affiliates desire to become
agents of Purchaser, Purchaser will permit them to act as agents in their own
name and will compensate them at a rate no less than favorable than the rate
which Purchaser is paying to any of its agents in Georgia with respect to
contracts entered into by Purchaser with such agents (i.e. excluding contracts
which apply to the entire country or major portions thereof).
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Seller on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
8.3. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the
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financial condition, Business, assets, results of operations or prospects of
Seller or the Purchased Assets.
8.4. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.5. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Seller in connection with the Closing including, without limitation,
NRTC and DirecTv consent as provided for in Section 7.3 herein, shall have been
duly obtained by Seller and shall be in full force and effect without conditions
which are materially adverse to Purchaser.
8.6. SUBSCRIBERS. On the Closing Date, the Georgia DBS Sellers shall
collectively have at least 14,000 Subscribers.
8.7. REVIEW OF SELLER. Purchaser shall have completed its due diligence
investigation covering the Business as provided for in Section 7.2 herein and no
fact or circumstances shall have come to the attention of Purchaser as a result
of such investigation which in the exercise of Purchaser's reasonable judgement
materially or adversely affects the business, prospects or financial condition
of the Business.
8.8. CLOSING OF ACQUISITIONS OF THE GEORGIA DBS SELLERS. Purchaser
shall have consummated the transactions contemplated by the Asset Purchase
Agreements dated as of the date hereof between Purchaser, on the one hand, and
each of the Georgia DBS Sellers, on the other hand, relating to the acquisition
of all of the DBS assets with respect to NRTC System Nos. 0120, 0422, 0073 and
1071.
8.9. SELLER'S CLOSING DELIVERIES. Seller shall have delivered to
Purchaser the following at Closing:
(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) copies of the Records which Purchaser may reasonably
request;
(c) a certified copy of Resolutions of the Board of Directors
of Seller authorizing the execution, delivery and performance of this Agreement;
(d) a certificate of good standing of Seller from the
Secretary of State of Georgia;
(e) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or otherwise addressed to
Purchaser's satisfaction;
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(f) a list of the Accounts Receivable from all Customers
(Reports 18A and 19A) and a list of the Unearned Revenue (Report 17), each as of
the last NRTC billing period ending prior to the Closing Date;
(g) a certificate signed by Seller's president, dated the
Closing Date, to the effect that the conditions set forth in this Article VIII
have been satisfied;
(h) an opinion of James C. Brim, Jr., Esq., counsel to Seller,
in form and substance reasonably acceptable to Purchaser;
(i) a certificate signed by Seller's president, dated the
Closing Date, regarding the transfer of Seller's account at Huntington Bank;
(j) a Noncompetition Agreement with Seller substantially in
the form attached hereto as Schedule 8.9; and
(k) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Seller's satisfaction of each of its obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Seller's obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Seller), on or before the Closing Date, of each of the following conditions
precedent:
9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in
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Section 7.3 herein) shall have been duly obtained by Purchaser and shall be in
full force and effect without conditions which are materially adverse to Seller.
9.5. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Seller the following at Closing:
(a) the Closing Payment;
(b) the Note;
(c) the Letter of Credit;
(d) a certified copy of Resolutions of the member of Purchaser
authorizing the execution, delivery and performance of this Agreement;
(e) a certificate signed by Purchaser's member, dated the
Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied;
(f) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Purchaser, in form and substance reasonably acceptable to Seller; and
(g) a certificate signed by Purchaser's member, dated the
Closing Date, regarding the transfer of Seller's account at Huntington Bank.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise specifically provided herein, each and every representation and
warranty contained in this Agreement shall expire with, and be terminated and
extinguished by the Closing or the termination of this Agreement pursuant to
Section 11.13 hereof, and thereafter, except and to the extent otherwise
specifically provided herein, neither Purchaser, Seller or any partner or
representative thereof shall be under any liability whatsoever with respect to
any such representation or warranty. The representations and warranties
hereunder shall not be affected or diminished by any investigation at any time
by or on behalf of the party for whose benefit such representations and
warranties were made. All statements contained herein or in any Schedule,
exhibit, certificate, list or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Seller and its representatives,
successors, and assigns shall indemnify, reimburse and hold Purchaser and each
of its partners, subsidiaries, affiliates, successors, assigns and agents
harmless from, against, for and in respect of any and all damages, losses,
settlement payments, obligations, liabilities, claims, demands, actions or
causes of action, judgments, encumbrances, costs and expenses (including
reasonable attorneys' fees) (collectively, the "Indemnifiable Damages") relating
to, resulting from or arising out of (i) any misrepresentation, untruth,
inaccuracy, breach or nonfulfillment of any representation,
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<PAGE> 22
warranty, agreement or covenant of Seller contained in or made in connection
with this Agreement or in any Schedule, exhibit, certificate or other document
delivered pursuant hereto, (ii) the failure of Seller to pay, perform or
discharge promptly when due any of its obligations, liabilities and debts except
as provided under this Agreement, (iii) any liability or obligation relating to
the operation of the Business prior to the Closing Date, (iv) any breach or
default prior to the Closing Date by Seller under any of the NRTC Agreements,
(v) any state or local sales, use, excise, personal property or similar tax
liability (including penalties and interest) of Seller, (vi) any liability or
obligation relating to the operation of the Electric Business prior to or after
the Closing Date, and (vii) any other liabilities, obligations or claims,
whether absolute or contingent, known or unknown, matured or unmatured and not
expressly assumed by Purchaser hereunder.
10.3. INDEMNIFICATION OF SELLER. Subject the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Seller and its
shareholders, subsidiaries, affiliates, officers and directors harmless from,
against, for and in respect of any and all Indemnifiable Damages (as defined in
Section 10.2 above) relating to, resulting from or arising out of (i) any
misrepresentation, untruth, inaccuracy, breach or nonfulfillment of any
representation, warranty, agreement or covenant of Purchaser contained in or
made in connection with this Agreement or in any Schedule, exhibit, certificate
or other document delivered pursuant hereto, (ii) the failure of Purchaser to
pay, perform or discharge promptly when due (a) its obligations set forth in
Section 4.3 herein, or (b) the Current Liabilities, (iii) the assertion against
Seller of any liability or obligation relating to Purchaser's operation of the
Business after the Closing Date, and (iv) any breach or default after the
Closing Date by Purchaser under the NRTC Agreements.
10.4. EXPIRATION OF INDEMNIFICATION OBLIGATIONS. The indemnification
obligations of Seller under Sections 10.2(i), (ii), (iii), (iv) and (vii) and
Purchaser under Section 10.3 above shall expire and terminate on the Survival
Termination Date, unless, prior to such termination, the party entitled to
indemnification hereunder (the "Indemnified Party") shall have provided written
notice to the other party hereto obligated to provide indemnification pursuant
to Sections 10.2 or 10.3 herein (the "Indemnifying Party") of an assertion by
the Indemnified Party of a right to indemnification under Sections 10.2 or 10.3
("Indemnification Claim").
10.5. RIGHT TO CONTEST.
(a) If the Indemnified Party receives notice or has knowledge
of any claim for which it believes the Indemnifying Party is obligated to
provide indemnification, the Indemnified Party shall provide the Indemnifying
Party with an Indemnification Claim within twenty (20) days of its receipt of
same, but in no event later than ten (10) days prior to the date a responsive
pleading with respect to such Indemnification Claim is due. The Indemnification
Claim shall set forth a brief description of the facts giving rise to such a
claim and the amount (or reasonable estimate) of the Indemnifiable Damages
suffered or which may be suffered by the Indemnified Party. The Indemnified
Party shall, at the expense of the Indemnifying Party, provide all information
regarding the contest or defense of the claim and cooperate fully with the
Indemnifying Party in the conduct of any such contest or defense. Before being
required to make any payment pursuant to Sections 10.2 or 10.3 herein, the
Indemnifying Party may, at its own expense, elect to undertake and control the
defense of, and take all necessary steps properly to contest any claim in
respect thereof involving third parties or to prosecute such claim to conclusion
or settlement satisfactory to the Indemnified Party. If the Indemnifying Party
makes
20
<PAGE> 23
the foregoing election, then the Indemnified Party shall have the right to
participate, at its own expense, in all proceedings but shall not admit any
liability, settle, compromise, pay or discharge the claim without the prior
written consent of the Indemnifying Party. If the Indemnifying Party does not
make such election, it shall be obligated to pay the costs of defending or
prosecuting such claim and shall be bound by whatever result is obtained by the
Indemnified Party respecting such claim.
(b) Except as otherwise specifically provided herein, the
remedies provided in this Agreement shall be cumulative and shall not preclude
assertion by any party of any other rights or the seeking of any other remedies
against any other party hereto.
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
To Purchaser: Digital Television Services of
Georgia, LLC
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Seller: Planters Electric Membership Corporation
P.O. Box 979
Millen, Georgia 30442-0979
Attn: Ellis H. Lovett, General Manager
with a copy to: James C. Brim, Jr., Esq.
P.O. Box 304
20 South Harvey Street
Camilla, Georgia 31730
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<PAGE> 24
11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Georgia, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns, if any, of the parties hereto. Except as
otherwise expressly provided herein, nothing expressed or implied herein is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto, any right or remedy hereunder or by reason hereof. This
Agreement may not be assigned by Purchaser (except to a party which, directly or
indirectly is controlled by, controls or is under common control with,
Purchaser) or Seller without the prior written consent of the other party.
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules
attached hereto constitute the entire agreement and understanding of the parties
in respect of the transactions contemplated hereby and supersede all prior
correspondence, conversations, agreements, arrangements, understandings and
other writings, including the Term Sheet dated December 13, 1996 between the
Georgia DBS Sellers and Columbia DBS Management, LLC. No promises, covenants or
representations of any character or nature other than those expressly stated
herein have been made to induce either party to enter into this Agreement. This
Agreement may be amended or modified only by a written instrument signed by
Purchaser and Seller.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives. Purchaser shall pay up to Five Thousand Dollars ($5,000) of any
transfer or similar fees due the NRTC and up to one hundred twenty percent
(120%) of the NRTC's costs and expenses incurred to complete the transfer and
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<PAGE> 25
assignment in connection with the transactions contemplated by this Agreement.
Seller shall pay any transfer fees due the NRTC in excess of the amounts
required to be paid by Purchaser pursuant to the immediately preceding sentence.
11.10. KNOWLEDGE OF SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Seller confirms that it has made or caused to be made due and diligent inquiry
as to the matters that are the subject of such representations and warranties.
11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Seller and Purchaser, (ii) either party
upon written notice to the other party if the Closing has not occurred on or
before the Termination Date, (iii) Seller, if Sections 9.1, 9.2 or 9.5 have not
been complied with or performed by Purchaser and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the sixtieth (60th) day
following written notice thereof from Seller; provided that Seller has not
defaulted in any material respect with respect to any of its obligations
hereunder, (iv) Purchaser, if the covenants and conditions set forth in Articles
VII and VIII (other than Section 8.7) required to be complied with and performed
by Seller have not been complied with or performed by Seller and such
noncompliance and nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Seller on or before the sixtieth
(60th) day following written notice thereof from Purchaser; provided that
Purchaser shall not have defaulted in any material respect with respect to any
of its obligations hereunder, or (v) Purchaser if the conditions set forth in
Section 8.7 required to be complied with and performed by Seller have not been
complied with or performed by Seller on or prior to March 31, 1997; provided
that Purchaser shall not have defaulted in any material respect with respect to
any of its obligations hereunder.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i) or (ii), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
(c) In the event of termination pursuant to Section 11.13(a)(iii),
Purchaser recognizes that Seller would be damaged, the extent to which is
extremely difficult and impractical to ascertain. The parties, therefore, agree
that if this Agreement is terminated pursuant to Section 11.13(a)(iii), Seller
shall be entitled to the sum equal to the Escrow Deposit. The parties agree that
this sum shall constitute liquidated damages and shall be in lieu of any and all
other relief to which Seller might otherwise be entitled due to Purchaser's
failure to consummate, or
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<PAGE> 26
Purchaser's default under, this Agreement. In the event the Escrow Deposit is
held by the Escrow Agent at the time Seller becomes entitled to the liquidated
damages hereunder, Seller and Purchaser shall instruct the Escrow Agent to pay
the Escrow Deposit to Seller.
(d) In the event of termination pursuant to Section 11.13(a)(iv) or
(v), Purchaser shall be entitled to recover from Seller all damages, losses,
costs and expenses (including reasonable attorneys' fees) provided by law.
11.14. POWER OF ATTORNEY. Seller hereby appoints Purchaser, and all
agents, officers, and employees designated by Purchaser, irrevocably for six (6)
months from and after the Closing Date, as its true and lawful attorney-in-fact
and duly authorized agent to:
(i) open Seller's mail and endorse and collect any checks,
notes, drafts or any other items payable to Seller from Subscribers or
otherwise issued in connection with the Business, and deposit same to
the account of Purchaser in any depository institution;
(ii) sign receipts and other papers necessary for the
collection of any and all amounts due from Subscribers;
(iii) notify Subscribers that the accounts have been assigned
to Purchaser; and
(iv) direct such Subscribers to make all payments due from
them directly to Purchaser.
Purchaser shall furnish Seller with a copy of any notice issued pursuant to
Sections 11.14(iii) or (iv) above and Seller hereby agrees that any such notice,
in Purchaser's sole discretion, may be sent on Seller's stationary, in which
event Seller shall, upon demand, co-sign such notice with Purchaser. This Power
of Attorney shall not affect Seller's right to receive revenues from the Leased
Subscriber Equipment as provided for in Section 7.7 herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of Georgia, LLC
By: DTS Management, LLC
Its: Member
By:
----------------------------------
Douglas S. Holladay, Jr. President
and Manager
SELLER:
Planters Electric Membership Corporation
By:
--------------------------------------
Its:
--------------------------------
Each of the undersigned has duly executed this Agreement as of the date
first above written for the sole purpose of agreeing to the provisions of
Section 4.3 hereof.
Digital Television Services, LLC
By: DTS Management, LLC
Its: Manager
By:
----------------------------------
Douglas S. Holladay, Jr. President
and Manager
DTS Management, LLC
By:
---------------------------------------
Douglas S. Holladay, Jr. President and
Manager
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<PAGE> 1
EXHIBIT 10.18
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF FEBRUARY 19, 1997
BY AND BETWEEN
DIGITAL TELEVISION SERVICES OF GEORGIA, LLC
AND
WASHINGTON ELECTRIC MEMBERSHIP CORPORATION
================================================================================
<PAGE> 2
LIST OF SCHEDULES
Schedule 1.1 Escrow Agreement
Schedule 1.2 Fixed Assets
Schedule 1.3 Locations
Schedule 1.4 NRTC/Member Agreement
Schedule 1.5 NRTC/Retail Agreement
Schedule 1.6 Other Assumed Agreements
Schedule 2.1(a) Assignment and Assumption Agreement
Schedule 2.1(b) Bill of Sale
Schedule 4.3(c) Promissory Note
Schedule 4.3(d) Letter of Credit
Schedule 4.5 Allocation of Purchase Price
Schedule 5.2(b) Consent of Seller
Schedule 5.3(a) Liens
Schedule 5.4 Fixed Assets Needing Repairs
Schedule 5.9 Changes or Events
Schedule 5.10 Licenses and Permits
Schedule 5.13 Litigation
Schedule 6.2(b) Consent of Purchaser
Schedule 8.9 Noncompetition Agreement
[Schedules have been omitted but will be furnished upon request]
<PAGE> 3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 19th day of February, 1997, by and between Digital Television
Services of Georgia, LLC, a Georgia limited liability company ("Purchaser"), and
Washington Electric Membership Corporation, a nonprofit Georgia electric
membership corporation ("Seller").
RECITALS
1. Seller owns and operates the National Rural Telecommunications
Cooperative's System No. 0073 (the "System") for the exclusive distribution in
certain areas in the State of Georgia of DBS Services offered by DirecTv (the
"Business").
2. Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser all of Seller's rights under the NRTC/Member Agreement and the
NRTC/Retail Agreement relating to the Locations, any residual rights of Seller
as a member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements and certain of the assets used in
the Business, subject to the terms and conditions of this Agreement. Purchaser
acknowledges and agrees that it is not acquiring and Seller shall retain all
assets relating to its Electric Business, all Leased Subscriber Equipment and
all accounts receivable related thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, Seller and
Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement, and the following definitions are
equally applicable to both the singular and plural forms of the terms defined:
"Accounts Payable" shall mean all accounts payable of Seller to the
NRTC as of the Closing Date relating to the Business; including, without
limitation, accounts payable to the NRTC with respect to wholesale bills,
equipment and other services.
"Accounts Receivable" shall mean all of the accounts receivable of
Seller as of the Closing Date for all Customers which are listed on Report 19A
(Accounts Receivable Summary) of the NRTC Central Billing Systems Reports, other
than accounts receivable of Seller relating to the rental or lease of Leased
Subscriber Equipment to Customers, whether arising prior to or after the Closing
Date.
<PAGE> 4
"Binder" shall mean the Sixty-Two Thousand Dollars ($62,000) of the Two
Hundred Thousand Dollars ($200,000) Purchaser deposited with Seller as agent for
the Georgia DBS Sellers, on December 17, 1996 as a good faith binder to proceed
with the transactions contemplated by this Agreement.
"Cable Programming" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"Cash" shall mean all cash in Seller's bank accounts at Huntington Bank
as of the Closing Date.
"Closing" shall mean the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and shall be held at 10:00 a.m. at the offices of Nelson Mullins Riley
& Scarborough, L.L.P., First Union Plaza, 999 Peachtree Street N.E., Suite 1400,
Atlanta, Georgia 30309 (i) at Purchaser's election, on the later of (a) the last
business day of the month in which all of the conditions precedent set forth in
Articles VIII and IX herein have been satisfied or waived, or (b) April 30,
1997; or (ii) such other date or at such other time or place (including via
mail, overnight courier or facsimile transmission) as the parties may mutually
agree upon in writing. The Closing shall be as effective as of the close of
business on the Closing Date.
"Closing Date" shall mean the date on which the Closing actually
occurs.
"Commercial Establishment" shall have the meaning ascribed to such term
in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Current Assets" shall mean Cash, Accounts Receivable, Inventory (if
purchased pursuant to Section 4.4(b) hereof) and Prepaid Expenses of Seller,
which will be acquired by Purchaser at Closing.
"Current Liabilities" shall mean Accounts Payables and Unearned Revenue
of Seller which will be assumed by Purchaser at Closing.
"Customers" shall mean those Persons, including Subscribers, which have
purchased DBS Services, or entered into a binding agreement to purchase DBS and
related services, from Seller at any time during the five (5) year period
immediately preceding the Closing Date.
"DBS Services" shall have the meaning ascribed to such term in the
NRTC/Member Agreement.
"DirecTv" shall mean DirecTv, Inc., a California corporation, the
successor in interest and rights holder to Hughes Communications Galaxy, Inc.
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<PAGE> 5
"Electric Business" shall mean the electric distribution system and
business of Seller operated in the State of Georgia and all assets related
thereto, including, without limitation, all real estate, motor vehicles, cash
and accounts receivable.
"Escrow Agent" shall mean Synovus Trust Company, a Georgia trust
company with offices in Albany, Georgia.
"Escrow Agreement" shall mean the Escrow Agreement dated as of the date
hereof among the Escrow Agent, Purchaser and the Georgia DBS Sellers which
Escrow Agreement shall be substantially in the form attached hereto as Schedule
1.1.
"Excluded Assets" shall mean (i) all Leased Subscriber Equipment, (ii)
all assets (including, but not limited to, real estate, motor vehicles, cash and
accounts receivable) of Seller relating to or used in connection with the
Electric Business, and (iii) all Patronage Capital and capital credits.
"Fixed Assets" shall mean the equipment and other tangible assets,
including, without limitation, any MTE terminals and demonstration units owned
by Seller and used or useable in connection with the Business, which equipment
and tangible assets are listed on Schedule 1.2 attached hereto.
"Franchise" shall mean any residual rights of Seller, if any, as a
member or affiliate of the NRTC to distribute DBS Services in the Locations
after the termination of the NRTC Agreements.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Georgia DBS Sellers" shall mean Seller, Mitchell Electric Membership
Corporation, Planters Electric Membership Corporation and DigiCom Services, Inc.
"Inventory" shall mean any DSS(TM) subscriber equipment of Seller held
for resale, other than Leased Subscriber Equipment, which Purchaser notifies
Seller pursuant to Section 4.4(b) hereof it desires to purchase pursuant to this
Agreement, which Inventory shall be valued at the lesser of each item's (i)
actual cost and (ii) current wholesale value.
"Leased Subscriber Equipment" shall mean all DSS(TM) subscriber
equipment of Seller leased or rented to Subscribers, all accounts receivable
arising therefrom and all records associated therewith.
"Lien" shall mean with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, claim, escrow, right of
first refusal, indenture, easement, license or other adverse claim or
restriction of any kind in respect of such property or asset. For purposes of
this Agreement, any restriction or limitation with respect to a security or
other ownership interest (including any restriction on the right to vote, sell
or otherwise dispose of such security or ownership interest) shall constitute a
"Lien" thereon. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
relating to such property or asset.
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<PAGE> 6
"Locations" shall mean the counties and certain other areas in the
State of Georgia set forth on Schedule 1.3 attached hereto in which Seller has
the exclusive right to distribute DBS Services pursuant to the NRTC Agreements.
"Non-Select Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications Cooperative, a
District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the NRTC/Retail
Agreement and any Other Assumed Agreements.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated June 5, 1992 by and between the
NRTC and Seller, as amended by that certain Amendment as of March 25, 1994 and
as may be further amended from time to time, together with all schedules and
exhibits thereto, a copy of which is attached as Schedule 1.4.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Product Retail
Agreement dated September 28, 1993 by and between the NRTC and Seller, as
amended from time to time, together with all schedules and exhibits thereto, a
copy of which is attached hereto as Schedule 1.5.
"Other Assumed Agreements" shall mean the contracts and agreements, if
any, set forth on Schedule 1.6 attached hereto, including any contracts and
agreements with DirecTv, copies of which are attached to such Schedule.
"Patronage Capital" shall mean the amount of patronage capital
dividends credited to the account of Seller at the NRTC for the period through
the Closing Date pursuant to Article XII of the NRTC Bylaws, as amended.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, joint
venture or other entity or organization including a government, political
subdivision or agency or instrumentality thereof.
"Prepaid Expenses" shall mean (i) Two Hundred Seventy-Five Dollars
($275) for each activation of a new Subscriber in the Locations to a Total
Choice Package (or its equivalent) from the date hereof to the Closing Date;
(ii) One Hundred Twenty-Five Dollars ($125) for each activation of a new
Subscriber to an Economy Choice Package (or its equivalent) from the date hereof
to the Closing Date; and (iii) all prepaid property taxes, prepaid supplies,
advances, deposits, deferred charges and other prepaid expenses (other than
prepaid insurance) shown on Seller's books and records as of the Closing Date
relating to the Business which Prepaid Expenses can be credited to Purchaser's
account after the Closing Date, as determined in accordance with GAAP.
"Programming" shall mean Cable Programming and any programming provided
DirecTv pursuant to the NRTC Agreements.
4
<PAGE> 7
"Purchase Price" shall mean the amount set forth in Section 4.1 herein.
"Purchased Assets" shall mean only (i) the NRTC Agreements, (ii)
Franchise, (iii) Current Assets, (iv) relationships, contracts and accounts with
Customers, (v) Fixed Assets, (vi) Records and (vii) all other assets of Seller,
whether tangible or intangible, used in connection with the Business, and shall
specifically exclude the Excluded Assets.
"Records" shall mean all files, books and records relating to the
provisions of DBS Services by Seller in the Locations, including, without
limitation, copies of Customer and prospective customer lists, computer
programs, tapes and electronic data processing software, accounting journals and
ledgers, accounts receivable records, and all NRTC reports, correspondence and
other documents relating to the NRTC Agreements and Other Assumed Agreements and
compliance therewith, other than the books and records associated with the
Leased Subscriber Equipment.
"Signing Deposit" shall mean One Hundred Twenty-Four Thousand Dollars
($124,000) of the Four Hundred Thousand Dollars ($400,000) to be deposited by
Purchaser with the Escrow Agent on the date hereof.
"Subscriber" as of any date shall mean a Customer who, at a minimum,
(i) is an active subscriber subscribing to a package of basic services, (ii) on
the last day of the calendar month prior to such date, whose account is not more
than sixty (60) days past due from the date payment is due, (iii) is not an
employee or agent of the service provider or charged a fee that is nominal
(e.g., demonstration unit) or substantially below the service provider's
published rates, and (iv) has not given notice of intent to discontinue service.
"Survival Termination Date" shall mean the last day of the eighteenth
(18th) month after the Closing Date.
"Termination Date" shall mean May 31, 1997.
"Unearned Revenue" shall mean all unearned revenue, advance payments
and deposits associated with Customer credit balances of Seller as of the
Closing Date which are listed on Report 17 (Unearned Revenue Report) of the NRTC
Central Billing System Reports.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, transfer, assign and convey the Purchased
Assets to Purchaser, and Purchaser shall purchase, acquire and accept from
Seller all of Seller's right, title and interest in and to the Purchased Assets,
free and clear of any and all Liens, on the Closing Date for the consideration
set forth in this Agreement. The sale, transfer, assignment and conveyance of
the Purchased Assets shall be made by the execution and delivery at Closing of
(i) an Assignment and Assumption Agreement substantially in the form attached
hereto as Schedule 2.1(a) (the
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"Assignment"), and (ii) a bill of sale substantially in the form attached hereto
as Schedule 2.1(b) (the "Bill of Sale"), and (iii) such other recordable
instruments of assignment, transfer and conveyance as Purchaser shall reasonably
request.
ARTICLE III
ASSUMPTION OF LIABILITIES/EXPRESS EXCLUSIONS
3.1. LIABILITIES OF SELLER. As of the Closing Date, Purchaser shall
assume and agree to pay, perform and otherwise discharge all obligations of
Seller with respect to the following:
(a) the NRTC Agreements to the extent the obligations therein
arise out of the provision of DBS Services to Customers and accrue on or after
the Closing Date; and
(b) all Current Liabilities as of the Closing Date and all
services to Customers associated with the Unearned Revenue.
Anything in this Agreement to the contrary notwithstanding,
except for the liabilities specifically set forth in this Section 3.1, Purchaser
shall not assume or be deemed to have assumed under this Agreement, by reason of
the transactions contemplated by this Agreement, or otherwise, any other trade
or other accounts payable, accrued expenses, debts, liabilities, obligations or
commitments of Seller of any nature whatsoever, known or unknown, and the
execution, delivery and performance of this Agreement shall not render Purchaser
liable for any such debt, liability, obligation or commitment.
By way of example and not as an exhaustive list, the following
liabilities and obligations of Seller are expressly not assumed by Purchaser,
pursuant to this Agreement or otherwise:
A. any liabilities or obligations of Seller under or with
respect to any employment agreement or any pension, profit-sharing, retirement,
disability or other benefit plan entered into or established by Seller with or
for the benefit of any employee of Seller; and
B. any liabilities or obligations of any kind arising out of
incidents, occurrences, actions or failures to act by or pertaining to Seller,
which occurred prior to the Closing Date, including, without limitation,
liabilities or obligations arising from (i) the distribution, sale or provision
of any services of Seller, or (ii) any failure or alleged failure to comply with
any federal, state or local law, rule or regulation applicable to Seller or the
Business.
Purchaser agrees to promptly notify Seller of any claims which Purchaser obtains
knowledge of which arise out of or result from liabilities of Seller not assumed
by Purchaser pursuant to this Agreement.
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ARTICLE IV
PURCHASE PRICE; PAYMENT OF PURCHASE PRICE
4.1. PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be Six Million Five Hundred Fifty-Six Thousand Seven
Hundred Ninety Dollars ($6,556,790), subject to adjustment as provided in
Section 4.4 herein.
4.2. ESCROW DEPOSIT. Contemporaneously with the execution of this
Agreement, Purchaser has delivered to the Escrow Agent the Signing Deposit and
Seller has delivered to the Escrow Agent the Binder (collectively, the "Escrow
Deposit") to be held by the Escrow Agent pursuant to the Escrow Agreement.
4.3. PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall
pay the Purchase Price to Seller as follows:
(a) The Escrow Deposit shall continue to be held by the Escrow
Agent pursuant to the Escrow Agreement. Purchaser shall also deposit with the
Escrow Agent One Hundred Twenty-Four Thousand Dollars ($124,000) to be held by
the Escrow Agent pursuant to the Escrow Agreement (the "Additional Deposit").
(b) An aggregate amount not to exceed Six Million Two Hundred
Forty-Six Thousand Seven Hundred Ninety Dollars ($6,246,790), subject to
adjustment as provided for in Section 4.4 herein, by certified or cashier's
check, or by wire transfer of immediately available funds to an account or
accounts designated in writing by Seller (together with the Escrow Deposit and
the Additional Deposit, the "Closing Payment"). Seller shall notify Purchaser no
later than thirty (30) days prior to the Closing Date of the actual amount of
the Closing Payment.
(c) The balance of the Purchase Price by the delivery of a
Promissory Note substantially in the form attached hereto as Schedule 4.3(c)
(the "Note"). The Note will be secured by an irrevocable standby letter of
credit substantially in the form attached hereto as Schedule 4.3(d) (the "Letter
of Credit"). The Letter of Credit shall be issued by a financial institution
with offices in, and with authority to transact business in, the United States
and which has capital surplus and undivided profits aggregating at least $500
million. The Letter of Credit, by its terms, shall not expire or be released
until all amounts due Seller under the Note have been paid. Purchaser shall have
the right to replace the Letter of Credit with a Letter of Credit issued by a
financial institution meeting the requirements set forth above (the "Substitute
Letter of Credit"); provided that the Substitute Letter of Credit shall be in an
amount equal to the principal amount of the Note at the time of such
substitution; and provided further that the written consent of Seller is
required prior to the issuance of a Substitute Letter of Credit, which consent
shall not be unreasonably withheld.
4.4. ADJUSTMENT TO PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the Current Assets of Seller and decreased by the
parties' good faith estimate of the Current
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Liabilities of Seller as of the Closing Date (the "Closing Adjustment"), which
adjustment shall be subject to final adjustment as provided for in paragraph (c)
below.
(b) No later than sixty (60) days after the Closing Date, or
within three (3) days after receipt of the necessary accounting data from the
NRTC Central Billing System, whichever is later, Purchaser shall make and
deliver to Seller a balance sheet reflecting the Current Assets and Current
Liabilities of Seller as of the Closing Date (the "Closing Date Balance Sheet"),
prepared on a basis consistent with GAAP. For purposes of the Closing Adjustment
and the Final Closing Adjustment (as hereinafter defined), the amount of
Accounts Receivable of Seller to be included in the Closing Date Balance Sheet
shall include only Accounts Receivable of Subscribers as reflected on Report 18A
(Subscriber Accounts Receivable Aging By Account) of the NRTC Central Billing
System Reports less a reserve of six percent (6%) for Accounts Receivable which
are not collectible. In addition, the Closing Date Balance Sheet and the Final
Closing Adjustment shall not include as a Current Asset any accounts receivable
arising from Leased Subscriber Equipment. Purchaser may, by providing Seller
with written notice at least five (5) days prior to the Closing, elect to
purchase all, or certain of, the DSS(TM) subscriber equipment owned by Seller
(other than Leased Subscriber Equipment) on the Closing Date; provided, however,
Purchaser shall not have the right to acquire any assets attributable to
Seller's Electric Business. Any such equipment which is purchased by Purchaser
shall be included as Inventory in the Closing Date Balance Sheet. Except as set
forth in this Section 4.4(b), no other assets or liabilities shall be included
in the Closing Date Balance Sheet. Seller shall make available to Purchaser such
documentation, back-up, invoices, and books and records of Seller as Purchaser
may reasonably request.
(c) Seller and Purchaser shall negotiate in good faith to
reconcile any discrepancies which may arise in connection with the determination
of the Closing Date Balance Sheet. If Seller and Purchaser are unable to
reconcile such discrepancies, Seller shall have fifteen (15) days from
presentment of the Closing Date Balance Sheet by Purchaser to notify Purchaser
if Seller wishes to have Purchaser's determination examined. If Seller elects to
have Purchaser's determination examined, it shall be submitted to the
determination in Atlanta, Georgia, by the Certified Public Accounting firm of
KMPG Peat Marwick (or any other independent Certified Public Accounting firm
mutually acceptable to Seller and Purchaser), the cost of such examination to be
paid fifty percent (50%) by Seller and fifty percent (50%) by Purchaser. The
determination by Purchaser shall be final and binding on the parties unless
Seller elects to have an examination as provided herein, in which case the
results of the examination shall be made within thirty (30) days of such
referral, and shall be final and binding on the parties (the "Final Closing
Adjustment").
(d) To the extent the Final Closing Adjustment is less than
the Closing Adjustment, Seller shall pay the difference in cash to Purchaser
within five (5) days after the final determination. In the event the Final
Closing Adjustment is greater than the Closing Adjustment, Purchaser shall pay
such excess in cash to Seller within five (5) days after the final
determination. If, following any payment pursuant to this Section 4.4(d), an
error (in billing or reporting by NRTC or otherwise) is thereafter discovered
which would have affected the Final Closing Adjustment, the party in whose favor
the error was made shall immediately pay in cash the amount of such error to the
other party.
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4.5. ALLOCATION OF PURCHASE PRICE. The parties have agreed, after
arms-length negotiations, to allocate the Purchase Price among the Purchased
Assets on the basis set forth on Schedule 4.5 to be delivered at the Closing,
and the parties shall make all federal, state and local tax filings consistent
therewith.
ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller hereby represents and warrants to
Purchaser as follows:
5.1. ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia, with all
requisite power and authority to own and operate the Business as it is now
conducted and to own the Purchased Assets in the places where the Business is
now conducted and where the Purchased Assets are now owned or operated.
5.2. AUTHORITY.
(a) Seller has full power and authority to execute, deliver
and perform this Agreement and all agreements and transactions contemplated
hereby. The execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly authorized by Seller and, except
for the consent of the NRTC, DirecTv and the other Persons set forth on Schedule
5.2(b) attached hereto, no other action or proceeding on the part of any other
party is necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and constitutes, and each of the other agreements to be
executed by Seller pursuant to the terms hereof will constitute upon execution
and delivery, a legal, valid and binding obligation of Seller enforceable in
accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 5.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any document related hereto by Seller and the
consummation by Seller of all of the transactions contemplated hereby or thereby
will not (with or without the giving of notice or the lapse of time or both) (i)
violate or require any consent or approval under any applicable provision of any
judgement, order, writ, injunction, decree, rule, regulation or law; (ii)
require any consent under, conflict with, result in termination of, accelerate
the performance required by, result in a breach of, constitute a default under
or otherwise violate the terms of any agreements, instruments or other
obligations to which Seller is a party or by which Seller or any of the
Purchased Assets may be bound or affected; (iii) require any consent or approval
by, notice to or registration with any governmental authority or any other
Person; (iv) conflict with or violate any provision of Seller's organizational
documents; or (v) result in the creation of a Lien upon any of the Purchased
Assets howsoever arising.
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5.3. TITLE TO THE PURCHASED ASSETS.
(a) Seller has good and marketable title to all of the
Purchased Assets, free and clear of all Liens except those Liens disclosed on
Schedule 5.3(a) attached hereto.
(b) Immediately following the Closing, Purchaser shall have
sufficient title in and to the Purchased Assets to operate and conduct the
Business in the same fashion as Seller was conducting the Business in the
ordinary course prior to the Closing Date.
5.4. CONDITION OF FIXED ASSETS. All of the Fixed Assets set forth on
Schedule 1.2 are in good operating condition, in a state of good maintenance and
repair, and are adequate and suitable for the purposes which are presently being
used. All appropriate repair and maintenance of the Fixed Assets has been
performed on a current basis and in accordance with generally accepted industry
standards. Except as set forth on Schedule 5.4 attached hereto, none of the
Fixed Assets are in need of any repairs which are outside the ordinary course of
maintenance and repairs routinely performed by Seller in the past, and no
currently needed repairs are reasonably likely to cost, either singularly or in
the aggregate with respect to all Fixed Assets, in excess of Five Thousand
Dollars ($5,000).
5.5. NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(a) Attached hereto as Schedules 1.4, 1.5 and 1.6 are true and
complete copies of each of the NRTC/Member Agreement, the NRTC/Retail Agreement,
and the Other Assumed Agreements, if any, respectively, together with all
amendments, schedules and exhibits thereto. The NRTC/Member Agreement grants
Seller the exclusive right to distribute DBS Services in the Locations, except
as set forth in the NRTC/Member Agreement.
(b) Seller has paid all sums to NRTC or DirecTv, as
appropriate, required under the NRTC/Member Agreement such that Seller is
entitled to the marketing and sales revenues as provided therein.
(c) Seller is in full compliance in all material respects with
any and all membership, affiliation, licensing or other requirements or
arrangements as may have been established by NRTC or DirecTv pursuant to the
NRTC Agreements, or otherwise.
(d) Seller is not in breach of the NRTC Agreements, nor has
Seller failed to perform any material obligation under the NRTC Agreements.
Seller has not received notice of any such breach or non-performance at any time
of such NRTC Agreements. To the best of Seller's knowledge, no other party to
any of the NRTC Agreements is in default thereunder or has failed to perform any
material obligation thereunder.
5.6. INVENTORY. The Inventory will not, as of the Closing Date, include
any items below standard quality, obsolete or sub-prime. The Inventory shall
consist solely of undamaged, original units in original, sealed cartons. Seller
owns all of the Inventory free and clear of any and all Liens and has full power
and authority to transfer the Inventory to Purchaser.
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5.7. ACCOUNTS RECEIVABLE. The Accounts Receivable represent arms'
length transactions with Customers made in the ordinary course of business and
none of the Accounts Receivable are subject to any counterclaim or setoff.
5.8. PREPAID EXPENSES. Each of the Prepaid Expenses is reasonable in
amount, was incurred and paid in the ordinary course of business and can be
utilized in the Business after the Closing Date.
5.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9 attached hereto and other than changes or events which have
affected the DBS industry in general, since December 31, 1995 to the best
knowledge, information and belief of Seller there has not been:
(a) any change in the position, financial or otherwise,
assets, liabilities, earnings, book value, Business, operations or prospects of
Seller which is materially adverse, singularly or in the aggregate;
(b) any obligation or liability incurred by Seller (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
other than obligations or liabilities incurred in the ordinary course of
business and consistent with past practices;
(c) any termination or waiver of any rights of Seller of
material value to the Business or to Seller;
(d) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or the Purchased Assets;
(e) the adoption of any statute, rule, regulation or order
which adversely affects the Business or the Purchased Assets;
(f) any sale, transfer or other disposition of any of the
Purchased Assets to any party, except for dispositions of surplus or used
equipment or other dispositions in the ordinary course of business; or
(g) any agreement to do any of the foregoing.
5.10. LICENSES AND PERMITS. Attached hereto in Schedule 5.10 is a list
of all federal, state, local and foreign permits, certificates, licenses,
approvals and other authorizations necessary in the conduct of the Business. All
such licenses and permits of Seller are in full force and effect, and no
violations are or have been recorded in respect thereof, and no proceeding is
pending or threatened to revoke or limit any thereof. Seller and its conduct of
the Business is in compliance with all applicable laws, statutes, ordinances,
rules, regulations and order of any federal, foreign, state or local government
and any other government department or agency having regulatory jurisdiction
over Seller, and in any judgment, decision, decree or order of any court or such
governmental agency, department or authority.
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5.11. TAX MATTERS.
(a) Seller has timely filed all federal, state and local tax
returns and tax reports required to be filed with respect to the Business with
the appropriate governmental agency in all jurisdictions in which such returns
and reports are required to be filed. All such returns and reports are true,
correct and complete, and all amounts shown as owing on them have been paid,
including all interest, penalties, deficiencies and assessments heretofore
levied or assessed against Seller. Seller has duly withheld, collected and
timely paid over, or holds for such payment, to the proper governmental
authorities all taxes required to be withheld or collected by it. There is no
agreement for extension of time of assessment or payment of any taxes of Seller.
No waiver of any statute of limitations has been executed by Seller for any tax
year which remains open or unsettled. To the best knowledge, information and
belief of Seller, there is no examination or audit pending by the Internal
Revenue Service or by any state or local taxing authority with respect to the
tax matters of Seller. There is no liability for taxes or any tax deficiency or
the existence of any basis from which liability for taxes or tax deficiency,
including interest and penalties, might be asserted against Seller for any
period in excess of the applicable reserve for taxes, if any, and Seller has no
knowledge of any such liability or deficiency or the existence of any basis
therefor.
(b) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise and other taxes (including interest and
penalties), if any, payable by Seller or relating to or chargeable against the
Purchased Assets or chargeable against Seller's revenue or income have been
fully paid or are not past due and are fully disclosed and accrued on the books
and records of Seller and the proper amount of reserves exist for the payment
thereof.
5.12. DISCLOSURES. No representation or warranty made by Seller in this
Agreement, and no statement made in any Schedule, exhibit, certificate or other
writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
5.13. LITIGATION. Except as set forth in Schedule 5.13 attached hereto,
there are no actions, suits, proceedings, orders, investigations or claims
pending or, to the best of Seller's knowledge, any threats against or affecting
Seller, the Purchased Assets or the Business, at law or in equity, before any
court, arbitration panel, tribunal or governmental department, commission,
board, bureau, agency or instrumentality.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
To induce Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser hereby represents and warrants to
Seller as follows:
6.1. ORGANIZATION. Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Georgia, with all requisite power to own and operate its business as it is now
conducted.
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6.2. AUTHORITY.
(a) Purchaser has full power and authority to execute,
deliver, and perform this Agreement. The execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly
authorized by Purchaser and no other action or proceeding on the part of any
other party is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser, and constitutes, and each of the other
agreements to be executed pursuant to the terms hereof upon execution and
delivery will constitute, a legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
(b) Except for the NRTC, DirecTv and the other Persons set
forth on Schedule 6.2(b) attached hereto, the execution, delivery and
performance of this Agreement or any other document related hereto by Purchaser
and the consummation by Purchaser of all of the transactions contemplated hereby
or thereby will not (with or without the giving of notice or the lapse of time
or both) (i) violate or require any consent or approval under any applicable
provision of any judgment, order, writ, injunction, decree, rule, regulation or
law; (ii) require any consent under, conflict with, result in the termination
of, accelerate the performance required by, result in the breach of, constitute
a default under or otherwise violate the terms of any agreements, instruments or
other obligations to which Purchaser is a party; (iii) require any consent or
approval by, notice to or registration with any governmental authority or any
other Person; or (iv) violate any provision of Purchaser's Articles of
Organization or Operating Agreement.
6.3. DISCLOSURES. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any Schedule, exhibit, certificate or
other writing delivered or to be delivered in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit any statement of a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE VII
COVENANTS
7.1. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. From the date
hereof through and until the Closing Date, unless performance of the following
obligations is waived by Purchaser (in its sole discretion) in advance and in
writing, Seller shall:
(a) consult with Purchaser on a regular basis with respect to
all decisions which might adversely affect the Business or the Purchased Assets;
(b) not modify, amend, alter or terminate any of the NRTC
Agreements, or waive any default or breach thereunder;
(c) comply in all material respects with the NRTC Agreements,
use its best efforts to cure any default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
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(d) maintain its Records in accordance with prior practice,
maintain the Purchased Assets and the Inventory in their present condition,
ordinary wear and tear excepted, consistent with past practice, and otherwise
use its best efforts to operate the Business as currently operated and in the
ordinary course in accordance with practices during the twelve (12) months
preceding the date of this Agreement;
(e) not sell, transfer, dispose or permit a Lien, directly or
indirectly, on any of the Purchased Assets or Inventory, except for sales or
dispositions of Inventory in the ordinary course of business;
(f) use its best efforts to preserve intact the current
business organization and relationships with employees, suppliers, advertisers,
Customers and other Persons having dealings with Seller relating to the
Business;
(g) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC and DirecTv;
(h) provide to Purchaser, concurrently with filing, sending or
receipt thereof, copies of all reports to and other filings and correspondence
with the NRTC and DirecTv;
(i) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension or limitation of
the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under, any of the NRTC Agreements, and (ii) copies of
all protests, complaints, challenges or other documents submitted to or filed
with the NRTC or DirecTv by third parties concerning the Business and, promptly
upon the filing or making thereof, copies of Seller's responses thereto; and
(j) notify Purchaser in writing immediately upon learning of
the institution or threat of any action against Seller in any court, or any
action against Seller before any governmental agency, and notify Purchaser in
writing promptly upon receipt of any administrative or court order relating to
the Business. Without limiting the generality of the foregoing, Seller shall not
take any of the actions (over which Seller can exercise control) listed in
Section 5.9 herein.
7.2. ACCESS.
(a) Prior to March 31, 1997, Purchaser may, through its
employees, agents and representatives, make or cause to be made such
investigation of Seller, its Records and the Business as Purchaser deems
necessary or advisable and shall have full access to the auditors and attorneys
of Seller. Seller shall permit Purchaser and its employees, agents and
representatives, on reasonable notice, to have access during normal business
hours to its premises, personnel and Records. Seller shall cooperate to provide
access to its Customers, suppliers, lenders and such other parties as Purchaser
may reasonably request. Seller shall, and shall cause its officers, attorneys
and accountants to, furnish Purchaser with such financial and operating data and
other information as Purchaser from time to time shall reasonably request,
including, but not limited to, Seller's balance sheets for the Business as of
December 31, 1995 and September 30, 1996. No investigation by Purchaser shall in
any way affect or otherwise
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diminish the representations, warranties and covenants of Seller hereunder;
provided, however, that Purchaser shall advise Seller as soon as practicable
after it obtains knowledge of any breach or nonperformance of the
representations, warranties or covenants of Seller.
(b) Purchaser will hold, and will cause its authorized
representatives (including its investors and lending institutions) to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or official request or by other requirements of law, all documents and
information concerning Seller and the Business furnished to Purchaser in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
Purchaser, (ii) in the public domain through no fault of Purchaser, or (iii)
later lawfully acquired by Purchaser from other sources) and will not release or
disclose such information to any other Person, except its auditors, attorneys,
financial advisors and other consultants and advisors and lending institutions
(including banks) in connection with this Agreement, it being understood that
such Persons shall be informed by such party of the confidential nature of such
information and shall be directed by such party and shall have agreed to treat
such information as confidential. In the event that the transactions
contemplated herein are not consummated for any reason, Purchaser will, upon
request by Seller, promptly return to Seller all copies of any Schedules,
statements, documents or other written information obtained in connection
herewith, without retaining any copies or summaries thereof, and shall maintain
such confidence except to the extent such information comes into the public
domain through no fault of Purchaser.
7.3. CONSENT OF NRTC, DIRECTV AND OTHERS. Seller and Purchaser shall
join in and deliver the requests for the consent of the NRTC and DirecTv to the
transfer of the NRTC Agreements, and such other requests for consent that
Purchaser reasonably determines may be necessary or appropriate to consummate
the transactions contemplated hereby, and they will each diligently take all
steps necessary or desirable to obtain such consents. The failure of either of
the parties to timely file or diligently seek the consents, or to cooperate
fully with the other party with respect thereto, shall be deemed a material
breach of this Agreement.
7.4. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Seller and Purchaser shall
mutually agree in advance as to timing, form and content before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any press release or make
any public statement prior to reaching mutual agreement, except as may be
required by law, contractual relationship with an auditor, auditor requirements
or lender requirements; provided, however, that neither party shall disclose the
Purchase Price hereunder without the prior written consent of the other party.
In the event that prior to the Closing Date either party is required by law to
make a statement with respect to the transactions contemplated herein, such
party shall notify the other party in writing as to the timing, form and content
of such statements. Seller and Purchaser agree to maintain the confidentiality
of this Agreement and the terms hereof and any information exchanged by the
parties in connection with the consummation of the transaction contemplated
hereby.
7.5. BEST EFFORTS. Subject to the terms and conditions herein provided,
Seller and Purchaser agree to use their best efforts to take, execute,
acknowledge and deliver, or cause to be taken, executed, acknowledged and
delivered, all actions, deeds, assignments, documents, instruments, transfers,
conveyances, discharges, releases, assurances and consents, and to do, or cause
to be done, all things necessary, proper or advisable under this Agreement and
all
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applicable laws and regulations to consummate, confirm, perfect, evidence and
otherwise make effective the transactions contemplated by this Agreement,
including actions necessary to obtain all requisite assignments of agreements
and contracts, and to fulfill the requirements of Articles VIII and IX hereof on
or prior to the Closing Date.
7.6. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the Closing Date, Seller will refrain, and will cause all of its
agents and employees to refrain, from taking, directly or indirectly, any action
to encourage, initiate, solicit or continue any discussions or negotiations
with, or any other offers from, any other Person concerning a merger, sale of
substantial stock or any similar transaction concerning Seller which would
affect the Business, or the sale of the Purchased Assets or any portion thereof.
7.7. SUBSCRIBER LEASES. From and after the date hereof, Seller
covenants and agrees to use its best efforts to keep in full force and effect
all leases or rentals of Leased Subscriber Equipment between Seller and
Subscribers and shall refrain from taking, directly or indirectly, any action to
encourage any Subscribers to terminate such leases. Notwithstanding any other
provisions of this Agreement, the parties hereto agree that all accounts
receivable of Seller relating to the lease or rental of Leased Subscriber
Equipment prior to or after the Closing Date shall remain the property of Seller
and shall not be transferred hereunder. In the event that after the Closing Date
Purchaser collects any rental or lease payments from Subscribers of Leased
Subscriber Equipment, Purchaser shall remit to Seller such payments within
thirty (30) days after receipt thereof. At the request of Seller, Purchaser
shall provide to Seller an accounting of such accounts receivable and receipts.
7.8. NEW SERVICES. In the event that in the future new satellite
services become available to Purchaser as a result of its license with NRTC
(such as satellite meter reading or load management) which are useful to Seller
in the Electric Business, Purchaser will make such services available to Seller
or its affiliates at a price equal to Purchaser's cost plus a royalty not to
exceed 2% of such cost; provided that making such services available does not
interfere with Purchaser's ability to provide DBS services to its Subscribers.
7.9. SELLER AS AGENT. If Seller or its affiliates desire to become
agents of Purchaser, Purchaser will permit them to act as agents in their own
name and will compensate them at a rate no less than favorable than the rate
which Purchaser is paying to any of its agents in Georgia with respect to
contracts entered into by Purchaser with such agents (i.e. excluding contracts
which apply to the entire country or major portions thereof).
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Purchaser's obligations to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions
precedent:
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8.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
8.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Seller on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
8.3. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and except
as otherwise permitted by this Agreement, there shall not have occurred any
material adverse change in the financial condition, Business, assets, results of
operations or prospects of Seller or the Purchased Assets.
8.4. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
8.5. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Seller in connection with the Closing including, without limitation,
NRTC and DirecTv consent as provided for in Section 7.3 herein, shall have been
duly obtained by Seller and shall be in full force and effect without conditions
which are materially adverse to Purchaser.
8.6. SUBSCRIBERS. On the Closing Date, the Georgia DBS Sellers shall
collectively have at least 14,000 Subscribers.
8.7. REVIEW OF SELLER. Purchaser shall have completed its due diligence
investigation covering the Business as provided for in Section 7.2 herein and no
fact or circumstances shall have come to the attention of Purchaser as a result
of such investigation which in the exercise of Purchaser's reasonable judgement
materially or adversely affects the business, prospects or financial condition
of the Business.
8.8. CLOSING OF ACQUISITIONS OF THE GEORGIA DBS SELLERS. Purchaser
shall have consummated the transactions contemplated by the Asset Purchase
Agreements dated as of the date hereof between Purchaser, on the one hand, and
each of the Georgia DBS Sellers, on the other hand, relating to the acquisition
of all of the DBS assets with respect to NRTC System Nos. 0073, 0422, 0120 and
1071.
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<PAGE> 20
8.9. SELLER'S CLOSING DELIVERIES. Seller shall have delivered to
Purchaser the following at Closing:
(a) the Assignment, the Bill of Sale and other instruments of
transfer to effectively assign, transfer and convey good and marketable title to
the Purchased Assets as Purchaser shall reasonably request, in form and
substance reasonably satisfactory to Purchaser;
(b) copies of the Records which Purchaser may reasonably
request;
(c) a certified copy of Resolutions of the Board of Directors
of Seller authorizing the execution, delivery and performance of this Agreement;
(d) a certificate of good standing of Seller from the
Secretary of State of Georgia;
(e) evidence satisfactory to Purchaser that all Liens
described on Schedule 5.3(a) herein have been removed or otherwise addressed to
Purchaser's satisfaction;
(f) a list of the Accounts Receivable from all Customers
(Reports 18A and 19A) and a list of the Unearned Revenue (Report 17), each as of
the last NRTC billing period ending prior to the Closing Date;
(g) a certificate signed by Seller's president, dated the
Closing Date, to the effect that the conditions set forth in this Article VIII
have been satisfied;
(h) an opinion of James C. Brim, Jr., Esq., counsel to Seller,
in form and substance reasonably acceptable to Purchaser;
(i) a certificate signed by Seller's president, dated the
Closing Date, regarding the transfer of Seller's account at Huntington Bank;
(j) a Noncompetition Agreement with Seller substantially in
the form attached hereto as Schedule 8.9; and
(k) such other documents and instruments as may be reasonably
requested and satisfactory to Purchaser and its counsel in connection with
Seller's satisfaction of each of its obligations hereunder.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Seller's obligation to perform this Agreement and consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Seller), on or before the Closing Date, of each of the following conditions
precedent:
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<PAGE> 21
9.1. TRUTH OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Purchaser contained in this Agreement, and all
representations and warranties set forth in any Schedule or exhibit attached
hereto, shall have been true, complete and correct when made and as of the
Closing Date, without the necessity of any material amendment or modification,
with the same force and effect as if made as of the Closing Date.
9.2. PERFORMANCE. Each of the agreements, obligations, conditions and
covenants to be performed or complied with by Purchaser on or before the Closing
Date pursuant to the terms hereof shall have been duly performed or complied
with on or before the Closing Date.
9.3. NO LITIGATION THREATENED. No action, suit or other proceeding
shall be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim, the consummation of which would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
9.4. CONSENTS. All authorizations and approvals of or consents of, or
filings with, any governmental authority or other Person required to be obtained
or made by Purchaser in connection with the Closing (including, without
limitation, NRTC consent as provided for in Section 7.3 herein) shall have been
duly obtained by Purchaser and shall be in full force and effect without
conditions which are materially adverse to Seller.
9.5. PURCHASER'S CLOSING DELIVERIES. Purchaser shall have delivered to
Seller the following at Closing:
(a) the Closing Payment;
(b) the Note;
(c) the Letter of Credit;
(d) a certified copy of Resolutions of the member of Purchaser
authorizing the execution, delivery and performance of this Agreement;
(e) a certificate signed by Purchaser's member, dated the
Closing Date, to the effect that the conditions set forth in this Article IX
have been satisfied;
(f) an opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Purchaser, in form and substance reasonably acceptable to Seller; and
(g) a certificate signed by Purchaser's member, dated the
Closing Date, regarding the transfer of Seller's account at Huntington Bank.
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<PAGE> 22
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise specifically provided herein, each and every representation and
warranty contained in this Agreement shall expire with, and be terminated and
extinguished by the Closing or the termination of this Agreement pursuant to
Section 11.13 hereof, and thereafter, except and to the extent otherwise
specifically provided herein, neither Purchaser, Seller or any partner or
representative thereof shall be under any liability whatsoever with respect to
any such representation or warranty. The representations and warranties
hereunder shall not be affected or diminished by any investigation at any time
by or on behalf of the party for whose benefit such representations and
warranties were made. All statements contained herein or in any Schedule,
exhibit, certificate, list or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties.
10.2. INDEMNIFICATION OF PURCHASER. Seller and its representatives,
successors, and assigns shall indemnify, reimburse and hold Purchaser and each
of its partners, subsidiaries, affiliates, successors, assigns and agents
harmless from, against, for and in respect of any and all damages, losses,
settlement payments, obligations, liabilities, claims, demands, actions or
causes of action, judgments, encumbrances, costs and expenses (including
reasonable attorneys' fees) (collectively, the "Indemnifiable Damages") relating
to, resulting from or arising out of (i) any misrepresentation, untruth,
inaccuracy, breach or nonfulfillment of any representation, warranty, agreement
or covenant of Seller contained in or made in connection with this Agreement or
in any Schedule, exhibit, certificate or other document delivered pursuant
hereto, (ii) the failure of Seller to pay, perform or discharge promptly when
due any of its obligations, liabilities and debts except as provided under this
Agreement, (iii) any liability or obligation relating to the operation of the
Business prior to the Closing Date, (iv) any breach or default prior to the
Closing Date by Seller under any of the NRTC Agreements, (v) any state or local
sales, use, excise, personal property or similar tax liability (including
penalties and interest) of Seller, (vi) any liability or obligation relating to
the operation of the Electric Business prior to or after the Closing Date, and
(vii) any other liabilities, obligations or claims, whether absolute or
contingent, known or unknown, matured or unmatured and not expressly assumed by
Purchaser hereunder.
10.3. INDEMNIFICATION OF SELLER. Subject the limitations hereinafter
set forth, Purchaser shall indemnify, reimburse and hold Seller and its
shareholders, subsidiaries, affiliates, officers and directors harmless from,
against, for and in respect of any and all Indemnifiable Damages (as defined in
Section 10.2 above) relating to, resulting from or arising out of (i) any
misrepresentation, untruth, inaccuracy, breach or nonfulfillment of any
representation, warranty, agreement or covenant of Purchaser contained in or
made in connection with this Agreement or in any Schedule, exhibit, certificate
or other document delivered pursuant hereto, (ii) the failure of Purchaser to
pay, perform or discharge promptly when due (a) its obligations set forth in
Section 4.3 herein, or (b) the Current Liabilities, (iii) the assertion against
Seller of any liability or obligation relating to Purchaser's operation of the
Business after the Closing Date, and (iv) any breach or default after the
Closing Date by Purchaser under the NRTC Agreements.
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<PAGE> 23
10.4. EXPIRATION OF INDEMNIFICATION OBLIGATIONS. The indemnification
obligations of Seller under Sections 10.2(i), (ii), (iii), (iv) and (vii) and
Purchaser under Section 10.3 above shall expire and terminate on the Survival
Termination Date, unless, prior to such termination, the party entitled to
indemnification hereunder (the "Indemnified Party") shall have provided written
notice to the other party hereto obligated to provide indemnification pursuant
to Sections 10.2 or 10.3 herein (the "Indemnifying Party") of an assertion by
the Indemnified Party of a right to indemnification under Sections 10.2 or 10.3
("Indemnification Claim").
10.5. RIGHT TO CONTEST.
(a) If the Indemnified Party receives notice or has knowledge
of any claim for which it believes the Indemnifying Party is obligated to
provide indemnification, the Indemnified Party shall provide the Indemnifying
Party with an Indemnification Claim within twenty (20) days of its receipt of
same, but in no event later than ten (10) days prior to the date a responsive
pleading with respect to such Indemnification Claim is due. The Indemnification
Claim shall set forth a brief description of the facts giving rise to such a
claim and the amount (or reasonable estimate) of the Indemnifiable Damages
suffered or which may be suffered by the Indemnified Party. The Indemnified
Party shall, at the expense of the Indemnifying Party, provide all information
regarding the contest or defense of the claim and cooperate fully with the
Indemnifying Party in the conduct of any such contest or defense. Before being
required to make any payment pursuant to Sections 10.2 or 10.3 herein, the
Indemnifying Party may, at its own expense, elect to undertake and control the
defense of, and take all necessary steps properly to contest any claim in
respect thereof involving third parties or to prosecute such claim to conclusion
or settlement satisfactory to the Indemnified Party. If the Indemnifying Party
makes the foregoing election, then the Indemnified Party shall have the right to
participate, at its own expense, in all proceedings but shall not admit any
liability, settle, compromise, pay or discharge the claim without the prior
written consent of the Indemnifying Party. If the Indemnifying Party does not
make such election, it shall be obligated to pay the costs of defending or
prosecuting such claim and shall be bound by whatever result is obtained by the
Indemnified Party respecting such claim.
(b) Except as otherwise specifically provided herein, the
remedies provided in this Agreement shall be cumulative and shall not preclude
assertion by any party of any other rights or the seeking of any other remedies
against any other party hereto.
ARTICLE XI
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, upon
personal delivery, upon receipted delivery by overnight courier, charges prepaid
or charged to the sender's account if delivery is confirmed by the delivery
service, upon receipt of a confirmed transmission if by facsimile transmission,
or three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, as follows (or at such other address
for a party as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof):
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<PAGE> 24
To Purchaser: Digital Television Services of
Georgia, LLC
Building C-200
880 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: Douglas S. Holladay, Jr.
with a copy to: C. Mark Kelly, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center, Suite 3350
100 North Tryon Street
Charlotte, North Carolina 28202
To Seller: Washington Electric Membership Corporation
258 North Harris Street
P.O. Box 598
Sandersville, Georgia 31082
Attn: Robert S. Moore
with a copy to: James C. Brim, Jr., Esq.
P.O. Box 304
20 South Harvey Street
Camilla, Georgia 31730
11.2. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
11.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Georgia, without regard to the choice of law provisions thereof.
11.4. WAIVERS. No provisions of this Agreement may be waived except by
an instrument in writing signed by the party sought to be bound. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or of the same right
or remedy or a waiver on any future occasion.
11.5. SEVERABILITY. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
11.6. SECTION AND ARTICLE HEADING REFERENCES. The Section and Article
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns,
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if any, of the parties hereto. Except as otherwise expressly provided herein,
nothing expressed or implied herein is intended or shall be construed to confer
upon or give any Person, other than the parties hereto, any right or remedy
hereunder or by reason hereof. This Agreement may not be assigned by Purchaser
(except to a party which, directly or indirectly is controlled by, controls or
is under common control with, Purchaser) or Seller without the prior written
consent of the other party.
11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules
attached hereto constitute the entire agreement and understanding of the parties
in respect of the transactions contemplated hereby and supersede all prior
correspondence, conversations, agreements, arrangements, understandings and
other writings, including the Term Sheet dated December 13, 1996 between the
Georgia DBS Sellers and Columbia DBS Management, LLC. No promises, covenants or
representations of any character or nature other than those expressly stated
herein have been made to induce either party to enter into this Agreement. This
Agreement may be amended or modified only by a written instrument signed by
Purchaser and Seller.
11.9. EXPENSES. Each of the parties hereto shall pay its own expenses
incurred in connection with the negotiation and consummation of this Agreement,
including the charges of its respective attorneys, accountants and other
representatives. Purchaser shall pay up to Five Thousand Dollars ($5,000) of any
transfer or similar fees due the NRTC and up to one hundred twenty percent
(120%) of the NRTC's costs and expenses incurred to complete the transfer and
assignment in connection with the transactions contemplated by this Agreement.
Seller shall pay any transfer fees due the NRTC in excess of the amounts
required to be paid by Purchaser pursuant to the immediately preceding sentence.
11.10. KNOWLEDGE OF SELLER. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to knowledge,
Seller confirms that it has made or caused to be made due and diligent inquiry
as to the matters that are the subject of such representations and warranties.
11.11. FACSIMILE SIGNATURES. Facsimile signatures shall be considered
original signatures for purposes of execution and enforcement of the rights
delineated in this Agreement.
11.12. SCHEDULES. The Schedules referred to in this Agreement are
attached hereto, made a part hereof and incorporated herein by this reference.
11.13. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
by (i) the mutual written consent of Seller and Purchaser, (ii) either party
upon written notice to the other party if the Closing has not occurred on or
before the Termination Date, (iii) Seller, if Sections 9.1, 9.2 or 9.5 have not
been complied with or performed by Purchaser and such noncompliance and
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the sixtieth (60th) day
following written notice thereof from Seller; provided that Seller has not
defaulted in any material respect with respect to any of its obligations
hereunder, (iv) Purchaser, if the covenants and conditions set forth in Articles
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<PAGE> 26
VII and VIII (other than Section 8.7) required to be complied with and performed
by Seller have not been complied with or performed by Seller and such
noncompliance and nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Seller on or before the sixtieth
(60th) day following written notice thereof from Purchaser; provided that
Purchaser shall not have defaulted in any material respect with respect to any
of its obligations hereunder, or (v) Purchaser if the conditions set forth in
Section 8.7 required to be complied with and performed by Seller have not been
complied with or performed by Seller on or prior to March 31, 1997; provided
that Purchaser shall not have defaulted in any material respect with respect to
any of its obligations hereunder.
(b) In the event of termination pursuant to this Section 11.13, written
notice thereof shall be given to the other party and this Agreement shall
terminate immediately. In the event of such termination pursuant to Section
11.13(a)(i) or (ii), no party hereto (or any of their respective directors,
officers or partners) shall have any liability or further obligation to the
other party to this Agreement.
(c) In the event of termination pursuant to Section 11.13(a)(iii),
Purchaser recognizes that Seller would be damaged, the extent to which is
extremely difficult and impractical to ascertain. The parties, therefore, agree
that if this Agreement is terminated pursuant to Section 11.13(a)(iii), Seller
shall be entitled to the sum equal to the Escrow Deposit. The parties agree that
this sum shall constitute liquidated damages and shall be in lieu of any and all
other relief to which Seller might otherwise be entitled due to Purchaser's
failure to consummate, or Purchaser's default under, this Agreement. In the
event the Escrow Deposit is held by the Escrow Agent at the time Seller becomes
entitled to the liquidated damages hereunder, Seller and Purchaser shall
instruct the Escrow Agent to pay the Escrow Deposit to Seller.
(d) In the event of termination pursuant to Section 11.13(a)(iv) or
(v), Purchaser shall be entitled to recover from Seller all damages, losses,
costs and expenses (including reasonable attorneys' fees) provided by law.
11.14. POWER OF ATTORNEY. Seller hereby appoints Purchaser, and all
agents, officers, and employees designated by Purchaser, irrevocably for six (6)
months from and after the Closing Date, as its true and lawful attorney-in-fact
and duly authorized agent to:
(i) open Seller's mail and endorse and collect any checks,
notes, drafts or any other items payable to Seller from Subscribers or
otherwise issued in connection with the Business, and deposit same to
the account of Purchaser in any depository institution;
(ii) sign receipts and other papers necessary for the
collection of any and all amounts due from Subscribers;
(iii) notify Subscribers that the accounts have been assigned
to Purchaser; and
(iv) direct such Subscribers to make all payments due from
them directly to Purchaser.
Purchaser shall furnish Seller with a copy of any notice issued pursuant to
Sections 11.14(iii) or (iv) above and Seller hereby agrees that any such notice,
in Purchaser's sole discretion, may be sent on Seller's stationary, in which
event Seller shall, upon demand, co-sign such notice with
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<PAGE> 27
Purchaser. This Power of Attorney shall not affect Seller's right to receive
revenues from the Leased Subscriber Equipment as provided for in Section 7.7
herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
Digital Television Services of Georgia, LLC
By: DTS Management, LLC
Its: Member
By:
----------------------------------
Douglas S. Holladay, Jr. President
and Manager
SELLER:
Washington Electric Membership Corporation
By:
--------------------------------------
Its:
---------------------------------
Each of the undersigned has duly executed this Agreement as of the date
first above written for the sole purpose of agreeing to the provisions of
Section 4.3 hereof.
Digital Television Services, LLC
By: DTS Management, LLC
Its: Manager
By:
----------------------------------
Douglas S. Holladay, Jr. President
and Manager
DTS Management, LLC
By:
--------------------------------------
Douglas S. Holladay, Jr. President and
Manager
26
<PAGE> 1
EXHIBIT 10.19
FORM OF
NRTC/MEMBER AGREEMENT
FOR MARKETING AND DISTRIBUTION
OF DBS SERVICES
This Agreement is made by and between the NATIONAL RURAL
TELECOMMUNICATIONS COOPERATIVE, a District of Columbia corporation ("NRTC"),
________________________ ("Member") on this ___ day of ______________, 199__.
Capitalized terms used herein and not otherwise defined shall have the meaning
given them in the Exhibits.
WHEREAS, Hughes Communications Galaxy, Inc. ("HCG") has obtained
authorization from the Federal Communication Commission ("FCC") to construct,
launch and operate one or more satellites and to transmit on 27 frequencies (the
"HCG Frequencies") from the 101(degree) W.L. orbital location to provide Ku-Band
Direct Broadcast Service ("DBS") to the Continental United States ("CONUS").
WHEREAS, NRTC has entered into an agreement with HCG (the "HCG
Agreement") in which NRTC has obtained the rights to distribute through its
members and others certain DBS Services to rural America;
WHEREAS, HCG intends to distribute sports, movies and other video
entertainment and information programming as its own DBS business ("DirecTv")
over the 101(degree) satellite(s) and to make such programming available to NRTC
for distribution through its members and others;
WHEREAS, NRTC wishes to provide Member with the right to distribute
such DBS Services to Subscribers, and Member wishes to become a distributor of
NRTC's DBS Services and HCG's DirecTv, if available, and to compensate NRTC for
these services;
NOW, THEREFORE, in consideration of the mutual promises set forth below
and for other good and valuable consideration, the adequacy and receipt of which
are hereby acknowledged, NRTC and Member hereby mutually agree as follows:
1. DBS SERVICES. The DBS Services to be provided by NRTC to Member for
distributing to Committed Member Residences as defined under this Agreement
shall consist of twenty (20) Cable Programming Services (the "Cable
Programming"); the satellite transponder capacity; telementry, tracking and
control ("TT&C") services to monitor the status of the satellite; service and
facilities necessary to uplink, transmit and process the signals to deliver the
Cable Programming access control services to control subscriber access to
programming, including report-back information related to purchase data;
security services designed to prevent and/or respond to and remedy security
breaches; subscriber terminal equipment availability and NRTC support services,
all as set forth in Exhibit A. The Cable Programming shall be provided in
accordance with the terms and conditions set forth in Exhibit B. NRTC may also
provide Member, if available, distribution rights to serve commercial
establishments and to provide certain data and audio services under terms and
conditions to be later agreed to by Member and NRTC.
2. NRTC ROLE (a) Grant of Distribution Rights. NRTC grants to Member the
exclusive right to market and sell DBS Services transmitted over the HCG
Frequencies to Committed Member Residences as set forth in Exhibit C
___________________. Any Committed Member
<PAGE> 2
Residence which subscriber to DBS Services shall be deemed a "Subscriber" under
this Agreement. Committed Member Residences shall be determined by and limited
to the specific residences listed or the specific geographic area described in
Exhibit C ___________________, as appropriate. To the extent consistent with
this Agreement and the terms of the Cable Programming agreements, Member shall
have the right to establish the terms and conditions upon which it will market
and sell DBS Services to Committed Member Residences and subject to its payment
to NRTC or HCG, as appropriate of all sums required under this Agreement, shall
be entitled to all revenues from such marketing and sales; provided, however
that any rights to distribute any of the Cable Programming shall extend only to
the extent and for the duration as may be provided under the relevant Cable
Programming agreements. Member acknowledges that NRTC may be unable to obtain
the right for Member to distribute Cable Programming to residences that have
cable television service available.
(b) DirecTv. NRTC grants to Member the non-exclusive right to market
and sell DirecTv to Committed Member Residences to the extent such rights are
granted to NRTC by HCG under the HCG Agreement. Member shall be compensated for
its marketing and sale of DirecTv as specified in Exhibit D and in accordance
with the terms and conditions contained in Exhibit D. The parties acknowledge
that HCG does not now have the right to distribute DirecTv programming and has
no obligation to NRTC or to Member to obtain such rights, but that HCG intends
to use reasonable efforts to obtain such rights. Member acknowledges that HCG,
on its own behalf, may market and sell DirecTv to residences, including
Committed Member Residences.
(c) Marketing. NRTC shall assist Member in marketing and promoting DBS
Services. NRTC shall develop marketing materials and other information to be
used by Member for national and local advertising and promotion of DBS Services.
Marketing materials shall be provided to Member at no cost or at NRTC's cost.
(d) Support Services. NRTC shall develop and provide Member with
subscriber authorization and data reporting capability, retail billing services,
central office subscriber support services and other services related to the
provision of DBS Services.
(e) Subscriber Terminal Equipment Availability. NRTC at Member's
request shall contract with Thomson Consumer Electronics, Inc. ("TCE") to
deliver subscriber terminal equipment to Member in quantities and under terms to
be set forth in a separate agreement between Member and NRTC. TCE has
represented to NRTC that the subscriber terminal equipment will be available in
accordance with the terms and conditions set forth in Exhibit A.
3. MEMBER ROLE. (a) Marketing. Member shall at its own expenses, (i) use best
efforts to promote, market and sell DBS Services to Committed Member Residences,
(ii) participate in NRTC sponsored promotional and advertising campaigns and
cooperate with NRTC in marketing tests and research, as reasonably requested by
NRTC; (iii) respond promptly to all inquires about DBS Services; and (iv) use
print, electronic and other media to promote the sale of DBS Services to the
extent commercially practical. Member shall determine the specific timing amount
of funds expended in such promotion, marketing and sales.
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<PAGE> 3
(b) Subscriber Authorization. Member shall (i) authorize new
Subscribers through the Conditional Access Management Center ("CAMC") in
accordance with procedures established by NRTC and provide NRTC with the
Subscriber's name, address, zip code, descramble identification and such other
information as NRTC may reasonably request; (ii) maintain information regarding
the location of each Subscriber's descrambler; (iii) require all Subscribers to
notify Member in the event the location of any descrambler is changed; (iv)
promptly proved new descrambler location information and all updated Subscriber
information to NRTC; and (v) require Subscriber to agree to NRTC audit
procedures as necessary to maintain current information regarding the location
of descramblers. "Authorized Subscriber" means any and all Subscribers that are
authorized by the CAMC as of the 15th of any given billing month to receive any
and all DBS Services.
(c) Billing and Collection. Member shall at its own expense (i) receive
and process orders; (ii) bill and collect payment; (iii) service subscribers
accounts; (iv) keep accurate books of account covering all transactions relating
to its responsibilities under this Agreement; and (v) provide NRTC with such
records and account information as may be reasonably requested by NRTC.
(d) Unauthorized Reception. Member shall take all reasonable steps
required to ensure that DBS Services are not received at any unauthorized
location or in any unauthorized manner. NRTC reserves the right to deny access
to DBS Services to Subscribers whose descramblers have been the subject of
unauthorized or inappropriate use as determined by NRTC. Member shall cooperate
with NRTC and assist in implementing security measures designed to prevent
and/or respond to or remedy security breaches related to the DBS Services.
4. PAYMENT TERMS. (a) Committed Member Payment and NRTC Marketing and
Development Fee. Upon execution of this Agreement, Member shall pay NRTC on a
one-time basis the Committed Member Payment and the NRTC Marketing and
Development Fee in the amounts specified in Exhibit C ________________________ .
(b) Monthly Operating Fees. Member shall pay NRTC monthly operating
fees ("Monthly Fees") on a per Authorized Subscriber basis in accordance with
the terms and conditions set forth in Exhibit E. NRTC shall notify Member at
least 30 days in advance of any adjustments to the Monthly Fees.
(c) Monthly Security Services Fees. Member shall pay NRTC a monthly fee
for security services on a per Authorized Subscriber basis ("Security Fee") in
accordance with the terms and conditions set forth in Exhibit F. Member shall
notify NRTC of any activities which could result in a Security Breach (as
defined in Exhibit G). If NRTC is notified of a Security Breach by HCG and such
breach has not been cured in accordance with the procedures outlined in Exhibit
G, NRTC shall notify Member and Member's Security Fee shall be suspended until
the Security Breach is cured; provided, however, that such suspension shall not
relieve Member of its obligation to pay NRTC the amount of any Security Fee due
and payable to NRTC for services provided prior to such notice nor relieve
Member of any other payment obligations under this Agreement.
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(d) Monthly Programming Fees. Member shall pay NRTC on a monthly basis
all programming fees, compulsory copyright license fees and other fees required
for the Cable Programming on a per Authorized Subscriber basis. Programming fees
shall be based substantially on accepted cable industry rate cards. NRTC shall
provide Member with a rate card specifying applicable fees prior to the Service
Commencement Date, which shall be attached hereto as Exhibit H. In addition,
beginning in the fourth year of operation, if required under the Cable
Programming agreements, Member shall agree to pay the cost of programming fees
for minimum subscriber levels of up to five percent (5%) (based on Member's
total number of Committed Member Residences) and/or any fees, guarantees,
penalties or costs due under the programming agreements that are attributable to
Member's failure to provide the required minimum subscriber level.
(e) NRTC Margin. NRTC shall be entitled to charge Member and Member
shall pay NRTC a reasonable margin on the cost of providing DBS Services under
this Agreement, as determined by NRTC's Board of Directors consistent with the
exercise of good faith and sound business judgment.
(f) Invoices. Bills rendered by NRTC to Member under this Agreement
shall be due and payable within 15 days of the date of invoice. Member shall be
liable to NRTC for payment of all charges regardless of whether Member actually
collects or receives payment from Subscribers. Any charges due are delinquent if
not paid fifteen (15) days after the date of the invoice. Interest at a rate of
1.5% per month will be paid by Member on any balance owed to NRTC which is not
paid when due. Should Member fail to pay in a timely manner any fees or other
amounts due NRTC, then NRTC shall have the right to offset such amounts against
and deduct such amounts from any fees of sums payable to Member for marketing or
sale of DirecTv or other services under this Agreement.
(g) Place of Payment. All payments by Member pursuant to this Agreement
shall be made to NRTC at the address provided in Section 23 and shall be deemed
received and made only upon actual receipt by NRTC.
(h) Suspension of Services for Non-Payment. (I) If NRTC does not
receive full and timely payment from Member of the fees described in this
Section 4, after written notice to Member and a 10 day period to cure, NRTC may
(i) suspend any and all DBS Services to Member or Subscribers; (ii) provide all
DBS Services to and receive payment directly from Subscriber; and/or (iii)
commence collection procedures or judicial action, at law or in equity, to
collect such sums, damages, costs, liabilities and expenses (including, without
limitation, court costs and reasonable attorneys' fee and other third party
fee(s), collectively "Expenses"). In addition, NRTC may at any time identify
member in writing to HCG. If NRTC identifies Member to HCG, HCG may, in its sole
discretion, after written notice to Member, followed by a 15 day period to cure,
(i) suspend any and all DBS Services to Member and/or Subscribers and/or (ii)
commence collection procedures or judicial action, at law and in equity to
collect such sums, damages, costs, liabilities and Expenses. If Member does not
pay NRTC (or HCG, as appropriate), then NRTC also may exercise its rights
pursuant to Section 14.
(II) If NRTC (i) has received full payment of fees due from
Member, but does not timely pay HCG all or any portion of such fees that are due
HCG by NRTC or (ii) fails to
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identify Member to HCG as delinquent, then under the HCG Agreement HCG may not
suspend DBS Services to Member or Subscribers but may thereafter require Member
to pay such fees directly to HCG rather than to NRTC under this Agreement.
5. SERVICE COMMENCEMENT, SERVICE TERM. (a) Service Commencement Date. The
Service Commencement Date "shall mean the date on which HCG commences provision
of DBS Services. The scheduled Service Commencement Date under the HCG Agreement
is April 1, 1994. This date is based upon the scheduled launch of the satellite
in December of 1993. Member acknowledges that the schedule Service Commencement
Date is subject to change due to delays in launching the satellite and
implementation and development of the other elements of DBS Services. Member
acknowledges that the Services Commencement Date may occur earlier than April 1,
1994.
(b) Late Commencement Payments. If the Service Commencement Date has
not occurred by December 31, 1994, the HCG Agreement has not otherwise been
cancelled or terminated, HCG is required to pay to NRTC for a maximum of 36
months a monthly Late Commencement Payment in an amount equal to 0.95 percent of
the aggregate Committed Member Payments actually paid to HCG by NRTC pursuant to
the HCG Agreement ("Late Commencement Payment"). Upon receipt of any such Late
Commencement Payment from HCG, NRTC shall pay Member on a quarterly basis its
pro rata share based on the Committed Member Payment made by Member under this
Agreement. Any Late Commencement Payment due to Member at the end of a month in
which the Service Commencement Date occurs shall be pro rated. No Late
Commencement Payment shall be due or payable if the failure or delay in the
performance by HCG of its obligations result from any acts or omissions of NRTC,
Member, other NRTC Members or their agents. If the Services Commencement Day
does not occur by December 31, 1997, NRTC or HCG may terminate the HCG
Agreement, and in such event this Agreement may be terminated pursuant to
Section 13 and Member shall be entitled to receive refunds pursuant to Section
12.
(c) Service Term. Unless this Agreement is cancelled, terminated, or
expires earlier, it shall remain in effect until HCG removes the satellite from
its assigned orbital location (the "Satellite Expiration Date"). In the event
the Satellite Expiration Date occurs earlier than ten (10) years from the
Service Commencement Date, Member shall receive a refund of its Committed Member
Payment in accordance with Section 12.
6. CONTRACT DECISION PROCESS. (a) Conditions. If HCG has not met certain
conditions under the HCG Agreement related to development of DBS Services and/or
obtaining the necessary Cable Programming by December 1, 1992, either NRTC or
HCG may by December 11, 1992, terminate the HCG Agreement. If HCG has not
obtained the necessary Cable Programming but has met the other conditions
related to development of DBS Services, NRTC may elect not to terminate the HCG
Agreement and instead may attempt to obtain the Cable Programming on its own
behalf. If NRTC does not assume by March 1, 1993, the obligation to obtain the
Cable Programming, the HCG Agreement will terminate at that time.
(b) Threshold Payment. If NRTC has not paid HCG at least $100 million
in aggregate Committed Member Payments on or before December 11, 1992, the HCG
Agreement may terminate.
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(c) Escrow Account. All Committed Member Payments paid to NRTC prior to
December 1, 1992 (or March 1, 1993, applicable) shall be placed in an
interest-bearing Escrow Account. If the HCG Agreement is terminated as described
above, the escrowed Committed Member Payments plus accrued interest shall be
released to NRTC. Upon receipt, NRTC shall refund to Member its Committed Member
Payment plus its pro-rata share of any occurred interest. If the HCG Agreement
is not terminated, then the Committed Member Payments in the Escrow Account,
plus any accrued interest, shall be released to HCG.
7. REPRESENTATIONS, WARRANTIES, AND COVENANTS. (a) Authority. NRTC and Member
each represent and warrant to the other that it has all requisite power and
authority (i) to execute, deliver and perform this Agreement and all agreements,
documents and instruments executed and delivered by each in connection with this
Agreement; (ii) to own, lease or operate its property and assets; and (iii) to
carry on its business as presently conducted.
(b) Litigation. NRTC and Member each represent and warrant to the other
that, to the best of its knowledge there is no outstanding or threatened
judgement, threatened or pending litigation or proceeding, involving or
affecting the transactions provided for in, or contemplated by, this Agreement,
except as has been previously disclosed in writing by either party to the other.
(c) Laws. NRTC and Member each shall comply with all FCC and other
governmental (whether international, federal, state, municipal, or otherwise)
statutes, laws, rules, regulations, ordinances, codes, directives and orders of
any such governmental agency, body, or court applicable to it regarding the
provision of DBS Services.
(d) Member. For purposes of this Agreement, the term "Member" shall
include both Members and Affiliates of NRTC as defined in the Bylaws or NRTC.
Member shall comply with and be bound by the provisions of the Articles of
Incorporation and Bylaws of NRTC and by such policies as it may adopt from time
to time.
8. INDEMNIFICATION. (a) Member shall indemnify and hold harmless NRTC, its other
Members, its affiliated companies, and its officers, directors, employees and
agents from all liabilities, claims, costs, damages and Expenses arising out of
any breach or claimed breach of any representations, warranties or obligations
of Member pursuant to this Agreement.
(b) Member shall indemnify and hold harmless NRTC, its other Members,
HCG and their affiliated companies, and its officers, directors, employees and
agents from all liabilities, claims, cost, damages and Expenses arising out of
any breach or claimed breach of any representation, warranties or obligations of
Member pursuant to this Agreement.
(c) If NRTC or HCG determines that is provisions of any programming
violates any applicable laws, NRTC or HCG may cease providing such programming
to Member. Member agrees that NRTC, HCG or program providers may change,
black-out, terminate or discontinue at any time any Cable Programming being
delivered. NRTC reserves the right with the exercise of good faith and
reasonable business judgement, to substitute or to change programming or modify
the terms and conditions related to the programming offered. In such event, NRTC
shall use reasonable best efforts to claim and provide Member alternate
programming. Member shall
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indemnify and hold harmless NRTC, its other Members, HCG and their respective
affiliated companies, officers, directors, employees and agents from and against
any and all liabilities, claims, costs, damages and Expenses caused by or
resulting from the content of the Cable Programming or the cessation of any DBS
Services.
(d) Member recognizes that pursuant to the HCG Agreement, HCG may
deliberately preempt or interrupt the use of all or a portion of DBS Services in
unusual or abnormal situations to protect the overall performance of the
satellite and shall indemnify and hold harmless NRTC and HCG, and their
affiliated companies, officers, directors, employees and agents from and against
any and all liabilities, claims, costs, damages and Expenses resulting from such
cessation of any DBS Services.
9. TRADEMARKS AND LOGOS. Member may use NRTC's or HCG's trademarks, services
marks or logos only in accordance with any licensing arrangements established by
NRTC and/or HCG, as appropriate. NRTC also may make available approved
promotional material with the names, trademarks and/or logos of HCG or the
programming providers for Member's use in marketing, advertising and promotion
of DBS Services or DirecTv in accordance with guidelines furnished by NRTC.
Member may not otherwise use any trademark, servicemark or logo of NRTC, HCG or
any programming providers in any promotional, marketing or advertising materials
without the permission of the owner of same. Member shall contact NRTC to obtain
permission from HCG or the programming providers when necessary and for any
information and assistance pertaining to HCG or the programming providers.
10. AVAILABILITY OF INFORMATION AND CERTIFICATE OF COMPLIANCE.
(a) Statements. Member shall provide within 30 days of a request by
NRTC a statement, certified by an appropriate officer of Member or in
independent billing service, setting forth the number of Subscribers receiving
DBS Services during the month specified in such request and stating to the best
of the officer's knowledge that DBS Services were provided and distributed
during such month in full compliance with all of the provisions of this
Agreement. At NRTC request, Member shall permit NRTC or its representatives at
reasonable times during normal business hours (or at any time if Member is in
default or breach of this Agreement) to review during the term of this Agreement
and for one (1) year thereafter, its Subscriber accounting system.
(b) Accuracy of Information. If requested by NRTC, Member shall within
ninety (90) days following the end of Member's fiscal year, during any portion
of which this Agreement is in effect, provide a letter addressed to NRTC signed
by an appropriate officer of Member which attests to the completeness and
accuracy of all information supplied to NRTC by Member during the preceding
fiscal year. Member's obligation to supply letters of attention shall continue
after the termination of this Agreement until NRTC receives the letter with
respect to the last fiscal year during any portion of which this Agreement is in
effect.
11. OUTAGE CREDITS. In the event of the occurrence of outages in portions of DBS
Services, as generally described in Exhibit I, HCG is required to provide
certain credits to NRTC pursuant to the HCG Agreement, to be applied toward fees
for future services. NRTC shall make all such credits provided by HCG available
to Member on a prorated basis in
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consideration of the amount of such credits and the number of Members entitled
to receive a proration of such credits.
12. REFUNDS TO MEMBER. Pursuant to the HCG Agreement, HCG is required to provide
refunds to NRTC as generally described in Exhibit J. NRTC shall make all refunds
it receives from HCG available to Member on a prorated basis in consideration of
the amount of the refunds, the amount of Member's Committed Member Payment and
the number of Members entitled to receive a portion of the refunds. Member
recognizes that refunds, if any, shall not include interest.
13. TERMINATION OF HCG AGREEMENT. In the event the HCG Agreement is terminated,
except as provided in Section 15, NRTC may terminate this Agreement and neither
party shall have any further obligations regarding the other except as
specifically provided in this Agreement; provided, however, that Member shall
receive refunds from NRTC as may be due and payable under Section 12 of this
Agreement.
14. BREACH BY MEMBER. If Member fails to make any and all payments due to NRTC
(or HCG, as appropriate) under this Agreement, or otherwise breaches or fails to
perform a material obligation under this Agreement, in addition to any other
remedies available in law or in equity, NRTC may in its sole discretion and upon
30 days written notice to Member, including therein, a 10 day period for Member
to cure, (i) suspend all DBS Services to Member and/or Subscribers; (ii)
terminate this Agreement; and (iii) bring an action for and immediately declare
due and payable all sums due and owing NRTC (or HCG, as appropriate). In
addition, if HCG has suspended any or all of the DBS Services to Member and/or
Subscribers for sixty (60) or more days under Section 4(h), then NRTC may
terminate this Agreement immediately upon notice to Member, and HCG may bring an
action at law or in equity to collect from Member the sums due under Section 4
to NRTC (or HCG, as appropriate) and the liabilities, costs, damages and
Expenses associated therewith. In the event of a termination under this Section,
neither NRTC nor HCG shall be responsible or liable to Member or others for any
damages, costs or Expenses arising therefrom; nor shall NRTC or HCG owe or be
required to provide Member any refund of amounts previously paid to NRTC or HCG
by Member. Upon such termination, Member shall have no further right to provide
DBS Services to any Subscribers and DBS Services may be provided to the
Subscribers directly by NRTC or any other distributor as NRTC may appoint.
15. NRTC BREACH OF HCG AGREEMENT. If the HCG Agreement is terminated or
cancelled as a result of a default or breach by NRTC, HCG is obligated to NRTC
under the HCG Agreement to continue to provide DBS Services to Member (subject
to Section 4(h)) either, at HCG's option, (i) by the assumption by HCG of NRTC's
rights and obligations under this Agreement (which assumption is hereby
expressly permitted upon written notice to Member) or (ii) under a new agreement
containing substantially the same terms or terms no less favorable than those
provided Member under this Agreement. This provision does not apply in the case
of a termination under Section 6.
16. LIMITATION OF LIABILITY. NOTWITHSTANDING ANY OTHER PROVISIONS IN THIS
AGREEMENT TO THE CONTRARY, NRTC SHALL NOT BE LIABLE TO MEMBER FOR ANY INDIRECT,
CONSEQUENTIAL OR INCIDENTAL DAMAGES,
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INCLUDING, WITHOUT LIMITATION, LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS,
CLAIMS OF CUSTOMERS, LOSS OF GOODWILL OR LOSS OF PROFITS OR MARGINS, ARISING IN
ANY MANNER FROM THIS AGREEMENT AND THE PERFORMANCE OR NON-PERFORMANCE OF ITS
OBLIGATIONS. ANY AND ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OR USE, ARE
EXPRESSLY EXCLUDED AND DISCLAIMED BY NRTC EXCEPT TO THE EXTENT SPECIFICALLY AND
EXPRESSLY PROVIDED FOR HEREIN. IT EXPRESSLY IS AGREED THAT NRTC'S SOLE
OBLIGATIONS AND LIABILITIES RESULTING FROM A BREACH OF THIS AGREEMENT AND
MEMBER'S EXCLUSIVE REMEDIES FOR ANY CAUSE WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, LIABILITY ARISING FROM NEGLIGENCE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND/OR THE TRANSACTIONS CONTEMPLATED HEREIN ARE THOSE SET FORTH
IN SECTIONS 6, 11 AND 12 AND ALL OTHER REMEDIES OF ANY KIND ARE EXPRESSLY
EXCLUDED.
17. INJUNCTIVE RELIEF. NRTC and Member each shall have the right to obtain
injunctive relief, if necessary, in order to prevent the other party from
willfully breaching its obligations under this Agreement or to compel the other
party to perform its obligations under this Agreement. If either party should
bring an action against the other in order to enforce any provision of this
Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys fees and costs in addition to any other remedy it may have.
18. FORCE MAJEURE. Any failure or delay of performance shall not be deemed a
breach of this Agreement by NRTC if such failure or delay results from any acts
of God, labor, dispute, breakdown of facilities, failure of equipment,
mechanical failure, weather, fire, flood, legal enactment, government order or
regulation, any act or omissions of Member or any similar cause beyond the
reasonable control of NRTC. Nothing in this Section shall be deemed to limit
Member's rights to receive Late Commencement Payments, release of escrowed
Committed Member Payment and any accrued interest, outage credit and refunds, if
applicable, pursuant to Sections 5, 6, 11 and 12 of this Agreement.
19. ASSIGNMENT AND TRANSFER. Member shall not assign or transfer, directly or
indirectly, in whole or in part, its rights or obligations under this Agreement
without the prior written consent of NRTC and HCG, which consent shall be not
unreasonably withheld , NRTC may transfer this Agreement in whole to a successor
of all or substantially all of its assets upon written notice to Member.
20. CONFIDENTIALITY. (a) General. NRTC and Member shall hold in confidence all
provisions of this Agreement and all information provided by either party to the
other in connection with this Agreement. NRTC and Member acknowledge and agree
that all information related to this Agreement, not otherwise known to the
public, is confidential and proprietary and is not to be disclosed to third
persons (other than to affiliates, officers, directors, employees and agents of
NRTC and Member, each of whom is bound by this provision) without the prior
written consent of both Member and NRTC, except: (i) at the written direction of
the other party; (ii) to the extent necessary to comply with law or valid court
order of a court of competent jurisdiction, in which event the party shall
notify the other party as promptly as
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practicable (and, if possible, prior to making any disclosure) and shall seek
confidential treatment of the information; (iii) as part of its normal reporting
or review procedures to its parent company, its auditors and its attorneys who
agree to be bound by this Section; (iv) in order to enforce any rights pursuant
to this Agreement (v) in order to comply with the provisions of any programming
agreements or copyright licensing requirements; (vi) to obtain appropriate
insurance, provided the insurance company agrees in writing to be bound by this
Section; (vii) to obtain financing; provided that any person or entity providing
financing agrees in writing to be bound by this Section; (viii) to obtain
programming services; (ix) and to the extent NRTC may be permitted or required
to disclose information or provide this Agreement to HCG under the HCG
Agreement.
(b) Subscriber Information. NRTC acknowledges that Member has
substantial proprietary interests and rights to subscriber information and
agrees to maintain all subscriber information on a strictly confidential basis.
NRTC and Member each further covenant that except as provided in Section 4(h)
and Section 14 under no circumstances will use or allow others to use the
subscriber information for any reason other than to verify amounts due under the
terms of this Agreement and for purposes as are approved in advance and in
writing by the other party. In the event a Subscriber subscribes to both DBS
Services and DirecTv, NRTC and Member recognize that HCG shall also have
proprietary interests in the subscriber information.
(c) Confidentiality Survival. All provisions in this Agreement relating
to the confidentiality of information shall survive the termination, expiration,
cancellation or rescission of this Agreement for a period of five (5) years.
21. CONSTRUCTION AND MODIFICATION OF AGREEMENT. The existence, validity,
construction, operation and effect of this Agreement and all Exhibits shall be
determined in accordance with and be governed by the laws of the District of
Columbia. The Agreement and Exhibits constitute the entire agreement between the
parties and supersede all previous understandings, commitments and
representations concerning the subject matter. Each party acknowledges that the
other party has not made any representations other than those that are contained
in this Agreement and Exhibits. This Agreement and Exhibits may not be amended
or modified in any way, except (i) as provided in the Agreement or Exhibits or
(ii) by a writing signed by an authorized officer of the party against whom the
amendment, modification or waiver is sought to be enforced. In addition, any
amendment or modification to this Agreement or the Exhibits is contingent on
HCG's prior written approval (which shall not be unreasonably withheld), except
the amounts due and payable to NRTC for Committed Member Payments, TT&C, Ground
Services and Security Services may be modified without HCG's prior approval to
the extent that such modified amounts are not less than those contained in the
HCG Agreement.
22. NO INFERENCE. No provision of this Agreement will be interpreted against any
party solely because the party or its legal representation drafted the
provision.
23. NOTICES. All notices and other communications from either party to the other
under this Agreement shall be in writing and shall be deemed received upon
actual receipt or upon the expiration of the fifth business day after being
deposited in the United States' mails, postage prepaid, addressed to the other
party as follows:
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TO NRTC: TO MEMBER:
National Rural Telecommunications
Cooperative
Woodland Park
Herndon, VA 22071
Attention: Chief Executive Officer
cc: Executive Director
24. SEVERABILITY. Nothing contained in this Agreement shall be construed to
require the commission of any act contrary to law. Wherever there is any
conflict between any provision of this Agreement and any law, the law shall
prevail and this Agreement shall be limited only to the extent necessary to
permit compliance with the minimum legal requirement. No other provisions of
this Agreement shall be affected and all other provisions shall continue in full
force and effect.
25. TAXES. Member shall be responsible for and shall pay all applicable
property, sales, use or similar taxes imposed by any local, state, national or
international, public or quasi-public governmental entity, in respect to
Member's marketing, sale, distribution or other activities related to DBS
Services.
26. INTENDED THIRD PARTY BENEFICIARY. The provisions of this Agreement are for
the benefit of the parties. It is expressly agreed and understood that HCG is an
intended third party beneficiary of this Agreement. No other persons or parties
are intended as beneficiaries of this Agreement and none shall have rights to
enforce or benefit from the provisions of this Agreement. NRTC and Member
acknowledge and agree that (a) HCG is not a party to this Agreement and is not
bound by or liable to NRTC or Member under the provisions of this Agreement
except to the extent that HCG assumes NRTC's rights and obligations under this
Agreement pursuant to Section 15, and (b) that Member is not a third party
beneficiary under the HCG Agreement.
27. NON WAIVER OF BREACH. Either party may specifically waive any breach of this
Agreement by the other party, provided that no waiver shall binding or effective
unless in writing and no waiver shall constitute a continuing waiver of similar
or other breaches. A waiving party, at any time, and upon notice given in
writing to the breaching party, may direct future compliance with the waived
term or terms of this Agreement, in which event the breaching party shall comply
as directed from that time forward.
28. EXHIBITS. Each and every Exhibit associated with this Agreement, and the
terms and conditions contained in the Exhibits, are incorporated into and made a
part of this Agreement. Certain Exhibits may be amended from time to time,
pursuant to Section 21.
29. COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which shall be deemed an original, and all counterparts together shall
constitute but one and the same document.
30. COOPERATION. Each party shall cooperate with the other and shall execute
additional documents as are reasonably necessary in order to carry out the
provisions of this Agreement.
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WHEREOF, each of the parties to this Agreement has duly executed and
delivered this Agreement as of the day and year indicated below.
National Rural Member
Telecommunications Cooperative
By: By:
--------------------------- ---------------------------
Title: Title:
--------------------------- ---------------------------
Date: Date:
--------------------------- ---------------------------
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FORM OF
AMENDMENT TO
NRTC/MEMBER AGREEMENT FOR MARKETING
AND DISTRIBUTION OF DBS SERVICES
This Amendment ("Amendment") to that certain NRTC/Member Agreement For
The Marketing And Distribution of DBS Services, dated ______________, 199__
("Agreement"), is made by and between ___________________________ ("Member") and
NATIONAL RURAL TELECOMMUNICATIONS COOPERATIVE ("NRTC").
A. For other good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, the parties hereto amend the Agreement and Exhibits as
follows:
1. Section 1 of the Agreement is hereby deleted in its entirety and the
following is inserted in lieu thereof:
1. DBS SERVICES. The DBS Services to be provided by NRTC to Member for
distribution to Committed Member Residences and/or to Commercial Establishments
(as both are defined under and subject to the terms of this Agreement) shall
consist of twenty-two (22) cable programming services ("Cable Programming"); all
other video, audio, data packages, "a la carte" programming services and other
services which are transmitted by HCG over the HCG Frequencies to Committed
Member Residences and/or to Commercial Establishments to the extent HCG has
obtained such rights ("HCG DirecTv"); the satellite transponder capacity;
telemetry, tracking and control ("TT&C") services to monitor the status of the
satellite; services and facilities necessary to uplink, transmit and process the
signals to deliver Cable Programming; access control services to control
subscriber access to programming, including report-back information related to
purchase data; security services designed to prevent and/or respond to and
remedy security breaches; subscriber terminal equipment availability and NRTC
support services, all as set forth in Exhibit A. Cable Programming shall be
provided in accordance with the terms and conditions set forth in Exhibit B,
which exhibit may be amended by NRTC from time to time. Cable Programming and
HCG DirecTv are referred to in this Agreement collectively as "Programming".
2. NRTC ROLE. (a) Grant of Distribution Rights. NRTC grants to Member
the exclusive right to market, sell and retain revenue from Programming (except
Non Select Services as defined in Section 2(b)) transmitted over the HCG
Frequencies directly to Committed Member Residences as set forth in
Exhibit C__. Programming and the terms and conditions with respect to
Programming marketed and sold to Committed Member Residences are set forth in
Exhibit H, which exhibit may be amended by NRTC from time to time. Any
Committed Member Residence and/or Commercial Establishment as applicable, which
subscribes to Programming shall be deemed a "Subscriber" under this Agreement.
Committed Member Residences shall be determined by and limited to the specific
residences listed or the specific geographic area described in Exhibit C___, as
appropriate. Member shall also have the right to market, sell and retain
revenue from the distribution of Programming (except Non Select Services)
directly to commercial establishments such as hotels, bars and similar
establishments being determined by and limited to those locations within
counties or zip codes for which Member has exercised Member Contract Options
C-2, C-6, C-7, C-8 or C-9. The Programming that is available to be marketed and
sold to Commercial Establishments shall be governed by the terms and conditions
to be set forth in Exhibit H-1, which exhibit may be amended by NRTC
<PAGE> 14
from time to time. To the extent consistent with this Agreement and the terms of
the Programming agreements, Member shall have the right to establish the terms
and conditions upon which it will market and sell Programming (except Non Select
Services) to such Committed Member Residences and/or Commercial Establishments
and, subject to its payment to NRTC or HCG, as appropriate, of all sums required
under this Agreement, shall be entitled to all revenues from such marketing and
sales to Committed Member Residences and Commercial Establishments ("Member
Revenues"). Any rights to distribute, market, sell and retain revenue from any
of the Programming shall be subject to Section 8 of this Agreement and shall
extend only to the extent and for the duration as may be provided under the
relevant Programming agreements. Member acknowledges that NRTC may be unable to
obtain the right for Member to distribute Programming to residences that have
cable television services available. With respect to Programming, NRTC shall pay
to Member on a pro rata basis all other net revenues that NRTC receives from HCG
which are directly attributable to Committed Member Residences and/or Commercial
Establishments. The parties acknowledge that HCG does not now have the right to
distribute all of the planned HCG DirecTv and has no obligation to NRTC or to
Member to obtain all of such rights, but that HCG intends to use reasonable
efforts to obtain all of such rights.
3. Section 2(b) of the Agreement is hereby deleted in its entirety and
the following is inserted in lieu thereof:
(b) Non Select Services. If a services or rights provider of HCG
DirecTv requires payment of minimum subscriber guarantees, advance payments or
other similar commitments (collectively, "Commitment"), and if and to the extent
NRTC requires Member to pay a pro rata share of such Commitment, NRTC shall
establish and notify Member of its share ("Member's Share"). If Member pays its
Member's Share, then such programming services shall be deemed Programming. If
Member is unwilling or unable to pay timely its Member's Share, or if NRTC
decides against such Commitment and does not establish a Member's Share, then
HCG shall become the exclusive distributor of such service(s) vis-a-vis NRTC and
Member ("Non Select Services") and, in such event, Member shall bill and collect
and pay to HCG or NRTC, as appropriate, the revenues for Non Select Services to
Committed Member Residences and/or Commercial Establishments, as applicable.
Member may retain five percent (5%) of the gross revenues collected by Member
for the Non Select Services and shall remit to NRTC or HCG, as appropriate, the
amounts pursuant to Section 4(d)(iii).
4. Section 2(d) of the Agreement is hereby deleted in its entirety and
the following is inserted in lieu thereof:
(d) Support Services. NRTC shall develop and provide Member with
Subscriber authorization, retail billing and data, reporting services. With
respect to these support services. NRTC shall (i) provide and perform all
obligations necessary in connection with the DBS Billing and Authorization
System ("NRTC Billing System") described in the DBS Billing and Authorization
System Specifications (Section 7 of Exhibit A, "Specifications"), (ii) monitor
and control all subcontractors under agreement to provide specific portions of
the NRTC Billing System and (iii) request and manage any and all identified
change orders with subcontractors for NRTC Billing System improvements. From
time to time, NRTC may amend the Specifications, or any exhibits related to the
Specifications. NRTC shall provide further central office Subscriber support
services and other services related to the provisions of DBS Services as
<PAGE> 15
circumstances dictate and shall notify Member of any amendments to the
Specifications as soon as reasonably possible.
5. Section 3(c) of the Agreement is hereby deleted in its entirety and
the following is inserted in lieu thereof:
(c) Billing and Collection. Member shall utilize the NRTC Billing
System according to procedural guidelines and requirements established and
amended by NRTC from time to time and shall perform Subscriber payment
processing described herein in a timely manner and on an accurate and efficient
basis. Member shall, at its own expense, (i) receive and process Subscriber
orders, (ii) bill Subscriber by and through the NRTC Billing System ("Member
Billing(s)") (iii) perform all obligations and adhere to all standards outlined
in the Specifications, (iv) service Subscriber accounts, (v) keep accurate books
of account covering all transactions relating to its responsibilities under this
Agreement and (vi) provide NRTC with such records and account information as may
be reasonably requested by NRTC. Member shall collect and process Subscriber
payments pursuant to Member Billings using the system ("NRTC Remittance System")
described in Exhibit K, which exhibit may be amended by NRTC from time to time,
unless Member elects to use the Member Remittance System described in Exhibit
K-1 by completing the election set forth in Exhibit K-1. Member may change to
NRTC at least 90 days prior to Member's requested effective date for the change
and (2) NRTC provides written approval of such change, which approval shall not
be unreasonably withheld.
6. Section 4(d) of the Agreement is hereby deleted in its entirety and
the following is inserted in lieu thereof:
(d) Monthly Programming Fees. Member shall pay NRTC on a monthly basis
the following: (i) All applicable programming fees, compulsory copyright license
fees and other fees required for the Programming. Cable Programming fees shall
be based substantially on accepted cable industry rate cards, as appropriate.
Applicable fees for the Programming marketed and sold to Committed Member
Residences are listed on Exhibit H. Applicable fees for marketing the
Programming available to Commercial Establishments are to be set forth on
Exhibit H-1. In addition, beginning in the fourth year of operation, if required
under the Cable Programming agreements, Member shall agree to pay the cost of
programming fees for minimum subscriber levels of up to five percent (5%) (based
on Member's total number of Committed Member Residences) and/or any fees,
guarantees, penalties or costs due under the programming agreements that are
attributable to Member's failure to provide the required minimum subscriber
level.
(ii) A sum equal to five percent (5%) of the monthly Member Billing(s) for
Programming, excluding the following: Non Select Services; authorization fees;
late fees; taxes; and other fees or charges billed to Subscribers that are not
attributable to Programming.
(iii) Subject to Section 2(b), all gross revenues collected from Non Select
Services, except when such revenues are paid directly to HCG, as appropriate.
7. Section 12 of the Agreement is hereby deleted in its entirety and
the following is inserted in lieu thereof:
<PAGE> 16
12. REFUNDS. (a) Pursuant to the HCG Agreement, HCG is required to
provide refunds to NRTC as generally described in Exhibit J. NRTC shall make all
refunds its receives from HCG available to Member on a prorated basis in
consideration of the amount of the refunds, the amount of Member's Committed
Member Payment and the number of Members entitled to receive a portion of the
refunds. Member recognizes that refunds, if any, shall not include interest.
(b) Pursuant to the HCG Agreement, HCG is required to provide to NRTC
five percent (5%) of the Net Proceeds from any HCG Sale. The terms (a) "HCG
Sale" shall mean any sale or lease by HCG of any HCG Frequencies or associated
Transponder on either of the initial two DBS Satellites other than those
delivering Cable Programming and (b) "Net Proceeds" shall mean the proceeds net
of all NRTC and HCG expenses associated with an HCG Sale. NRTC shall pay all Net
Proceeds it receives from HCG to Member on a prorated basis in consideration of
the amount of the Net Proceeds, the amount of Member's Committed Member Payment
and the number of Members entitled to receive a portion of the Net Proceeds.
Member recognizes that Net Proceeds, if any, shall not include interest. HCG
sale-leasebacks (or the like), public offerings or stock offerings,
inter-Affiliate transfers or restructures or other HCG sales or leases in which
NRTC continues to retain the distribution rights to Programming transmitted over
the capacity are specifically excluded from the definition of an HCG Sale. For
purposes of Section 13, the term "refunds" as used therein shall include Net
Proceeds, if applicable.
8. Section 20(b) of the Agreement is hereby deleted in its entirety and
the following is inserted in lieu thereof:
(b) Subscriber Information. NRTC acknowledges that Member has
substantial proprietary interests and rights to Subscriber information and
agrees to maintain all Subscriber information on a strictly confidential basis.
NRTC and Member each further covenant that except as provided in Section 4(h)
and Section 14 under no circumstances will it use or allow others to use the
Subscriber information for any reason other than to verify amounts due under the
terms of this Agreement and for purposes as are approved in advance and in
writing by the other party. In the event HCG distributes Non Select Services to
a Subscriber. NRTC and Member recognize that HCG shall also have proprietary
interests in such Subscriber's information.
9. Section 7 of Exhibit A to this Agreement is hereby deleted in its
entirety and replaced by the attached Section 7 dated February 14, 1994.
10. Exhibit D to this Agreement is hereby deleted in its entirety.
11. Exhibit E to this Agreement is hereby deleted in it entirety and
replaced by the attached Exhibit E dated February 14, 1994.
B. Except as specifically provided above, all terms and provisions of the
Agreement and Exhibits shall remain unmodified and in full force and effect.
C. This Amendment may be executed in counterparts, each of which shall be deemed
an original, and all such counterparts together shall constitute but one and the
same instrument.
<PAGE> 17
D. MEMBER SPECIFICALLY ACKNOWLEDGES THAT NRTC MUST MEET CERTAIN REQUIREMENTS OF
HCG BEFORE THIS AMENDMENT CAN BECOME LEGALLY BINDING. IF NRTC IN SUCCESSFUL IN
MEETING THESE REQUIREMENTS, NRTC SHALL EXECUTE THIS AMENDMENT. IF NRTC IS
UNSUCCESSFUL IN MEETING THESE REQUIREMENTS, THIS AMENDMENT SHALL BE NULL AND
VOID AND THE AGREEMENT SHALL CONTINUE IN FULL FORCE AND EFFECT UNMODIFIED BY THE
TERMS AND CONDITIONS OF THIS AMENDMENT.
IN WITNESS WHEREOF, the parties have executed this Amendment through
their duly authorized representatives effective as of the date signed by NRTC.
NATIONAL RURAL
TELECOMMUNICATIONS
COOPERATIVE
By: By:
----------------------- -------------------------
Date: Date:
Title: President Title: Chief Operating Officer
<PAGE> 18
SCHEDULE 1 TO EXHIBIT 10.19
1. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated April 26, 1993 by and between Spacenet, Inc. ("Spacenet") and the
NRTC, as amended by Amendment to NRTC/Member Agreement for Marketing
and Distribution of DBS Services dated March 31, 1994. Covers Committed
Member Residences ("CMR") in the following geographic areas: Los
Alamos, Colfax and San Miguel Counties, New Mexico.
2. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated December 16, 1992 by and between Coast Satellite TV ("Satellite")
and the NRTC, as amended by Amendment to NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated March 15, 1994,
assigned to Pacific pursuant to an Application for Assignment (Of All
Rights) made by Satellite and Pacific and approved by the NRTC and
DirecTv as of March 19, 1995 and subsequently assigned to DTS
California pursuant to an Application for Assignment (Of All Rights)
made by Pacific and DTS California and approved by the NRTC and DirecTv
as of April 1, 1996. Covers CMR in the following geographic areas: San
Luis Obispo, CA.
3. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated July 30, 1993 by and between Intertech Satellite Systems, Inc.
("Intertech") and the NRTC, as amended by Amendment to NRTC/Member
Agreement for the Marketing and Distribution of DBS Services dated
March 25, 1994, assigned to Northeast pursuant to an Application for
Assignment (Of All Rights) made by Intertech and Northeast and approved
by the NRTC and DirecTv as of March 30, 1994 and subsequently assigned
to DTS New York I pursuant to an Application for Assignment (Of All
Rights) made by Northeast and DTS New York I and approved by the NRTC
and DirecTv as of August 29, 1996. Covers CMR in the following
geographic areas: Cortland, Schuyler and Yates Counties, New York.
4. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated November 30, 1993 by and between Sky Vision, Inc. ("Sky Vision")
and the NRTC, as amended by Amendment to NRTC/Member Agreement for
Marketing and Distribution of DBS Services dated March 25, 1994,
assigned to Skywave Communications, Inc. ("Skywave") pursuant to an
Application for Assignment (Of All Rights) made by Sky Vision and
Skywave and approved by the NRTC and DirecTv as of January 30, 1995 and
subsequently assigned to DTS Kansas pursuant to an Application for
Assignment (Of All Rights) made by Skywave and DTS Kansas and approved
by the NRTC and DirecTv as of January 31, 1997. Covers CMR in the
following geographic areas: Cowley, Sumner, Lynch, Harvey, Greenwood,
Allen, Anderson, Bourbon, Coffey, Linn, Woodson, Clay, Sedgwick, and
Shawnee, Kansas.
5. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated May 10, 1993 by and between Direct Television of New Mexico, Inc.
("DTNM") and the NRTC, as amended by Amendment to NRTC/Member Agreement
for Marketing and Distribution of DBS Services dated March 31, 1994,
assigned to Teg pursuant to an Application for Assignment (Of All
Rights) made by DTNM and Teg and approved by the NRTC and DirecTv as of
February 20, 1995 and subsequently assigned to DTS New Mexico pursuant
to an Application for Assignment (Of All Rights) made by Teg and
<PAGE> 19
DTS New Mexico and approved by the NRTC and DirecTv as of August 29,
1996. Covers CMR in the following geographic areas: Santa Fe, Taos, Lea
and Rio Arriba, New Mexico.
6. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated July 29, 1993 by and between Omega and the NRTC, as amended by
Amendment to NRTC/Member Agreement for Marketing and Distribution of
DBS Services dated March 31, 1994, assigned to DTS Colorado pursuant to
an Application for Assignment (Of All Rights) made by Omega and DTS
Colorado and approved by the NRTC and DirecTv as of August 29, 1996.
Covers CMR in the following geographic areas: Saguache and Chaffee
Counties, Colorado.
7. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated July 24, 1992 by and between Pee Dee (formerly Pee Dee Electric
Membership) and the NRTC, as amended by Amendment to NRTC/Member
Agreement for Marketing and Distribution of DBS Services dated March
31, 1994, assigned to DTS South Carolina I pursuant to an Application
for Assignment (Of All Rights) made by Pee Dee and DTS South Carolina I
and approved by the NRTC and DirecTv as of November 26, 1996. Covers
CMR in the following geographic areas: Chesterfield, Darlington,
Dillon, Lee, Marion, Marlboro, Florence, and Clarendon, South Carolina.
8. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated November 10, 1992 by and between Santee (by assignment from
Santee Electric Cooperative, Inc.) and the NRTC, as amended by
Amendment to NRTC/Member Agreement for Marketing and Distribution of
DBS Services dated March 31, 1994, assigned to DTS South Carolina II
pursuant to an Application for Assignment (Of All Rights) made by
Santee and DTS South Carolina II and approved by the NRTC and DirecTv
as of November 26, 1996. Covers CMR in the following geographic areas:
Clarendon, Georgetown and Williamsburg, South Carolina.
9. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated December 18, 1992 by and between Direct (formerly Direct
Programming Services Associates, Ltd.) and the NRTC, as amended by
Amendment to NRTC/Member Agreement for Marketing and Distribution of
DBS Services dated March 25, 1994, assigned to DTS Kentucky pursuant to
an Application for Assignment (Of All Rights) made by Direct and DTS
Kentucky and approved by the NRTC and DirecTv as of January 1, 1997.
Covers CMR in the following georgraphic areas: Pike, Anderson,
Franklin, Madison, Pulaski, Spencer, Jefferson, Oldham, Bourbon,
Fayette, Jessamine, Scott, woodford, Daviess, Boone, Campbell, Kenton,
Clark, Ohio, Warren, Barron, Pulaski, Spencer, Grant, Shelby, Edmonson,
Grayson, Butler, Simpson, Hancock, McLean, Russell, Carroll, Clinton,
Wayne, McCreary, Trimble, Nelson, and Boyle, Kentucky.
10. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated November 12, 1993 by and between Kansas DBS, L.L.C. ("Kansas
DBS") and the NRTC, as amended by Amendment to NRTC/Member Agreement
for Marketing and Distribution of DBS Services dated March 14, 1994,
assigned to DTS Kansas pursuant to an Application for Assignment (Of
All Rights) made by Kansas DBS and DTS Kansas
<PAGE> 20
and approved by the NRTC and DirecTv as of January 31, 1997. Covers CMR
in the following geographic areas: Barber, Barton, Cheyenne, Clark,
Cloud, Comanche, Ellis, Ellsworth, Finney, Ford, Gove, Grant, Gray,
Greeley, Hamilton, Harper, Huskell, Hodgeman, Jewell, Kearney, Kingman,
Kiowa, Lincoln, Logan, McPherson, Meade, Mitchell, Morton, Osborne,
Ottawa, Pratt, Rawlins, Reno, Republic, Rice, Russell, Saline, Scott,
Seward, Sheridan, Sherman, Smith, Stafford, Stanton, Stevens, Thomas,
Trego, Wallace, Wichita, Edwards, Ness, Pawnee, Rush, Lane, Dickinson,
Elk, Sedgwick, Butler, and Edwards, Kansas.
11. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated October 22, 1992 by and between Northeast DBS Enterprises, L.P.
("Northeast DBS") and the NRTC, as amended by Amendment to NRTC/Member
Agreement for Marketing and Distribution of DBS Services dated March
31, 1994, assigned to DTS Vermont pursuant to an Application for
Assignment (Of All Rights) made by Northeast DBS and DTS Vermont and
approved by the NRTC and DirecTv as of February 18, 1997. Covers CMR in
the following geographic areas: Chesire, Sullivan and Grafton, New
Hampshire; Bennington and Windsor, Vermont; Litchfield and Windham,
Connecticut; and Butler and Wayne Counties, Pennsylvania.
12. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated December 18, 1992 by and between Mitchell and the NRTC, as
amended by Amendment to NRTC/Member Agreement for Marketing and
Distribution of DBS Services dated March 31, 1994, assigned to DTS
Georgia pursuant to an Application for Assignment (Of All Rights) made
by Mitchell and DTS Georgia and approved by the NRTC and DirecTv as of
May 9, 1997. Covers CMR in the following georgraphic areas: Baker,
Colquitt, Early, Miller Seminole, Tift, Worth, Terrell, Sumter, Lee,
Dougherty, Calhoun, Decatur, Grady, and Mitchell, Georgia.
13. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated October 11, 1993 by and between DigiCom and the NRTC, as amended
by Amendment to NRTC/Member Agreement for Marketing and Distribution of
DBS Services dated March 25, 1994, assigned to DTS Georgia pursuant to
an Application for Assignment (Of All Rights) made by DigiCom and DTS
Georgia and approved by the NRTC and DirecTv as of May 9, 1997. Covers
CMR in the following geographic areas: Lamar and Monroe, Georgia.
14. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated June 4, 1992 by and between Planters and the NRTC, as amended by
Amendment to NRTC/Member Agreement for Marketing and Distribution of
DBS Services dated March 25, 1994, assigned to DTS Georgia pursuant to
an Application for Assignment (Of All Rights) made by Planters and DTS
Georgia and approved by the NRTC and DirecTv as of May 9, 1997. Covers
CMR in the following geographic areas: Burke, Tenkers, and Screven,
Georgia.
15. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated June 5, 1992 by and between Washington and the NRTC, as amended
by Amendment to NRTC/Member Agreement for Marketing and Distribution of
DBS Services dated March 25, 1994, assigned to DTS Georgia pursuant to
an Application for Assignment (Of All
<PAGE> 21
Rights) made by Washington and DTS Georgia and approved by the NRTC and
DirecTv as of May 9, 1997. Covers CMR in the following geographic
areas: Baldwin, Glascok, Hancock, Jefferson, Johnson, Warren,
Washington, Wilkinson, Greene, Putnam, Morgan, Jasper, Jones, and
Twiggs, Georgia.
16. NRTC/Member Agreement for Marketing and Distribution of DBS Services
dated March 4, 1993 by and between Falls Earth Station, Inc. ("Falls
Earth") and the NRTC, as amended by Amendment to NRTC/Member Agreement
for Marketing and Distribution of DBS Services dated March 31, 1994,
and assigned to DTS New York I (successor of merger to Digital
Television Services of New York II, LLC) pursuant to an Application for
Assignment (of All Rights) made by Falls Earth and DTS New York II and
approved by the NRTC and DirecTv as of August 29, 1996. Covers CMR in
the following geographic areas: Madison and Oneida Counties, New York.
<PAGE> 1
EXHIBIT 10.20
DIGITAL TELEVISION SERVICES, LLC
EMPLOYEE UNIT PLAN
This Employee Unit Plan was duly approved and adopted by the board of
managers of DTS Management, LLC (the manager of the Company, hereinafter
referred to as "DTS Management") as of March 7, 1997. Capitalized terms used but
not defined herein shall have the meaning ascribed to them in the LLC Agreement
(as defined below).
1. PURPOSE. This Employee Unit Plan of Digital Television Services, LLC
(the "Plan") is intended to provide incentives to employees and independent
contractors of Digital Television Services, LLC, a Delaware limited liability
company (the "Company") or any of its "Subsidiaries" (as such term is defined in
the Amended and Restated Limited Liability Company Agreement of the Company
dated February 10, 1997 (the "LLC Agreement")) by providing them with awards of
Interests in the Company denominated as Class D Units (the "Units"), the rights,
preferences, limitations, obligations, and liabilities of which are governed,
notwithstanding any other provision herein, by the LLC Agreement and the letter
agreement relating to each award of Units (the "Award Letter"). If the terms of
this Plan or any Award Letter conflict in any way with the provisions of the LLC
Agreement, the LLC Agreement shall govern. The terms of this Plan or any Award
Letter shall not be deemed in conflict or inconsistent with the provisions of
the LLC Agreement merely because they impose greater or additional restrictions,
obligations or duties, or if the provisions of the Plan or Award Letter state
that such Plan or Award Letter terms apply notwithstanding provisions to the
contrary in the LLC Agreement.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be
administered by the board of managers of DTS Management (the
"Board") or by a committee appointed by the Board (the "Committee").
Hereinafter, all references in this Plan to the "Committee" shall
mean the Board if no Committee has been appointed. Subject to the
terms of the Plan, the Committee shall have the authority to (i)
determine to whom, from among the class of individuals and entities
eligible under paragraph 3 to receive Units, Units may be awarded;
(ii) determine the number of Units to be awarded; (iii) determine
the time or times at which Units shall be awarded; (iv) determine
the purchase price of Units (if any) method of payment of the
purchase price; (v) determine the time or times when Units shall
become vested and the duration of the vesting period; (vi) determine
whether restrictions such as repurchase options (in addition to
those already provided for in the LLC Agreement) are to be imposed
on Units and the nature of such restrictions, if any; (vii)
determine any and all other terms and conditions with respect to
awards not inconsistent with the LLC Agreement or this Plan; and
(viii) interpret the Plan and prescribe and rescind rules and
regulations relating to it. The interpretation and construction by
the Committee of any provisions of the Plan, any Award Letter, and
the LLC Agreement with respect to any Unit awarded under this Plan
shall be final unless otherwise determined by the Board. The
Committee may from time to
<PAGE> 2
time adopt such rules and regulations for carrying out the Plan as
it may deem advisable. No member of the Board or the Committee shall
be liable for any action or determination made in good faith with
respect to the Plan or any Unit awarded under it.
B. COMMITTEE ACTIONS. The Committee may select one of its
members as its chairman, and shall hold meetings at such time and
places as it may determine. A majority of the Committee shall
constitute a quorum and acts by a majority of the members of the
Committee, or acts reduced to or approved in writing by a majority
of the members of the Committee (if consistent with applicable state
law), shall constitute the valid acts of the Committee. From time to
time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and
thereafter directly administer the Plan. Pursuant to Section 5.1(a)
of the LLC Agreement, notwithstanding any other provision herein, if
the Board creates a Committee, such Committee shall consist of at
least three members, one designated by Columbia A, one by Whitney,
and one by Chisholm.
C. DELEGATION OF COMMITTEE AUTHORITY. The Committee may at any
time and from time to time authorize by written resolution one or
more of its members or officers of Management to award Units to
particular employees or to a particular class or group of employees
within such parameters as shall be specified in such resolution, and
the action by such authorized persons shall for all purposes be
deemed action by the Committee hereunder.
3. ELIGIBLE EMPLOYEES AND INDEPENDENT CONTRACTORS. Units may be awarded to
any employee or independent contractor of the Company or any Subsidiary. The
Committee may take into consideration a recipient's individual circumstances in
determining whether to award a Unit. The awarding of any Unit to any individual
or entity, of itself, shall neither entitle such person to, nor disqualify such
person from, participation in any other grant of Units.
4. CLASS D UNITS UNDER THE PLAN. The Units shall be authorized but
unissued Class D Units of the Company or Units reacquired by the Company in any
manner. The aggregate number of Units which may be issued pursuant to the Plan
is 180,000, subject to adjustment as provided in paragraph 11 and subject to the
LLC Agreement, including Section 5.3(c)(x) thereof. If any Unit awarded under
the Plan shall be forfeited for any reason without having been vested or shall
be repurchased by the Company, such Units shall again be available for awards of
Units under the Plan.
5. AWARDING OF UNITS. Units may be awarded under the Plan at any time on
or after the date hereof pursuant to an Award Letter in such form as approved by
the Committee. The date of award of a Unit or Units under the Plan will be the
date
2
<PAGE> 3
specified in the Award Letter; provided, however, that such date shall not be
prior to the date on which the Committee acts to approve the award.
6. VESTING OF UNITS. Subject to the provisions of paragraphs 7 through 10,
each Unit awarded under the Plan shall become vested as follows:
A. VESTING. The Unit shall either be fully vested on the date
of award or shall become vested thereafter in such amounts and under
such circumstances as the Committee shall determine and as shall be
specified in the Award Letter.
B. FULL VESTING OF INSTALLMENTS. Once a Unit becomes vested
pursuant to the terms of the relevant Award Letter it shall remain
vested unless otherwise specified by the Committee and set forth in
the Award Letter.
C. ACCELERATION OR WAIVER OF VESTING. The Committee shall have
the right to accelerate the date that any Unit becomes vested or
waive vesting requirements, in whole or in part, in any Award Letter
for any reason or for no reason in the sole discretion of the
Committee.
7. TERMINATION OF BUSINESS RELATIONSHIP. Each Award Letter may provide
that the Units awarded thereby shall be forfeited before their stated vesting
dates, upon terms specified by the Committee, if the owner ceases to be an
employee or independent contractor of the Company, of any Subsidiary, or of the
Company and all Subsidiaries (any such relationship hereinafter referred to as a
"Business Relationship with the Company"), or if the owner otherwise fails to
satisfy vesting requirements with respect to Units awarded under this Plan.
Nothing in the Plan or in any Award Letter shall be deemed to give any owner the
right to continue his or her Business Relationship with the Company for any
period of time.
8. DEATH; DISABILITY.
A. DEATH. Unless otherwise specified by the Committee in the
relevant Award Letter, if an owner's Business Relationship with the
Company terminates by reason of death, his or her Units may be
retained, to the extent the owner had become vested in such Units as
of the date of such owner's death, by such owner's estate, personal
representative or beneficiary who has acquired the vested Units by
will or by the laws of intestate succession, subject in all cases to
the provisions of the LLC Agreement.
B. DISABILITY. Unless otherwise specified by the Committee in
the relevant Award Letter, if an owner's Business Relationship with
the Company terminates by reason of such owner's disability, such
owner shall have the right, subject in all cases to the provisions
of the LLC Agreement, to retain his or her Units, to the extent the
owner had become vested in such Units as of the date his or her
Business Relationship with the Company terminated due to such
owner's disability. For the purposes of the Plan, the term
"disability" shall
3
<PAGE> 4
mean "permanent and total disability" as defined in Section 22(e)(3)
of the Internal Revenue Code of 1986, as amended.
9. TRANSFERABILITY. The Units shall be subject in all respects to the
provisions of the LLC Agreement with respect to the Transferability or
assignability of the Units as well as any provisions of the Award Letter
concerning Transferability.
10. TERMS AND CONDITIONS OF AWARDS OF UNITS. All awards of Units under
this Plan shall be evidenced by Award Letters (which need not be identical)
signed by the Company and the person receiving the award in such form or forms
as the Committee may from time to time approve. Such Award Letters shall conform
to the terms and conditions of this Plan and may contain such other provisions
as the Committee deems advisable which are not inconsistent with the Plan or the
LLC Agreement, including restrictions applicable to Units. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of DTS Management to execute and deliver
such Award Letters. The proper officers of Management are authorized and
directed to take any and all action necessary or advisable from time to time to
carry out the terms of such Award Letters.
11. ADJUSTMENTS. Upon the occurrence of any of the following events, an
owner's rights with respect to Units awarded to such owner hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
Award Letter relating to such Units and subject to the LLC Agreement:
A. UNIT DIVIDENDS AND UNIT SPLITS. If the Units shall be
subdivided or combined into a greater or smaller number of Units or
if the Company shall issue any Units as a Unit dividend on its
outstanding Class D Units, the number of Units (vested and unvested)
subject to an award of Units hereunder shall be appropriately
increased or decreased proportionately.
B. CONSOLIDATIONS, MERGERS, CORPORATE CONVERSIONS,
REORGANIZATIONS. The Units shall be subject to such provisions of
the LLC Agreement as may be applicable in the event of any
consolidation, merger, reorganization or Corporate Conversion
(including a Qualified Corporate Conversion) of the Company.
C. CONTINUATION OF VESTING REQUIREMENTS AND RESTRICTIONS.
Subject to the LLC Agreement, in the event of a transaction
described in subparagraph B. above pursuant to which securities of
the Company or of another entity are issued in exchange for or with
respect to the outstanding Class D Units, upon delivery of any
additional consideration that may be required to be delivered by the
owner in order to receive such securities, an owner shall be
entitled to receive the securities such owner would have received if
such owner had vested in his or her Units prior to such event;
provided, however, that any securities received by any owner whose
Units remain subject
4
<PAGE> 5
to vesting, repurchase rights, or similar restrictions shall
continue to be subject to those or comparable provisions, unless
otherwise provided in the Award Letter pursuant to which the Units
were awarded.
D. ISSUANCES OF SECURITIES. Except as expressly provided
herein and in the LLC Agreement, no issuance by the Company of
equity or debt instruments of any class shall affect, and no
adjustment by reason thereof shall be made with respect to, the
number of Units awarded to any owner.
E. FRACTIONAL SHARES. No fractional Units shall be issued
under the Plan (but fractional Units may become vested pursuant to a
percentage vesting schedule).
F. INCREASE IN AUTHORIZED UNITS. Upon the happening of any of
the events described in subparagraph A above, the aggregate number
of Class D Units set forth in paragraph 4 hereof which previously
have been or subsequently may be awarded under the Plan shall also
be appropriately adjusted to reflect the events described in such
subparagraph. The Committee shall determine the specific adjustment
to be made under this paragraph 11 and its determination shall be
conclusive.
12. AMENDMENT OF PLAN. Subject to the provisions of the LLC Agreement, the
Board may terminate or amend the Plan in any respect at any time. Except as
otherwise provided in this Plan, the LLC Agreement or the Award Letter, in no
event may action of the Board or Members alter or impair the rights of any
owner, without his or her consent, with respect to any Unit previously awarded
to such owner.
13. APPLICATION OF FUNDS. The proceeds received by the Company, if any,
from the sale of Units awarded under the Plan shall be used for general Company
purposes.
14. WITHHOLDING OF INCOME TAXES. Upon the award of Units, the vesting or
transfer of restricted Units, or the making of a distribution or other payment
with respect to such Units, the Company may withhold taxes in respect of amounts
that the Company, in its discretion, determines constitute compensation
includible in gross income. The Committee in its discretion may condition (i)
the award of a Unit or (ii) the vesting or transferability of Units, on the
owner's making satisfactory arrangement for such withholding. Such arrangement
may include payment by the owner in cash or by check of the amount of the
withholding taxes or, at the discretion of the Committee, by the owner's
delivery of previously held Units having an aggregate fair market value equal to
the amount of such withholding taxes.
15. DETERMINATION OF FAIR MARKET VALUE OF UNITS. The Board, in its
discretion, shall determine the fair market value of Units whenever it is
necessary or desirable to determine such fair market value.
5
<PAGE> 6
16. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
Units under this Plan is subject to the approval of any governmental authority
required in connection with the authorization, issuance or sale of such Units.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
file tax information returns reporting the income received by owners in
connection with the Plan.
17. GOVERNING LAW. The validity and construction of the Plan and the Award
Letter evidencing Awards of Units shall be governed by the laws of the State of
Delaware.
18. DISPUTE RESOLUTION; CONSENT TO JURISDICTION. All disputes between or
among any persons arising out of or in any way connected with this Plan, the LLC
Agreement, any Award Letter or any award of Units under this Plan shall be
solely and finally settled in accordance with the Dispute Resolution Exhibit to
the LLC Agreement (which is Exhibit F thereto), and each person accepting an
award under the Plan and the Company consent to the personal jurisdiction of the
courts of the State of Georgia, including United States federal courts sitting
in Georgia, (rather than the Commonwealth of Virginia as set forth in Section
11.9 of the LLC Agreement) with respect to matters arising out of or related to
the enforcement of the provisions of the Dispute Resolution Exhibit and
resolution of matters, if any, related to the Plan or the LLC not required to be
resolved pursuant to the Dispute Resolution Exhibit. Each such person hereby
irrevocably consents to the service of process of any of the aforementioned
courts in any such suit, action or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, to the last known address of
such person, such service to become effective ten (10) days after such mailing.
The undersigned hereby certifies that this Plan was duly adopted by action
of the Board of managers of DTS Management on March 7, 1997.
-----------------------------------
Douglas S. Holladay, Jr., Chief
Executive Officer and Manager
-----------------------------------
Manager
6
<PAGE> 1
EXHIBIT 10.21(a)
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease"), is made and entered into this 2nd day
of August, 1996, by and between Landlord and Tenant.
WITNESSETH:
1. Certain Definitions. For purposes of this Lease, the following terms
shall have the meanings hereinafter ascribed thereto:
(a) Landlord: Fund II, Fund III, Fund VI and Fund VII
Associates, a Georgia general partnership.
(b) Landlord's Address:
3885 Holcomb Bridge Road
Norcross, Georgia 30092
(c) Tenant: Columbia Management, L.L.C., a Georgia limited
liability company
(d) Tenant's Address:
Initial Address:
1080 Holcomb Bridge Road
Building 100, Suite 300
Roswell, Georgia 30076
After Rental Commencement Date:
880 Holcomb Bridge Road
Suite C-260
Roswell, Georgia 30075
(e) Building Address:
880 Holcomb Bridge Road
Roswell, Georgia 30075
(f) Suite Number: C-200
(g) Rentable Floor Area of Demised Premises: 2,979 square feet
(h) Rentable Floor Area of Building: 12,786 square feet
<PAGE> 2
(i) Lease Term: Thirty-six (36) months
(j) Base Rental Rate: First months rental payable on
lease execution.
<TABLE>
<CAPTION>
Rate Per Square Foot
of Rentable Floor Area
Months of Demised Premises Monthly Annually
------ ------------------- ------- --------
<S> <C> <C> <C>
1-12 $20.00 $4,965.00 $59,580.00
13-24 $20.50 $5,089.13 $61,069.50
25-36 $21.00 $5,213.25 $62,559.00
</TABLE>
(k) Rental Commencement Date: October 1, 1996 or the date upon
which Tenant commences its business operations in the Demised Premises,
whichever shall first occur.
(1) Construction Allowance for initial Demised Premises:
$18.00 per square foot or $53,622.00.
(m) Security Deposits: $62,559.00
(n) Broker(s): Wells & Associates, Inc., for Landlord;
Miller-Richmond Company, for Tenant.
2. Lease of Premises. Landlord, in consideration of the covenants and
agreements to be performed by Tenant, and upon the terms and conditions
hereinafter stated, does hereby rent and lease unto Tenant, and Tenant does
hereby rent and lease from Landlord, certain premises (hereinafter referred to
as the "Demised Premises") in the building (hereinafter referred to as
"Building") located on that certain tract of land (the "Land") more particularly
described on Exhibit "A" attached hereto and by this reference made a part
hereof, which Demised Premises comprise all of the Rentable Floor Area in Suite
C-200 of the Building and are outlined on the floor plan attached hereto as
Exhibit "B" and by this reference made a part hereof, with no easement for
light, view or air included in the Demised Premises or being granted hereunder.
The "Project" is comprised of the Building, the Land, the Building's parking
facilities, any walkways, covered walkways or other means of access to the
Building and the Building's parking facilities, all common areas, including any
plazas, and any other improvements or landscaping on the Land,
3. Term. The term of this Lease (hereinafter referred to as the "Lease
Term") shall commence on the date first hereinabove set forth, and, unless
sooner terminated as provided in this Lease, shall end on the expiration of the
period designated in Article l(i) above, which period shall commence on the
Rental Commencement Date, unless the Rental Commencement Date shall be other
than the first day of a calendar month, in which event such period shall
continence on the first day of the calendar month following the month in which
the Rental Commencement Date occurs. Promptly after the Rental Commencement Date
Landlord shall
<PAGE> 3
send to Tenant a supplemental notice specifying the Rental Commencement Date,
the date of expiration of the Lease Term in accordance with Article l(i) above
and certain other matters as therein set forth. Landlord shall not be liable for
any delay in tendering possession of the Demised Premises to Tenant due to the
failure of Landlord substantially to complete the build-out or design work in
accordance with Exhibit "C" or due to the failure of the previous occupant of
the Demised Premises to vacate upon termination of said occupant's lease or for
delay caused by any other reason not reasonably within the control of Landlord.
4. Possession. The obligations of Landlord and Tenant with respect to
the Building and the initial leasehold improvements to the Demised Premises are
set forth in Exhibit "C" attached hereto and by this reference made a part
hereof. Taking of possession by Tenant shall be deemed conclusively to establish
that Landlord's construction obligations with respect to the Demised Premises
have been completed in accordance with the plans and specifications approved by
Landlord and Tenant and that the Demised Premises, to the extent of Landlord's
construction obligations with respect thereto, are in good and satisfactory
condition.
5. Rental Payments.
(a) Commencing on the Rental Commencement Date, and continuing
thereafter throughout the Lease Tenn, Tenant hereby agrees to pay all
Rent due and payable under this Lease; provided, however, in the event
that Landlord fails to tender possession of the Demised Premises on or
before the Rental Commencement Date for any reason other than an
omission, delay or default of Tenant, then Base Rental shall abate
until Landlord tenders possession. As used in this Lease, the term
"Rent" shall mean the Base Rental, Tenant's Forecast Additional Rental
(as hereinafter defined), Tenant's Additional Rental (as hereinafter
defined), and any other amounts that Tenant assumes or agrees to pay
under the provisions of this Lease that are owed to Landlord, including
without limitation any and all other sums that may become due by reason
of any default of Tenant or failure on Tenant's part to comply with the
agreements, terms, covenants and conditions of this Lease to be
performed by Tenant. Base Rental together with Tenant's Forecast
Additional Rental shall be due and payable in twelve (12) equal
installments on the first day of each calendar month, commencing on the
Rental Commencement Date and continuing thereafter throughout the Lease
Term and any extensions or renewals thereof, and Tenant hereby agrees
to pay such Rent to Landlord at Landlord's address as provided herein
(or such other address as may be designated by Landlord from time to
time) monthly in advance. Tenant shall pay all Rent and other sums of
money as the same shall become due from and payable by Tenant to
Landlord under this Lease at the times and in the manner provided in
this Lease, without demand, set-off or counterclaim.
(b) If the Rental Commencement Date is other than the first
day of a calendar month or if this Lease terminates on other than the
last day of a calendar month, then the installments of Base Rental and
Tenant's Forecast Additional Rental for such month or months shall be
prorated on a daily basis and the installment or installments so
prorated shall be paid in advance. Also, if the Rental Commencement
Date occurs on other than the first day of a calendar year, or if this
Lease expires or is terminated on other than
<PAGE> 4
the last day of a calendar year, Tenant's Additional Rental shall be
prorated for such commencement or termination year, as the case may be,
by multiplying Tenant's Additional Rental by a fraction, the numerator
of which shall be the number of days of the Lease Term (from and after
the Rental Commencement Date) during the commencement or expiration or
termination year, as the case may be, and the denominator of which
shall be 365, and the calculation described in Article 7 hereof shall
be made as soon as possible after the expiration or termination of this
Lease, Landlord and Tenant hereby agreeing that the provisions relating
to said calculation shall survive the expiration or termination of this
Lease.
6. Base Rental. From and after the Rental Commencement Date Tenant
shall pay to Landlord a base annual rental (herein called "Base Rental") for
each Lease Year equal to the Base Rental Rate set forth for such Lease Year in
Article 1(j)) above multiplied by the Rentable Floor Area of Demised Premises
set forth in Article l(g) above. As used in this Lease, the term "Lease Year"
shall mean the twelve month period commencing on the Rental Commencement Date,
and each successive twelve month period thereafter during the Lease Term, except
that if the Rental Commencement Date is not on the first day of a calendar
month, the first Lease Year shall extend through the end of the twelfth full
calendar month after the Rental Commencement Date.
7. Additional Rental.
(a) For purposes of this Lease, "Tenant's Forecast Additional
Rental" shall mean Landlord's reasonable estimate of Tenant's
Additional Rental for the coming calendar year or portion thereof. If
at any time it appears to Landlord that Tenant's Additional Rental for
the current calendar year will vary from Landlord's estimate by more
than five percent (5 %), Landlord shall have the right to revise, by
notice to Tenant, its estimate for such year, and subsequent payments
by Tenant for such year shall be based upon such revised estimate of
Tenant's Additional Rental. Failure to make a revision contemplated by
the immediately preceding sentence shall not prejudice Landlord's right
to collect the Ml amount of Tenant's Additional Rental. Prior to the
Rental Commencement Date and thereafter prior to the beginning of each
calendar year during the Lease Term, including any extensions thereof,
Landlord shall present to Tenant a statement of Tenant's Forecast
Additional Rental for such calendar year; provided, however, that if
such statement is not given prior to the beginning of any calendar year
as aforesaid, Tenant shall continue to pay during the next ensuing
calendar year on the basis of the amount of Tenant's Forecast
Additional Rental payable during the calendar year just ended until the
month after such statement is delivered to Tenant.
(b) For purposes of this Lease, "Tenant's Additional Rental"
shall mean for each calendar year (or portion thereof) Tenant's Share
(as hereinafter defined) of the amount by which the Operating Expenses
(as defined below) for such calendar year (or portion thereof) shall
exceed the product derived by multiplying the Rentable Floor Area of
Building by $4.00. The "Tenant's Share" shall be twenty-three and three
tenths percent (23.3 %), determined by dividing the Rentable Floor Area
of Demised Premises by the Rentable Floor Area of Building. The
Tenant's Share shall be a adjusted to reflect
<PAGE> 5
any change in the Rentable Floor Area of Demised Premises or Rentable
Floor Area of Building. In the event the Building is not fully occupied
during any calendar year, the Operating Expenses which are variable in
nature shall be adjusted for the purposes of determining Tenant's
Additional Rental to an amount that would have been incurred by
Landlord for such calendar year if the Building had been fully occupied
during such calendar year. Landlord agrees that only Operating Expenses
which would normally vary depending on the amount of space actually
occupied in the Building, such as costs of utilities, supplies and
janitorial services, shall be adjusted in this manner and that fixed
expenses which are unrelated to occupancy levels shall not be so
adjusted.
(c) Within one hundred fifty (150) days after the end of the
calendar year in which the Rental Commencement Date occurs and of each
calendar year thereafter during the Lease Term, or is soon thereafter
as practicable, Landlord shall provide Tenant a statement showing the
Operating Expenses for said calendar year and a statement prepared by
Landlord showing any adjustment to the Operating Expenses to reflect
full occupancy of the Building during such calendar year, and comparing
Tenant's Forecast Additional Rental with Tenant's Additional Rental. In
the event Tenant's Forecast Additional Rental exceeds Tenant's
Additional Rental for said calendar year, Landlord shall credit such
amount against Rent next due hereunder or, if the Lease Term has
expired or is about to expire, refund such excess to Tenant if Tenant
is not in default under this Lease (in the instance of a default such
excess shall be held as additional security for Tenant's performance of
its duties and obligations under this Lease, may be applied by Landlord
to cure any such default, and shall not be refunded until any such
default is cured). In the event that the Tenant's Additional Rental
exceeds Tenant's Forecast Additional Rental for said calendar year,
Tenant shall pay Landlord, within thirty (30) days of receipt of the
statement, an amount equal to such difference. The provisions of this
Lease concerning the payment of Tenant's Additional Rental shall
survive the expiration or earlier termination of this Lease.
(d) Landlord's books and records pertaining to the calculation
of Operating Expenses for any calendar year within the Lease Term may
be audited by Tenant or its representatives at Tenant's expense, at any
time within twelve (12) months after the end of each such calendar
year; provided that Tenant shall give Landlord not less than thirty
(30) days prior written notice of any such audit. If Landlord's
calculation of Tenant's Additional Rental for the audited calendar year
was incorrect, then Tenant shall be entitled to a prompt refund of any
overpayment or Tenant shall promptly pay to Landlord the amount of any
underpayment, as the case may be.
8. Operating Expenses.
(a) For the purposes of this Lease, "Operating Expenses" shall
mean all expenses, costs and disbursements (but not specific costs
billed to specific tenants of the Building) of every kind and nature,
computed on an accrual basis, relating to or incurred or paid in
connection with the ownership, management, operation, repair and
maintenance of the Project, including but not limited to, the
following:
<PAGE> 6
(1) reasonable wages, salaries and other reasonable
costs of all on-site and off-site employees engaged in the
operation, management, maintenance or access control of the
Project, including taxes, insurance and benefits relating to
such employees, allocated based upon the time such employees
are engaged directly in providing such services;
(2) the reasonable cost of all supplies, tools,
equipment and materials used in the operation, management,
maintenance and access control of the Project;
(3) the cost of all utilities for the Project,
including but not limited to the cost of electricity, gas,
water, sewer services and power for heating, lighting, air
conditioning and ventilating;
(4) the reasonable cost of all maintenance and
service agreements for the Project and the equipment therein,
including but not limited to security service, window
cleaning, elevator maintenance, janitorial service,
landscaping maintenance and customary landscaping replacement;
(5) the reasonable cost of repairs and general
maintenance of the Project;
(6) amortization of the reasonable cost of
acquisition and/or installation of capital investment items
(including security equipment), amortized over their
respective lives, which are installed for the purpose of
reducing operating expenses, promoting safety, complying with
governmental requirements, or maintaining the first-class
nature of the Project;
(7) the cost of casualty, rental loss, liability and
other insurance applicable to the Project and Landlord's
personal property used in connection therewith;
(8) the reasonable cost of trash and garbage removal,
vermin extermination, and snow, ice and debris removal;
(9) the cost of legal and accounting services
incurred by Landlord in connection with the management,
maintenance, operation and repair of the Project, excluding
the owner's or Landlord's general accounting and fund
accounting, such as partnership statements and tax returns,
and excluding costs excluded by Article 8(b)(14) below;
(10) all taxes, assessments and governmental charges,
whether or not directly paid by Landlord, whether federal,
state, county or municipal and whether they be by taxing
districts or authorities presently taxing the Project or by
others subsequently created or otherwise, and any other taxes
and assessments attributable to the Project or its operation
(and the costs of contesting any of the
<PAGE> 7
same), including business license taxes and fees, excluding,
however, taxes and assessments imposed on the personal
property of the tenants of the Project, federal and state
taxes on income, death taxes, franchise taxes, and any taxes
(other than business license taxes and fees) imposed or
measured on or by the income of Landlord from the operation of
the Project; provided, however, that if at any time during the
Lease Term, the present method of taxation or assessment shall
be so changed that the whole or any part of the taxes,
assessments, levies, impositions or charges now levied,
assessed or imposed on real estate and the improvements
thereon shall be discontinued and as a substitute therefor, or
in lieu of or in addition thereto, taxes, assessments, levies,
impositions or charges shall be levied, assessed and/or
imposed wholly or partially as a capital levy or otherwise on
the rents received from the Project or the rents reserved
herein or any part thereof, then such substitute or additional
taxes, assessments, levies, impositions or charges, to the
extent so levied, assessed or imposed, shall be deemed to be
included within the Operating Expenses to the extent that such
substitute or additional tax would be payable if the Project
were the only property of Landlord subject to such tax; and it
is agreed that Tenant will be responsible for ad valorem taxes
on its personal property; and
(11) a management fee in the amount of three percent
(3%) of the gross rental income from the Project.
(b) For purposes of this Lease, and notwithstanding anything
in any other provision of this Lease to the contrary, "Operating
Expenses" shall not include the following:
(1) the cost of any special build-out work or service
performed for any tenant (including Tenant) or by any tenant
at such tenant's cost;
(2) the cost of installing, operating and maintaining
any specialty service, such as a restaurant, cafeteria, retail
store, sundry shop, newsstand, or concession, but only to the
extent such costs exceed those which would normally be
expected to be incurred had such space been general office
space;
(3) the cost of correcting defects in construction;
(4) compensation paid to officers and executives of
Landlord;
(5) the cost of any items for which Landlord is
reimbursed by insurance, condemnation or otherwise, except for
costs reimbursed pursuant to provisions similar to Articles 7
and 8 hereof,
(6) the cost of any additions, changes, replacements
and other items which are made in order to prepare for a
tenant's occupancy;
<PAGE> 8
(7) the cost of repairs incurred by reason of fire or
other casualty to the extent such costs are covered by
insurance carried by Landlord;
(8) insurance premiums to the extent Landlord may be
directly reimbursed therefor, except for premiums reimbursed
pursuant to provisions similar to Articles 7 and 8 hereof,
(9) interest on debt or amortization payments on any
mortgage or deed of trust and rental under any ground lease or
other underlying lease;
(10) any real estate brokerage commissions;
(11) any advertising expenses incurred in connection
with the marketing of any rentable space;
(12) any expenses for repairs or maintenance which
are covered by warranties and service contracts, to the extent
such maintenance and repairs are made at no cost to Landlord;
(13) legal expenses arising out of the construction
of the improvements on the Land or the enforcement of the
provisions of any lease affecting the Land or Building,
including without limitation this Lease; and
(14) costs or amounts paid to parties affiliated with
Landlord or Landlord's managing agent to the extent such costs
or amounts exceed the fair market value of the services or
materials provided.
9. Landlord's Alterations and Improvements. Landlord (or its
successors-in-title) has constructed the Building as the second of a two-phase
development containing one restaurant, one retail/office building and one free
standing office building, parking facilities and other related improvements.
Landlord reserves the right at any time and from time to time (i) to make or
permit changes or revisions in the common areas of the Project, including,
without limitation, additions to, subtractions from, rearrangements of,
alterations of, and modifications or supplements to the common areas of the
Project, (ii) provide for separate ownership of said three (3) buildings and
(iii) to convey the Building and the portion of the Land on which the Building
is located separate from the portion of the Land on which the other building is
located; provided, however, Landlord agrees that no such changes, revisions,
additions, subtractions, rearrangements, alterations, modifications, supplements
or conveyances shall have the effect of reducing the number of parking spaces
available for use by tenants and occupants of the Building below the number
required by governmental laws and ordinances or shall permanently and materially
interfere with access to the Building and the Demised Premises. In the event
Landlord shall elect to divide the Land to accommodate the separate ownership of
the Building and the second building constructed on the Land, the portion of the
Land (and improvements) not owned or leased by Landlord shall automatically be
deemed to be deleted from the definitions of "Land" and "Project" hereunder, and
Landlord and Tenant agree to execute and deliver, each to the other, an
appropriate amendment to this Lease effectuating such deletion.
<PAGE> 9
Landlord and Tenant further agree that, whether or not the ownership of the
three (3) buildings is separated as contemplated herein, (a) certain of the
costs of management, operation, maintenance, repair and security of the entire
such development may be incurred for the benefit of the buildings, and such
costs shall be allocated between and shared by the three (3) buildings
(including the Building), and (b) Tenant's Share shall continue to be calculated
only with reference to the Rentable Floor Area of the Building. Determination of
such costs and their allocation shall be made by Landlord in a fair and
equitable manner and in accordance with generally accepted accounting
principles. Such costs allocated to the Building shall be included in Operating
Expenses under this Lease.
10. Tenant Taxes. Tenant shall pay promptly when due all taxes directly
or indirectly imposed or assessed upon Tenant's gross sales, business
operations, machinery, equipment, trade fixtures and other personal property or
assets, whether such taxes are assessed against Tenant, Landlord or the
Building. In the event that such taxes are imposed or assessed against Landlord
or the Building, Landlord shall furnish Tenant with all applicable tax bills,
public charges and other assessments or impositions and Tenant shall forthwith
pay the same either directly to the taxing authority or, at Landlord's option,
to Landlord.
11. Payments. All payments of Rent and other payments to be made to
Landlord shall be made on a timely basis and shall be payable to Landlord or as
Landlord may otherwise designate. All such payments shall be mailed or delivered
to Landlord's Address designated in Article l(b) above or at such other place as
Landlord may designate from time to time in writing. If mailed, all payments
shall be mailed in sufficient time and with adequate postage thereon to be
received in Landlord's account by no later than the due date for such payment.
Tenant agrees to pay to Landlord Fifty Dollars ($50.00) for each check presented
to Landlord in payment of any obligation of Tenant which is not paid by the bank
on which it is drawn.
12. Interest and Late Charges. A late charge shall be imposed upon any
installment of rent or other payment required from Tenant which is not paid
within five (5) days of the date in the amount of $10.00 per day from the date
such payment was due until the date such payment is made, and such late charge
shall be payable immediately to Landlord as additional rent hereunder. In
addition, any installment of rent or other payment required from Tenant which is
not paid within ten (10) days of the date when it was due shall bear interest at
the rate of twelve percent (12%) per annum or at the maximum rate allowed by
law, whichever is less. Such interest shall accrue from the date such payment
was due until the date such payment is made, and such interest shall be payable
immediately to Landlord as additional rent hereunder. There will also be a
$50.00 charge by management should any check be returned by a bank for
insufficient funds.
13. Use Rules. The Demised Premises shall be used for executive,
general administrative, office space, and other similar purposes and no other
purposes and in accordance with all applicable laws, ordinances, rules and
regulations of governmental authorities, all nationally recognized industry
standards applicable to such uses and the Rules and Regulations attached hereto
and made a part hereof. Tenant covenants and agrees to abide by the Rules and
Regulations in all respects as now set forth and attached hereto or as hereafter
promulgated by Landlord. Landlord shall have the right at all times during the
Lease Term to publish and
<PAGE> 10
promulgate and thereafter enforce such rules and regulations or changes in the
existing Rules and Regulations as it may reasonably deem necessary to protect
the tenantability, safety, operation, and welfare of the Demised Premises and
the Project. Tenant hereby expressly agrees that Tenant shall comply in all
respects with all applicable laws, ordinances, rules and regulations of
governmental authorities regarding the handling, storage, transportation and
disposal of biomedical waste and other contaminants in connection with the
operation of Tenant's business in the Demised Premises, including, without
limitation, the applicable provisions of the Georgia Comprehensive Solid Waste
Management Act, Official Code of Georgia Annotated Section 12-8- 20, et seq. and
the regulations promulgated thereunder.
14. Alterations. Except for any initial improvement of the Demised
Premises pursuant to Exhibit "C", which shall be governed by the provisions of
said Exhibit "C", Tenant shall not make, suffer or permit to be made any
alterations, additions or improvements to or of the Demised Premises or any part
thereof, or attach any fixtures or equipment thereto, without first obtaining
Landlord's written consent, which consent shall not be unreasonably withheld.
All such alterations, additions and improvements shall become Landlord's
property at the expiration or earlier termination of the Lease Tenn and shall
remain on the Demised Premises without compensation to Tenant unless Landlord
elects by notice to Tenant to have Tenant remove such alterations, additions and
improvements, in which event, notwithstanding any contrary provisions respecting
such alterations, additions and improvements contained in Article 31 hereof,
Tenant shall promptly restore, at its sole cost and expense, the Demised
Premises to its condition prior to the installation of such alterations,
additions and improvements, normal wear and tear excepted.
15. Repairs.
(a) Landlord shall maintain in good order and repair, subject
to normal wear and tear and subject to casualty and condemnation, the
Building (excluding the Demised Premises and other portions of the
Building leased to other tenants), the Building parking facilities, the
public areas and the landscaped areas. Notwithstanding the foregoing
obligation, the cost of any repairs or maintenance to the foregoing
necessitated by the intentional acts or negligence of Tenant or its
agents, contractors, employees, subtenants or assigns, shall be borne
solely by Tenant and shall be deemed Rent hereunder and shall be
reimbursed by Tenant to Landlord upon demand. Landlord shall not be
required to make any repairs or improvements to the Demised Premises
except for any initial improvements to the Demised Premises pursuant to
the provisions of Exhibit "C" and except structural repairs necessary
for safety and tenantability.
(b) Tenant covenants and agrees that it will take good care of
the Demised Premises and all alterations, additions and improvements
thereto and will keep and maintain the same in good condition and
repair, except for normal wear and tear. Tenant shall at once report,
in writing, to Landlord any defective or dangerous condition known to
Tenant. To the fullest extent permitted by law, Tenant hereby waives
all rights to make repairs at the expense of Landlord or in lieu
thereof to vacate the Demised Premises as may be provided by any law,
statute or ordinance now or hereafter in effect. Landlord has no
obligation and has made no promise to alter, remodel, improve, repair,
<PAGE> 11
decorate or paint the Demised Premises or any part thereof, except as
specifically and expressly herein set forth.
16. Landlord's Right of Entry. Landlord shall retain duplicate keys to
all doors of the Demised Premises and Landlord and its agents, employees and
independent contractors shall have the right to enter the Demised Premises at
reasonable hours to inspect and examine same, to make repairs, additions,
alterations, and improvements, to exhibit the Demised Premises to mortgagees,
prospective mortgagees, purchasers or tenants, and to inspect the Demised
Premises to ascertain that Tenant is complying with all of its covenants and
obligations hereunder; provided, however, that Landlord shall, except in case of
emergency, afford Tenant such prior notification of an entry into the Demised
Premises as shall be reasonably practicable under the circumstances. Landlord
shall be allowed to take into and through the Demised Premises any and all
materials that may be required to make such repairs, additions, alterations or
improvements. During such time as such work is being carried on in or about the
Demised Premises, the Rent provided herein shall not abate, and, except with
respect to Landlord's gross negligence or willful misconduct, Tenant waives any
claim or cause of action against Landlord for damages by reason of interruption
of Tenant's business or loss of profits therefrom because of the prosecution of
any such work or any part thereof.
17. Insurance.
(a) Tenant shall procure at its expense and maintain
throughout the Lease Term a policy or policies of fire and extended
coverage insurance insuring the full replacement cost of its furniture,
equipment, supplies, and other property owned, leased, held or
possessed by it and contained in the Demised Premises, together with
the excess value of the improvements to the Demised Premises over the
Construction Allowance, and workmen's compensation insurance as
required by applicable law. Tenant shall also procure at its expense
and maintain throughout the Lease Term a policy or policies of
insurance, insuring Tenant, Landlord, Landlord's managing agent and
Landlord's mortgagee, if any, against any and all liability for injury
to or death of a person or persons and for damage to property
occasioned by or arising out of any construction work being done by
Tenant or Tenant's contractors on the Demised Premises, or arising out
of the condition, use, or occupancy of the Demised Premises, or in any
way occasioned by or arising out of the activities of Tenant, its
agents, contractors or employees in the Demised Premises, or other
portions of the Building or the Project, and of Tenant's guests and
licensees while they are in the Demised Premises, the limits of such
policy or policies to be in combined single limits for both damage to
property and personal injury and in amounts not less than One Million
Dollars ($1,000,000.00) for each occurrence. Such insurance shall, in
addition, extend to any liability of Tenant arising out of the
indemnities provided for in this Lease. Tenant shall also carry such
other types of insurance in form and amount which Landlord shall
reasonably deem to be prudent for Tenant to carry, should the
circumstances or conditions so merit Tenant carrying such type of
insurance and provided that such insurance is then customarily required
to be maintained by landlords of similar projects. All insurance
policies procured and maintained by Tenant pursuant to this Article 17
shall name Landlord and any additional parties designated by Landlord
as additional insureds, shall be carried with
<PAGE> 12
companies licensed to do business in the State of Georgia reasonably
satisfactory to Landlord and shall be non-cancelable and not subject to
material change except after twenty (20) days written notice to
Landlord. Such policies or duly executed certificates of insurance with
respect thereto, accompanied by proof of payment of the premium
therefor, shall be delivered to Landlord prior to the date Tenant
enters the Demised Premises for the installation of its improvements,
trade fixtures or furniture, and renewals of such policies shall be
delivered to Landlord at least thirty (30) days prior to the expiration
of each respective policy term.
(b) Landlord shall procure at its expense (but with the
expense to be included in Operating Expenses as provided in Article
8[a] hereof) and shall thereafter maintain throughout the Lease Term a
policy or policies of fire and extended coverage insurance with respect
to the Building and the improvements to the Demised Premises, insuring
against loss or damage by fire and such other risks as are from time to
time included in a standard form of fire and extended coverage policy
of insurance available in the State of Georgia. Said Building and
improvements to the Demised Premises shall be insured for the benefit
of Landlord in an amount not less than the full replacement costs
thereof as determined from time to time by the insurance company
(excluding any costs of replacing leasehold improvements in the Demised
Premises in excess of the Construction Allowance, and such insurance
may provide for a reasonable deductible). Landlord shall also procure
at its expense (but with the expense to be included in Operating
Expenses as provided in Article 8[a] hereof) and shall thereafter
maintain throughout the Lease Term a policy or policies of commercial
general liability insurance insuring against the liability of Landlord
arising out of the maintenance, use and occupancy of the Project, with
limits of such policy or policies to be in combined single limits for
both damage to property and personal injury and in amounts not less
than One Million Dollars ($1,000,000.00) for each occurrence. Such
insurance required herein shall be issued by and binding upon an
insurance company approved by the Insurance Commissioner of the State
of Georgia and licensed to do business in the State of Georgia. Upon
reasonable request from Tenant, Landlord will provide a certificate of
insurance evidencing the maintenance of the insurance required herein.
18. Waiver of Subrogation. Landlord and Tenant shall each have included
in all policies of fire, extended coverage, business interruption and other
insurance respectively obtained by them covering the Demised Premises, the
Building and contents therein, a waiver by the insurer of all right of
subrogation against the other in connection with any loss or damage thereby
insured against. Any additional premium for such waiver shall be paid by the
primary insured. To the full extent permitted by law, Landlord and Tenant each
waives all right of recovery against the other for, and agrees to release the
other from liability for, loss or damage to the extent such loss or damage is
covered by valid and collectible insurance in effect at the time of such loss or
damage or would be covered by the insurance required to be maintained under this
Lease by the party seeking recovery.
<PAGE> 13
19. Default.
(a) The following events shall be deemed to be events of
default by Tenant under this Lease: (i) Tenant shall fail to pay any
installment of Rent or any other charge or assessment against Tenant
pursuant to the terms hereof within ten (10) days after the due date
thereof; (ii) Tenant shall fail to comply with any term, provision,
covenant or warranty made under this Lease by Tenant, other than the
payment of the Rent or any other charge or assessment payable by
Tenant, and shall not cure such failure within twenty (20) days after
notice thereof to Tenant; (iii) Tenant or any guarantor of this Lease
shall make a general assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts as they become due, or
shall file a petition in bankruptcy, or shall be adjudicated as
bankrupt or insolvent, or shall file a petition in any proceeding
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, or shall file an answer admitting or fail
timely to contest the material allegations of a petition filed against
it in any such proceeding; (iv) a proceeding is commenced against
Tenant or any guarantor of this Lease seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any present or future statute, law or regulation,
and such proceeding shall not have been dismissed within forty-five
(45) days after the commencement thereof; (v) a receiver or trustee
shall be appointed for the Demised Premises or for all or substantially
all of the assets of Tenant or of any guarantor of this Lease; (vi)
Tenant shall abandon or vacate all or any portion of the Demised
Premises or fail to take possession thereof as provided in this Lease;
(vii) Tenant shall do or permit to be done anything which creates a
lien upon the Demised Premises or the Project and such lien is not
removed or discharged within fifteen (15) days after the filing
thereof; (viii) Tenant shall fail to return a properly executed
instrument to Landlord in accordance with the provisions of Article 27
hereof within the time period provided for such return following
Landlord's request for same as provided in Article 27; or (ix) Tenant
shall fail to return a properly executed estoppel certificate to
Landlord in accordance with the provisions of Article 28 hereof within
the time period provided for such return following Landlord's request
for same as provided in Article 28.
(b) Upon the occurrence of any of the aforesaid events of
default, Landlord shall have the option to pursue any one or more of
the following remedies without any notice or demand whatsoever: (i)
terminate this Lease, in which event Tenant shall immediately surrender
the Demised Premises to Landlord and if Tenant fails to do so, Landlord
may without prejudice to any other remedy which it may have for
possession or arrearages in Rent, enter upon and take possession of the
Demised Premises and expel or remove Tenant and any other person who
may be occupying said Demised Premises or any part thereof, by force,
if necessary, without being liable for prosecution or any claim of
damages therefor; Tenant hereby agreeing to pay to Landlord on demand
the amount of all loss and damage which Landlord may suffer by reason
of such termination, whether through inability to relet the Demised
Premises on satisfactory terms or otherwise; (ii) terminate Tenant's
right of possession (but not this Lease) and enter upon and take
possession of the Demised Premises and expel or remove Tenant and any
other
<PAGE> 14
person who may be occupying said Demised Premises or any part thereof,
by entry (including the use of force, if necessary), dispossessory suit
or otherwise, without thereby releasing Tenant from any liability
hereunder, without terminating this Lease, and without being liable for
prosecution or any claim of damages therefor and, if Landlord so
elects, make such alterations, redecorations and repairs as, in
Landlord's judgment, may be necessary to relet the Demised Premises,
and Landlord may, but shall be under no obligation to do so, relet the
Demised Premises or any portion thereof in Landlord's or Tenant's name,
but for the account of Tenant, for such term or terms (which may be for
a term extending beyond the Lease Term) and at such rental or rentals
and upon such other terms as Landlord may reasonably deem advisable,
with or without advertisement, and by private negotiations, and receive
the rent therefor, Tenant hereby agreeing to pay to Landlord the
deficiency, if any, between all Rent reserved hereunder and the total
rental applicable to the Lease Term hereof obtained by Landlord
re-letting, and Tenant shall be liable for Landlord's expenses in
redecorating and restoring the Demised Premises and all costs incident
to such re-letting, including broker's commissions and lease
assumptions, and in no event shall Tenant be entitled to any rentals
received by Landlord in excess of the amounts due by Tenant hereunder;
or (iii) enter upon the Demised Premises by force, if necessary, and do
whatever Tenant is obligated to do under the terms of this Lease; and
Tenant agrees to reimburse Landlord on demand for any expenses
including, without limitation, reasonable attorneys' fees which
Landlord may incur in thus effecting compliance with Tenant's
obligations under this Lease.
(c) Pursuit of any of the foregoing remedies shall not
preclude pursuit of any other remedy herein provided or any other
remedy provided by law or at equity, nor shall pursuit of any remedy
herein provided constitute an election of remedies thereby excluding
the later election of an alternate remedy, or a forfeiture or waiver of
any Rent or other charges and assessments payable by Tenant and due to
Landlord hereunder or of any damages accruing to Landlord by reason of
violation of any of the terms, covenants, warranties and provisions
herein contained. No reentry or taking possession of the Demised
Premises by Landlord or any other action taken by or on behalf of
Landlord shall be construed to be an acceptance of a surrender of this
Lease or an election by Landlord to terminate this Lease unless written
notice of such intention is given to Tenant. Forbearance by Landlord to
enforce one or more of the remedies herein provided upon an event of
default shall not be deemed or construed to constitute a waiver of such
default. In determining the amount of loss or damage which Landlord may
suffer by reason of termination of this Lease or the deficiency arising
by reason of any reletting of the Demised Premises by Landlord as above
provided, allowance shall be made for the expense of repossession.
Tenant agrees to pay to Landlord all costs and expenses incurred by
Landlord in the enforcement of this Lease, including, without
limitation, the fees of Landlord's attorneys as provided in Article 25
hereof.
20. Waiver of Breach. No waiver of any breach of the covenants,
warranties, agreements, provisions, or conditions contained in this Lease shall
be construed as a waiver of said covenant, warranty, provision, agreement or
condition or of any subsequent breach thereof,
<PAGE> 15
and if any breach shall occur and afterwards be compromised, settled or
adjusted, this Lease shall continue in full force and effect as if no breach had
occurred.
21. Assignment and Subletting. Tenant shall not, without the prior
written consent of Landlord, which consent shall not be unreasonably withheld,
assign this Lease or any interest herein or in the Demised Premises, or
mortgage, pledge, encumber, hypothecate or otherwise transfer or sublet the
Demised Premises or any part thereof or permit the use of the Demised Premises
by any party other than Tenant. Pursuant to this Article 21, consent to a
proposed assignment or sublease shall be determined based on, but not limited
to, the following: (i) the financial responsibility of the proposed assignee or
subtenant, (ii) the identity or business character of the proposed assignee or
subtenant, (iii) the need for alteration of the Demised Premises, and (iv) the
proposed use of the Demised Premises. Consent to one or more such transfers or
subleases shall not destroy or waive this provision, and all subsequent
transfers and subleases shall likewise be made only upon obtaining the prior
written consent of Landlord. Without limiting the foregoing prohibition, in no
event shall Tenant assign this Lease or any interest herein, whether directly,
indirectly or by operation of law, or sublet the Demised Premises or any part
thereof or permit the use of the Demised Premises or any part thereof by any
party if such proposed assignment, subletting or use would contravene any
restrictive covenant (including any exclusive use) granted to any other tenant
of the Building or would contravene the provisions of Article 13 of this Lease.
Notwithstanding the foregoing prohibition, Tenant shall have the right, without
the consent of Landlord but with prior notice to Landlord, to assign this Lease
to an entity which is more than fifty percent (50%) owned, directly or
indirectly, by Tenant, and to sublet portions of the Demised Premises. No
assignment of this Lease or subletting of the Demised Premises shall relieve
Tenant of any liability arising under this Lease. Sublessees or transferees of
the Demised Premises for the balance of the Lease Term shall become directly
liable to Landlord for all obligations of Tenant-hereunder, without relieving
Tenant (or any guarantor of Tenant's obligations hereunder) of any liability
therefor, and Tenant shall remain obligated for all liability to Landlord
arising under this Lease during the entire remaining Lease Term including any
extensions thereof, whether or not authorized herein. If Tenant is a partnership
(which, for purposes of this Article 21 shall include limited liability
companies and limited liability partnerships), a withdrawal or change, whether
voluntary, involuntary or by operation of law, of partners or members owning a
controlling interest in Tenant shall be deemed a voluntary assignment of this
Lease and subject to the foregoing provisions. If Tenant is a corporation, any
dissolution, merger, consolidation or other reorganization of Tenant, or the
sale or transfer of a controlling interest in the capital stock of Tenant, shall
be deemed a voluntary assignment of this Lease and subject to the foregoing
provisions. Landlord may, as a prior condition to considering any request for
consent to an assignment or sublease (when Landlord's consent is required),
require Tenant to obtain and submit current financial statements of any proposed
subtenant or assignee. No assignment of this Lease consented to by Landlord
shall be effective unless and until Landlord shall receive an original
assignment and assumption agreement, in form and substance reasonably
satisfactory to Landlord, signed by Tenant and Tenant's proposed assignee,
whereby the assignee assumes due performance of this Lease to be done and
performed for the balance of the then remaining Lease Term of this Lease. No
subletting of the Demised Premises, or any part thereof, shall be effective
unless and until there shall have been delivered to Landlord an agreement, in
form and substance reasonably satisfactory to Landlord, signed by Tenant and the
proposed sublessee,
<PAGE> 16
whereby the sublessee acknowledges the right of Landlord to continue or
terminate any sublease, in Landlord's sole discretion, upon termination of this
Lease, and such sublessee agrees to recognize and attorn to Landlord in the
event that Landlord elects under such circumstances to continue such sublease.
22. Destruction.
(a) If the Demised Premises are damaged by fire or other
casualty, the same shall be repaired or rebuilt as speedily as
practical under the circumstances at the expense of Landlord, unless
this Lease is terminated as provided in this Article 22, and during the
period required for restoration, a just and proportionate part of Base
Rental shall be abated until the Demised Premises are repaired or
rebuilt.
(b) If the Demised Premises are (i) damaged to such an extent
that repairs cannot, in Landlord's judgment, be completed within one
hundred eighty (180) days after the date of the casualty or (ii)
damaged or destroyed as a result of a risk which is not insured under
standard fire insurance policies with extended coverage endorsement, or
(iii) damaged or destroyed during the last eighteen (18) months of the
Lease Term, or if the Building is damaged in whole or in part (whether
or not the Demised Premises are damaged), to such an extent that the
Building cannot, in Landlord's judgment, be operated economically as an
integral unit, then and in any such event Landlord may at its option
terminate this Lease by notice in writing to Tenant within sixty (60)
days after the date of such occurrence. If the Demised Premises are
damaged to such an extent that repairs cannot, in Landlord's judgment,
be completed within one hundred eighty (180) days after the date of the
casualty or if the Demised Premises are substantially damaged during
the last eighteen (18) months of the Lease Term, then in either such
event Tenant may elect to terminate this Lease by notice in writing to
Landlord within thirty (30) days after the date of such occurrence.
Unless Landlord or Tenant elects to terminate this Lease as hereinabove
provided, this Lease will remain in full force and effect and Landlord
shall repair such damage at its expense to the extent required under
subparagraph (c) below as expeditiously as possible under the
circumstances.
(c) If Landlord should elect or be obligated pursuant to
subparagraph (a) above to repair or rebuild because of any damage or
destruction, Landlord's obligation shall be limited to the original
Building and any other work or improvements which were originally
performed or installed at Landlord's expense as described in Exhibit
"C" hereto or with the proceeds of the Construction Allowance. If the
cost of performing such repairs exceeds the actual proceeds of
insurance paid or payable to Landlord on account of such casualty, or
if Landlord's mortgagee or the lessor under a ground or underlying
lease shall require that any insurance proceeds from a casualty loss be
paid to it, Landlord may terminate this Lease unless Tenant, within
thirty (30) days after demand therefor, deposits with Landlord a sum of
money sufficient to pay the difference between the cost of repair and
the proceeds of the insurance available to Landlord for such purpose.
<PAGE> 17
23. Services by Landlord. Landlord shall provide the Building Standard
Services described on Exhibit "D" attached hereto and by reference made a part
hereof.
24. Attorneys' Fees and Homestead. In the event Landlord or Tenant
defaults in the performance of any of the terms, agreements or conditions
contained in this Lease and the non-defaulting party places the enforcement of
this Lease, or any part thereof, or the collection of any Rent due or to become
due hereunder, or recovery of the possession of the Demised Premises, in the
hands of an attorney, or files suit upon the same, and should such
non-defaulting party prevail in such suit, the defaulting party, to the extent
permitted by applicable law, agrees to pay the non-defaulting party all
reasonable attorney's fees actually incurred by the non-defaulting party. Tenant
waives all homestead rights and exemptions which it may have under any law as
against any obligation owing under this Lease, and assigns to Landlord its
homestead and exemptions to the extent necessary to secure payment and
performance of its covenants and agreements hereunder.
25. Time. Time is of the essence of this Lease and whenever a certain
day is stated for payment or performance of any obligation of Tenant or
Landlord, the same enters into and becomes a part of the consideration hereof.
26. Subordination and Attornment.
(a) Tenant agrees that this Lease and all rights of Tenant
hereunder are and shall be subject and subordinate to any ground or
underlying lease which may now or hereafter be in effect regarding the
Project or any component thereof, to any mortgage now or hereafter
encumbering the Demised Premises or the Project or any component
thereof, to all advances made or hereafter to be made upon the security
of such mortgage, to all amendments, modifications, renewals,
consolidations, extensions, and restatements of such mortgage, and to
any replacements and substitutions for such mortgage. The terms of this
provision shall be self-operative and no further instrument of
subordination shall be required. Tenant, however, upon request of
Landlord or any party in interest, shall execute promptly such
instrument or certificates as may be reasonably required to carry out
the intent hereof, whether said requirement is that of Landlord or any
other party in interest, including, without limitation, any mortgagee.
Landlord is hereby irrevocably vested with full power and authority as
attorney-in-fact for Tenant and in Tenant's name, place and stead, to
subordinate Tenant's interest under this Lease to the lien or security
title of any mortgage and to any future instrument amending, modifying,
renewing, consolidating, extending, restating, replacing or
substituting any such mortgage.
(b) If any mortgagee or lessee under a ground or underlying
lease elects to have this Lease superior to its mortgage or lease and
signifies its election in the instrument creating its lien or lease or
by separate recorded instrument, then this Lease shall be superior to
such mortgage or lease, as the case may be. The term "mortgage", as
used in this Lease, includes any deed of trust, deed to secure debt, or
security deed and any other instrument creating a lien in connection
with any other method of
<PAGE> 18
financing, or refinancing. The term "mortgagee", as used in this Lease,
refers to the holder(s) of the indebtedness secured by a mortgage.
(c) In the event any proceedings are brought for the
foreclosure of, or in the event of exercise of the power of sale under,
any mortgage covering the Demised Premises or the Project, or in the
event the interests of Landlord under this Lease shall be transferred
by reason of deed in lieu of foreclosure or other legal proceedings, or
in the event of termination of any lease under which Landlord may hold
title, Tenant shall, at the option of the transferee or purchaser at
foreclosure or under power of sale, or the lessor of Landlord upon such
lease termination, as the case may be (sometimes hereinafter called
"such person"), attorn to such person and shall recognize and be bound
and obligated hereunder to such person as "Landlord" under this Lease;
provided, however, that no such person shall be (i) bound by any
payment of Rent for more than one (1) month in advance, except
prepayments in the nature of security for the performance by Tenant of
its obligations under this Lease (and then only if such prepayments
have been deposited with and are under the control of such person);
(ii) bound by any amendment or modification of this Lease made without
the express written consent of the mortgagee or lessor of Landlord, as
the case may be; (iii) obligated to cure any defaults under this Lease
of any prior landlord (including Landlord); (iv) liable for any act or
omission of any prior landlord (including Landlord); (v) subject to any
offsets or defenses which Tenant might have against any prior landlord
(including Landlord); or (vi) bound by any warranty or representation
of any prior landlord (including Landlord) relating to work performed
by any prior landlord (including Landlord) under this Lease. Tenant
agrees to execute any attornment agreement not in conflict herewith
requested by Landlord, its mortgagee or such person. Tenant's
obligation to attorn to such person shall survive the exercise of any
such power of sale, foreclosure or other proceeding. Tenant agrees that
the institution of any suit, action or other proceeding by any
mortgagee to realize on Landlord's interest in the Demised Premises or
the Building pursuant to the powers granted to a mortgagee under its
mortgage, shall not, by operation of law or otherwise, result in the
cancellation or termination of the obligations of Tenant hereunder.
Landlord and Tenant agree that notwithstanding that this Lease is
expressly subject and subordinate to any mortgages, any mortgagee, its
successors and assigns, or other holder of a mortgage or of a note
secured thereby, may sell the Demised Premises or the Building, in the
manner provided in the mortgage and may, at the option of such
mortgagee, its successors and assigns, or other holder of the mortgage
or note secured thereby, make such sale of the Demised Premises or
Building subject to this Lease.
27. Estoppel Certificates. Within ten (10) days after request therefor
by Landlord, Tenant agrees to execute and deliver to Landlord in recordable form
an estoppel certificate addressed to Landlord, any mortgagee or assignee of
Landlord's interest in, or purchaser of, the Demised Premises or the Building or
any part thereof, certifying (if such be the case) that this Lease is unmodified
and is in full force and effect (and if there have been modifications, that the
same is in full force and effect as modified and stating said modifications);
that there are no defenses or offsets against the enforcement thereof or stating
those claimed by Tenant; and stating the date to which Rent and other charges
have been paid. Such certificate shall also
<PAGE> 19
include such other information as may reasonably be required by such mortgagee,
proposed mortgagee, assignee, purchaser or Landlord. Any such certificate may be
relied upon by Landlord, any mortgagee, proposed mortgagee, assignee, purchaser
and any other party to whom such certificate is addressed.
28. Cumulative Rights. All rights, powers and privileges conferred
hereunder upon the parties hereto shall be cumulative to, but not restrictive
of, or in lieu of those conferred by law.
29. Holding Over. If Tenant remains in possession after expiration or
termination of the Lease Term with or without Landlord's written consent, Tenant
shall become a tenant-at-sufferance, and there shall be no renewal of this Lease
by operation of law. During the period of any such holding over, all provisions
of this Lease shall be and remain in effect except that the monthly rental shall
be one and one-half times the amount of Rent (including any adjustments as
provided herein) payable for the last full calendar month of the Lease Term
including renewals or extensions. The inclusion of the preceding sentence in
this Lease shall not be construed as Landlord's consent for Tenant to hold over.
30. Surrender of Premises. Upon the expiration or other termination of
this Lease, Tenant shall quit and surrender to Landlord the Demised Premises and
every part thereof and all alterations, additions and improvements thereto,
broom clean and in good condition and state of repair, reasonable wear and tear
only excepted. If Tenant is not then in default, Tenant shall remove all
personalty and equipment not attached to the Demised Premises which it has
placed upon the Demised Premises, and Tenant shall restore the Demised Premises
to the condition immediately preceding the time of placement thereof. If Tenant
shall fail or refuse to remove all of Tenant's effects, personalty and equipment
from the Demised Premises upon the expiration or termination of this Lease for
any cause whatsoever or upon Tenant being dispossessed by process of law or
otherwise, such effects, personalty and equipment shall be deemed conclusively
to be abandoned and may be appropriated, sold, stored, destroyed or otherwise
disposed of by Landlord. Tenant shall pay Landlord on demand any and all
expenses incurred by Landlord in the removal of such property, including,
without limitation, the cost of repairing any damage to the Building or Project
caused by the removal of such property and storage charges (if Landlord elects
to store such property). The covenants and conditions of this Article 31 shall
survive any expiration or termination of this Lease.
31. Notices. All notices required or permitted to be given hereunder
shall be in writing and may be delivered in person to either party or may be
sent by courier or by United States Mail, certified, return receipt requested,
postage prepaid. Any such notice shall be deemed received by the party to whom
it was sent (i) in the case of personal delivery or courier delivery, on the
date of delivery to such party, and (ii) in the case of certified mail, the date
receipt is acknowledged on the return receipt for such notice or, if delivery is
rejected or refused or the U.S. Postal Service is unable to deliver same because
of changed address of which no notice was given pursuant hereto, the first date
of such rejection, refusal or inability to deliver. All such notices shall be
addressed to Landlord or Tenant at their respective address set forth
hereinabove or at such other address as either party shall have theretofore
given to the other by notice as herein provided.
<PAGE> 20
32. Damage or Theft of Personal Property. All personal property brought
into the Demised Premises by Tenant, or Tenant's employees or business visitors,
shall be at the risk of Tenant only, and Landlord shall not be liable for theft
thereof or any damage thereto occasioned by any act of co-tenants, occupants,
invitees or other users of the Building or any other person, unless such theft
or damage is the result of the Act of Landlord or its employees and Landlord is
not relieved therefrom by Article 18 hereof. Unless caused by the gross
negligence of Landlord or its employees, Landlord shall not at any time be
liable for damage to any property in or upon the Demised Premises which results
from power surges or other deviations from the constancy of the electrical
service or from gas, smoke, water, rain, ice or snow which issues or leaks from
or forms upon any part of the Building or from the pipes or plumbing work of the
same, or from any other place whatsoever.
33. Eminent Domain.
(a) If all or part of the Demised Premises shall be taken for
any public or quasi-public use by virtue of the exercise of the power
of eminent domain or by private purchase in lieu thereof, this Lease
shall terminate as to the part so taken as of the date of taking, and,
in the case of a partial taking, either Landlord or Tenant shall have
the right to terminate this Lease as to the balance of the Demised
Premises by written notice to the other within thirty (30) days after
such date; provided, however, that a condition to the exercise by
Tenant of such right to terminate shall be either (i) that more than
fifteen percent (15 %) of the Demised Premises was taken or (ii) that
the portion of the Demised Premises taken shall be of such extent and
nature as substantially to handicap, impede or impair Tenant's use of
the balance of the Demised Premises. If title to so much of the
Building is taken that a reasonable amount of reconstruction thereof
will not in Landlord's sole discretion result in the Building being a
practical improvement and reasonably suitable for use for the purpose
for which it is designed, then this Lease shall terminate on the date
that the condemning authority actually takes possession of the part so
condemned or purchased.
(b) If this Lease is terminated under the provisions of this
Article 34, Rent shall be apportioned and adjusted as of the date of
termination. Tenant shall have no claim against Landlord or against the
condemning authority for the value of any leasehold estate or for the
value of the unexpired Lease Term providing that the foregoing shall
not preclude any claim that Tenant may have against the condemning
authority for the unamortized cost of leasehold improvements, to the
extent the same were installed at Tenant's expense (and not with the
proceeds of the Construction Allowance), or for loss of business,
moving expenses or other consequential damages, in accordance with
subparagraph (d) below.
(c) If there is a partial taking of the Building and this
Lease is not thereupon terminated under the provisions of this Article
34, then this Lease shall remain in full force and effect, and Landlord
shall, within a reasonable time thereafter, repair or reconstruct the
remaining portion of the Building to the extent necessary to make the
same a complete architectural unit; provided that in complying with its
obligations
<PAGE> 21
hereunder Landlord shall not be required to expend more than the net
proceeds of the condemnation award which are paid to Landlord.
(d) All compensation awarded or paid to Landlord upon a total
or partial taking of the Demised Premises or the Building shall belong
to and be the property of Landlord without any participation by Tenant.
Nothing herein shall be construed to preclude Tenant from prosecuting
any claim directly against the condemning authority for loss of
business, for damage to, and cost of removal of, trade fixtures,
furniture and other personal property belonging to Tenant, and for the
unamortized cost of leasehold improvements to the extent same were
installed at Tenant's expense (and not with the proceeds of the
Construction Allowance). In no event shall Tenant have or assert a
claim for the value of any unexpired term of this Lease. Subject to the
foregoing provisions of the subparagraph (d), Tenant hereby assigns to
Landlord any and all of its right, title and interest in or to any
compensation awarded or paid as a result of any such taking.
(e) Notwithstanding anything to the contrary contained in this
Article 34, if, during the Lease Term, the use or occupancy of any part
of the Building or the Demised Premises shall be taken or appropriated
temporarily for any public or quasi-public use under any governmental
law, ordinance, or regulations, or by right of eminent domain, this
Lease shall be and remain unaffected by such taking or appropriation
and Tenant shall continue to pay in full all Rent payable hereunder by
Tenant during the Lease Term. In the event of any such temporary
appropriation or taking, Tenant shall be entitled to receive that
portion of any award which represents compensation for the loss of use
or occupancy of the Demised Premises during the Lease Term, and
Landlord shall be entitled to receive that portion of any award which
represents the cost of restoration and compensation for the loss of use
or occupancy of the Demised Premises after the end of the Lease Term.
34. Parties. The term "Landlord", as used in this Lease, shall include
Landlord and its assigns and successors. It is hereby covenanted and agreed by
Tenant that should Landlord's interest in the Demised Premises cease to exist
for any reason during the Lease Term, then notwithstanding the happening of such
event, this Lease nevertheless shall remain in full force and effect, and Tenant
hereby agrees to attorn to the then owner of the Demised Premises. The term
"Tenant" shall include Tenant and its heirs, legal representatives and
successors, and shall also include Tenant's assignees and sublessees, if this
lease shall be validly assigned or the Demised Premises sublet for the balance
of the Lease Term or any renewals or extensions thereof. In addition, Landlord
and Tenant covenant and agree that Landlord's right to transfer or assign
Landlord's interest in and to the Demised Premises, or any part or parts
thereof, shall be unrestricted, and that in the event of any such transfer or
assignment by Landlord which includes the Demised Premises, Landlord's
obligations to Tenant thereafter arising hereunder shall cease and terminate,
and tenant shall look only and solely to Landlord's assignee or transferee for
performance thereof.
35. Liability of Tenant. Tenant hereby indemnifies and agrees to hold
Landlord, and its partners, shareholders, directors and officers harmless from
and against, any and all liability, loss, cost, damage or expense, including,
without limitation, court costs and reasonable
<PAGE> 22
attorney's fees, imposed on Landlord by any person whomsoever, arising from or
in connection with the use or occupancy of the Demised Premises caused in whole
or in part by any negligent act or omission of Tenant, or any of its employees,
contractors, servants, agents, subtenants or assignees, or of Tenant's invitees
while such invitees are within the Demised Premises, or otherwise occurring in
connection with any default of Tenant hereunder. The provisions of this Article
36 shall survive any termination of this Lease.
36. Force Majeure. In the event of strike, lockout, labor trouble,
civil commotion, act of God, or any other cause beyond a party's control
(collectively "force majeure") resulting in Landlord's inability to supply the
services or perform the other obligations required of Landlord hereunder, this
Lease shall not terminate and Tenant's obligation to pay Rent and all other
charges and sums due and payable by Tenant shall not be affected or excused and
Landlord shall NOT be considered to be in default under this Lease. If, as a
result of force majeure, Tenant is delayed in performing any of its obligations
under this Lease, other than Tenant's obligation to take possession of the
Demised Premises on or before the Rental Commencement Date and to pay Rent and
all other charges and sums payable by Tenant hereunder, Tenant's performance
shall be excused for a period equal to such delay and Tenant shall not during
such period be considered to be in default under this Lease with respect to the
obligation, performance of which has thus been delayed.
37. Landlord's Liability. Landlord shall have no personal liability
with respect to any of the provisions of this Lease. If Landlord is in default
with respect to its obligations under this Lease, Tenant shall look for
satisfaction of Tenant's remedies, if any, solely to the equity of Landlord in
and to the Building and the Land described in Exhibit "A" hereto and to the
proceeds of Landlord's insurance policy or policies actually paid to Landlord
and not applied by Landlord by the applicable claim or to the restoration of the
Building as required by the term of this Lease (unless same are not so applied
because such proceeds are required by the holder of a mortgage to be paid to it
to reduce the debt secured by such mortgage). It is expressly understood and
agreed that Landlord's liability under the term of this Lease shall in no event
exceed the amount of its interest in and to said Land and Building and the
aforesaid proceeds of insurance. In no event shall any partner of Landlord nor
any joint venturer in Landlord, nor any officer, director or shareholder of
Landlord or any such partner or joint venturer of Landlord be personally liable
with respect to any of the provisions of this Lease.
38. Landlord's Covenant of Quiet Enjoyment. Provided Tenant performs
the terms, conditions and covenants of this Lease, and subject to the terms and
provisions hereof, Landlord covenants and agrees to take all necessary steps to
secure and to maintain for the benefit of Tenant the quiet and peaceful
possession of the Demised Premises, for the Lease Term, without hindrance, claim
or molestation by Landlord or any other person lawfully claiming under Landlord.
39. Security Deposits.
(a) As additional security for the faithful performance by
Tenant throughout the Lease Term, and any extensions or removals
thereof, of all the terms and conditions of the Lease on the part of
Tenant to be performed, Tenant has deposited with Landlord
<PAGE> 23
the sum set forth in Article 1(m) above. Subject to withdrawals for
Base Rental pursuant to subparagraph (c), below, such amount shall be
returned to Tenant on the day set for the expiration of the Lease Term,
or any extension or renewal thereof, provided Tenant has fully and
faithfully observed and performed all of the terms, covenants,
agreements, warranties and conditions hereof on its part to be observed
and performed. Landlord will deposit said security deposit in an
interest bearing account. Landlord will not be required to keep said
security deposit separate from its general funds. Tenant fully and
faithfully performs all of its obligations under this Lease throughout
the Lease Term, without default, then following the expiration of the
Landlord will pay to Tenant any interest that was earned on said
security deposit. Landlord shall have the right to apply all or any
part of said deposit toward the cure of any default of Tenant. If all
or any part of said security deposit is so applied by Landlord, then
Tenant shall immediately pay to Landlord an amount sufficient to return
said security deposit to the balance on deposit with Landlord prior to
said application.
(b) In the event of a sale or transfer of Landlord's interest
in the Demised Premises or the Building or a lease by Landlord of the
Building, Landlord shall have the right to transfer the within
described security deposit to the purchases or Lessee, as the case may
be, and Landlord shall be relieved of all liability to Tenant for the
return of such security deposits. The security deposits shall not be
mortgaged, assigned or encumbered by Tenant. In the event of a
permitted assignment or subletting under this Lease by Tenant, the
security deposits shall be hold by Landlord as a deposit made by the
permitted assignee or subtenant and Landlord shall have no further
liability with respect to the return of said security deposits to the
original Tenant.
(c) Commencing on the first day of the month following the
twenty-fifty (25th) full calendar month of this Lease and continuing on
the first day of each succeeding month during the remainder of the
Lease Term, Landlord shall apply part of the security deposit toward
the payment of Base Rental.
Notwithstanding the foregoing, Landlord shall in no way be prejudiced
by its application of the security deposit toward the payment of Base Rental,
and, in the event that the balance of the security deposit is insufficient to
cure a default of Tenant or to pay Base Rental as set forth above, then Landlord
may pursue any of the remedies under this Lease available to Landlord.
40. Hazardous Substances. Tenant hereby covenants and agrees that
Tenant shall not cause or permit any "Hazardous Substances" (as hereinafter
defined) to be generated, placed, held, stored, used, located or disposed of at
the Project or any part thereof, except for Hazardous Substances as are commonly
and legally used or stored as a consequence of using the Demised Premises for
general office, medical treatment, medical laboratory and administrative
purposes, but only so long as the quantities thereof do not pose a threat to
public health or to the environment or would necessitate a "response action", as
that term is defined in CERCLA (as hereinafter defined), and so long as Tenant
strictly complies or causes compliance with all applicable governmental rules
and regulations concerning the use, storage, production, transportation and
disposal of such Hazardous Substances. For purposes of this Article 41,
"Hazardous Substances" shall mean and include those elements or compounds which
are
<PAGE> 24
contained in the list of Hazardous Substances adopted by the United States
Environmental Protection Agency (EPA) or in any list of toxic pollutants
designated by Congress or the EPA or which are defined as hazardous, toxic,
pollutant, infectious or radioactive by any other federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability (including, without limitation, strict
liability) or standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, as now or at any time hereinafter in effect
(collectively "Environmental Laws"). Tenant hereby agrees to indemnify Landlord
and hold Landlord harmless from and against any and all losses, liabilities,
including strict liability, damages, injuries, expenses, including reasonable
attorneys' fees, costs of settlement or judgment and claims of any and every
kind whatsoever paid, incurred or suffered by, or asserted against, Landlord by
any person, entity or governmental agency for, with respect to, or as a direct
or indirect result of, the presence in, or the escape, leakage, spillage,
discharge, emission or release from, the Demised Premises of any Hazardous
Substances (including, without limitation, any losses, liabilities, including
strict liability, damages, injuries, expenses, including reasonable attorneys'
fees, costs of any settlement or judgment or claims asserted or arising under
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), any so-called federal, state or local "Superfund" or "Superlien"
laws or any other Environmental Law); provided, however, that the foregoing
indemnity is limited to matters arising solely from Tenant's violation of the
covenant contained in this Article. The obligations of Tenant under this Article
shall survive any expiration or termination of this Lease.
41. Submission of Lease. The submission of this Lease for examination
does not constitute an offer to lease and this Lease shall be effective only
upon execution hereof by Landlord and Tenant.
42. Severability. If any clause or provision of the Lease is illegal,
invalid or unenforceable under present or future laws, the remainder of this
Lease shall not be affected thereby, and in lieu of each clause or provision of
this Lease which is illegal, invalid or unenforceable, there shall be added as a
part of this Lease a clause or provision as nearly identical to the said clause
or provision as may be legal, valid and enforceable.
43. Entire Agreement. This Lease contains the entire agreement of the
parties and no representations, inducements, promises or agreements, oral or
otherwise, between the parties not embodied herein shall be of any force or
effect. No failure of Landlord to exercise any power given Landlord hereunder,
or to insist upon strict compliance by Tenant with any obligation of Tenant
hereunder, and no custom or practice of the parties at variance with the terms
hereof, shall constitute a waiver of Landlord's right to demand exact compliance
with the terms hereof. This Lease may not be altered, waived, amended or
extended except by an instrument in writing signed by Landlord and Tenant. This
Lease is not in recordable form, and Tenant agrees not to record or cause to be
recorded this Lease or any short form or memorandum thereof.
44. Headings. The use of headings herein is solely for the convenience
of indexing the various paragraphs hereof and shall in no event be considered in
construing or interpreting any provision of this Lease.
<PAGE> 25
45. Broker. Wells & Associates, Inc. is acting solely as agent for
Landlord in this transaction and is to be paid a commission by Landlord.
Miller-Richmond Company is acting solely as agent for Tenant in this transaction
and is to be paid a commission by Landlord.
46. Governing Law. The laws of the State of Georgia shall govern the
validity, construction, performance and enforcement of this Lease.
47. Special Stipulations. The special stipulations attached hereto as
Exhibit "E" are hereby incorporated herein by this reference as though fully set
forth.
48. Authority. Each of the persons executing this Lease on behalf of
Tenant does hereby personally represent and warrant that Tenant is a duly
organized and validly existing limited liability company and is fully authorized
and qualified to do business in the State of Georgia, that Tenant has full right
and authority to enter into this Lease, and that each person signing on behalf
of Tenant is an authorized representative of Tenant and is authorized to sign on
behalf of Tenant. Upon the request of Landlord, Tenant shall deliver to Landlord
documentation satisfactory to Landlord evidencing Tenant's compliance with this
Article, and Tenant agrees to promptly execute all necessary and reasonable
applications or documents as reasonably requested by Landlord, required by the
jurisdiction in which the Demised Premises is located, to permit the issuance of
necessary permits and certificates for Tenant's use and occupancy of the Demised
Premises.
<PAGE> 26
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
as of the day, month and year first above written.
"LANDLORD":
FUND II, FUND III, FUND VI AND FUND VII
ASSOCIATES, a Georgia general partnership
By: WELLS REAL ESTATE FUND II, L.P., a
Georgia limited partnership
By:
----------------------------------
Lee F. Wells, III, general partner
By: WELLS PARTNERS, L.P., a Georgia
limited partnership, general partner
By: WELLS CAPITAL, INC., a Georgia
corporation
By:
-----------------------------
Lee F. Wells, III, President
[CORPORATE SEAL]
By: WELLS REAL ESTATE FUND III, L.P.,
a Georgia limited partnership
By:
----------------------------------
Lee F. Wells, III, general partner
By: WELLS PARTNERS, L.P., a Georgia
limited partnership, general partner
By: WELLS CAPITAL, INC., a Georgia
corporation
By:
----------------------------------
Lee F. Wells, III, President
[CORPORATE SEAL]
<PAGE> 27
By: WELLS REAL ESTATE FUND VI, L.P.,
a Georgia limited partnership
By:
----------------------------------
Lee F. Wells, III, general partner
By: WELLS PARTNERS, L.P., a Georgia
limited partnership, general partner
By: WELLS CAPITAL, INC., a Georgia
corporation
By:
----------------------------------
Lee F. Wells, III, President
[CORPORATE SEAL]
By: WELLS REAL ESTATE FUND VII, L.P.,
a Georgia limited partnership
By:
----------------------------------
Lee F. Wells, III, general partner
By: WELLS PARTNERS, L.P., a Georgia
limited partnership, general partner
By: WELLS CAPITAL, INC., a Georgia
corporation
By:
----------------------------------
Lee F. Wells, III, President
[CORPORATE SEAL]
"TENANT":
COLUMBIA MANAGEMENT, L.L.C., a Georgia
limited liability company
By: (SEAL)
----------------------------------
Title:
---------------------------
<PAGE> 28
RULES AND REGULATIONS
1. No sign, picture, advertisement or notice visible from the exterior of
the Demised Premises shall be installed, affixed, inscribed, painted or
otherwise displayed by Tenant on any part of the Demised Premises or
the Building unless the same is first approved by Landlord. Any such
sign, picture, advertisement or notice approved by Landlord shall be
painted or installed for Tenant at Tenant's cost by Landlord or by a
party approved by Landlord. No awnings, curtains, blinds, shades or
screens shall be attached to or hung in, or used in connection with any
window or door of the Demised Premises without the prior consent of
Landlord, including approval by Landlord of the quality, type, design,
color and manner of attachment. See attached Sign Criteria Exhibit "F".
2. Tenant agrees that its use of electrical current shall never exceed the
capacity of existing feeders, risers or wiring installation.
3. The Demised Premises shall not be used for storage of merchandise held
for sale to the general public. Tenant shall not do or permit to be
done in or about the Demised Premises or Building anything which shall
increase the rate of insurance on said Building or obstruct or
interfere with the rights of other lessees of Landlord or annoy them in
any way, including, but not limited to, using any musical instrument
making loud or unseemly noises, or singing, etc. The Demised Premises
shall not be used for sleeping or lodging. No cooking or related
activities shall be done or permitted by Tenant in the Demised Premises
except with permission of Landlord. Tenant will be permitted to use for
its own employees within the Demised Premises approved equipment for
brewing coffee, tea, hot chocolate and similar beverages, provided that
such use is in accordance with all applicable federal, state, county
and city laws, codes, ordinances, rules and regulations. No vending
machines of any kind will be installed, permitted or used on any part
of the Demised Premises without the prior consent of Landlord. No part
of said Building or Demised Premises shall be used for gambling,
immoral or other unlawful purposes. No intoxicating beverage shall be
sold in said Building or Demised Premises without prior written consent
of Landlord. No area outside of the Demised Premises shall be used for
storage purposes at any time. Tenant may bring in food to cook in a
microwave oven and have a refrigerator.
4. No birds or animals of any kind shall be brought into the Building
(other than trained seeing-eye dogs required to be used by the visually
impaired). No bicycles, motorcycles or other motorized vehicles shall
be brought into the Building.
5. The sidewalks, entrances, passages, corridors, halls, elevators, and
stairways in the Building shall not be obstructed by Tenant or used for
any purposes other than those for which same were intended as ingress
and egress. No windows, floors or skylights that reflect or admit light
into the Building shall be covered or obstructed by Tenant. Toilets,
wash basins and sinks shall not be used for any purpose other than
those for which they are constructed, and no sweeping, rubbish, or
other obstructing or improper substances
<PAGE> 29
shall be thrown therein. Any damage resulting to them, or to heating
apparatus, from misuse by Tenant or its employees, shall be borne by
Tenant.
6. Five (5) keys for the front door and five (5) keys for the rear door
will be furnished Tenant without charge. Landlord may make a reasonable
charge for any additional keys. No additional lock, latch or bolt of
any kind shall be placed upon any door nor shall any changes be made in
existing locks without written consent of Landlord and Tenant shall in
each such case furnish Landlord with a key for any such lock. At the
termination of the Lease, Tenant shall return to Landlord all keys
furnished to Tenant by Landlord, or otherwise procured by Tenant, and
in the event of loss of any keys so furnished, Tenant shall pay to
Landlord the cost thereof.
7. Landlord shall have the right to prescribe the weight, position and
manner of installation of heavy articles such as safes, machines and
other equipment brought into the Building. No safes, furniture, boxes,
large parcels or other kind of freight shall be taken to or from the
Demised Premises or allowed in any elevator, hall or corridor except at
times allowed by Landlord. In no event shall any weight be placed upon
any floor by Tenant so as to exceed the design conditions of the floors
at the applicable locations.
8. Tenant shall not cause or permit any gases, liquids or odors to be
produced upon or permeate from the Demised Premises, and, except in the
case of normal and customary medical supplies, n o flammable,
combustible or explosive fluid, chemical or substance shall be brought
into the Building.
9. Unless agreed to in writing by Landlord, Tenant shall not employ any
person other than Landlord's contractors for the purpose of cleaning
and taking care of the Demised Premises. Cleaning service will not be
furnished on nights when rooms are occupied after 8:00 p.m., unless, by
agreement in writing, service is extended to a later hour for
specifically designated rooms. Landlord shall not be responsible for
any loss, theft, mysterious disappearance of or damage to, any
property, however occurring.
10. No connection shall be made to the electric wires or gas or electric
fixtures, without the consent in writing on each occasion of Landlord.
All glass, locks and trimmings in or upon the doors and windows of the
Demised Premises shall be kept whole and in good repair. Tenant shall
not injure, overload or deface the Building, the woodwork or the walls
of the Demised Premises, nor permit upon the Demised Premises any
noisome, noxious, noisy or offensive business.
11. If Tenant requires wiring for a bell or buzzer system, such wiring
shall be done by the electrician of Landlord only, and no outside
wiring men shall be allowed to do work of this kind unless by the
written permission of Landlord or its representatives. Any wiring for
telephone service must be approved by Landlord, and no boring or
cutting for wiring shall be done unless approved by Landlord or its
representatives, as stated.
<PAGE> 30
12. Tenant and its employees and invitees shall observe and obey all
parking and traffic regulations as imposed by Landlord. All vehicles
shall be parked only in areas designated for vehicle parking by
Landlord.
13. Canvassing, peddling, soliciting and distribution of handbills or any
other written materials in the Building are prohibited, and Tenant
shall cooperate to prevent the same.
14. Landlord shall have the right to change the name of the Building and to
change the street address of the Building, provided that in the case of
a change in the street address, Landlord shall give Tenant not less
than 180 days' prior notice of the change, unless the change is
required by governmental authority.
15. Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular lessee, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor
of any other lessee, nor prevent Landlord from thereafter enforcing any
such Rules and Regulations against any or all of the other lessees of
the Building.
16. These Rules and Regulations are supplemental to, and shall not be
construed to in any way modify or amend, in whole or in part, the
terms, covenants, agreements and conditions of any lease of any
premises in the Building.
17. Landlord reserves the right upon fifteen (15) days' prior written
notice to Tenant to make such other and reasonable Rules and
Regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Building and the Land, and for the
preservation of good order therein.
<PAGE> 1
EXHIBIT 10.21(b)
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (hereinafter called this
"Amendment"), is made and entered into as of the 20th day of December, 1996, by
and between FUND II, FUND III, FUND VI AND FUND VII ASSOCIATES, a Georgia
general partnership (hereinafter called "Landlord"), and COLUMBIA DBS
MANAGEMENT, LLC, a Georgia limited liability company (hereinafter called
"Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant have heretofore executed and entered into
that certain Lease Agreement dated August 2, 1996 (hereinafter called the
"Lease") pursuant to which Tenant leased approximately 2,979 square feet of
space (hereinafter called the "Original Premises") known as Suite C-200 in the
office building situated at 880 Holcomb Bridge Road, Roswell, Georgia 30075
(hereinafter called the "Building"); and
WHEREAS, the parties hereto desire to modify and amend the Lease in
certain particulars as hereinafter set forth.
NOW, THEREFORE, in consideration of the payment of Ten and No/ 100
Dollars ($10.00) by Tenant to Landlord, the mutual promises and obligations
contained herein and the other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
covenant and agree, and modify and amend the Lease, as follows:
1. Definitions. Capitalized terms used in this Amendment but not
otherwise defined herein shall have the meanings given in the Lease.
2. Amendments. The Lease is hereby modified and amended as follows:
2.1 Expansion of Demised Premises. (a) Effective as of the
earlier of the date upon which Landlord delivers the Expansion Space
(as hereinafter defined) to Tenant or February 1, 1997 (hereinafter
called the "Effective Date"), the Demised Premises, in addition to the
Original Premises, shall include the space which is more particularly
described on Exhibit "A" attached hereto an made a part hereof by this
reference and which is deemed to contain 3,414 rentable square feet of
floor area (hereinafter called the "Expansion Space"). On the Effective
Date the Demised Premises shall be deemed to contain 6,393 rentable
square feet.
(b) Landlord shall prepare the Expansion Space for Tenants
occupancy in accordance with a space plan to be prepared by Hardy &
Associates (hereinafter called "Tenant's Expansion Work"). Landlord
shall not be liable for any failure or delay in completing Tenant's
Expansion Work if such failure or delay is the result of (a) Tenant's
request for materials, finishes or installations other than
Landlord's
<PAGE> 2
standard; or (b) Tenants changes in the plans or specifications.
Failure of Landlord substantially to complete Tenants Expansion Work or
to deliver actual possession of the Expansion Space on or before
February 1, 1997 shall postpone the Effective Date, but shall not
extend the term of the Lease. Landlord shall pay an aggregate amount of
not more than $60,372.00 (hereinafter called the "Expansion Allowance")
toward the completion of Tenants Expansion Work. If the cost of Tenants
Expansion Work is greater than the Expansion Allowance, Tenant shall
pay Landlord the full excess amount before Tenant occupies the
Expansion Space. If the cost of Tenants Expansion Work is less than the
Expansion Allowance, both Landlord and Tenant agree that no additional
funds will be allocated toward Tenants Expansion Work from Landlord.
2.2 Extension of Term. The Lease Term is hereby extended for
an additional period of five (5) months; therefore, the Lease Term
shall expire on January 31, 2000, unless sooner terminated in
accordance with the Lease.
2.3 Base Rental. As of the Effective Date, the Base Rental
with respect to the Demised Premises shall be as follows:
From the Effective Date through September 30, 1997, the
monthly installments of Base Rent shall be $10,655.00.
From October 1, 1997 through September 30, 1998 the monthly
installments of Base Rent shall be $10,921.38.
From October 1, 1998 through February 29, 2000, the monthly
installments of Base Rent shall be $11,187.75.
2.4 Application of Security Deposit. Notwithstanding anything
to the contrary set forth in Article 40(c) of the Lease, commencing on
April 1, 1999 and continuing on the first day of each succeeding month
during the remainder of the Lease Term, Landlord shall apply part of
the security deposit toward the payment of Base Rental as to the
Original Premises. Notwithstanding such application, Tenant shall
continue to pay Base Rental as to the Expansion Space (in monthly
installments of $5,974.50) in accordance with Article 5 of the Lease.
2.5 Additional Rental. Effective as of the Effective
Date, Tenant's Share shall be fifty percent (50.0%).
2.6 Identity of Tenant. Notwithstanding the fact that the
Lease was executed by Columbia Management, L.L.C., the "Tenant" under
the Lease is, and shall be for all purposes, Columbia DBS Management,
LLC, a Georgia limited liability company.
3. Guaranty as to Expansion Space. Prior to or contemporaneously with
Tenants execution of this Amendment, Columbia DBS Holdings, LLC shall execute a
guaranty of Tenants obligations under the Lease as to the Expansion Space
substantially
<PAGE> 3
in the form attached hereto as Exhibit "B
4. Brokers. Landlord and Tenant each hereby represent and warrant to
each other that they have not dealt with any brokers or intermediaries who are
entitled to compensation in connection with this Amendment other than Wells &
Associates, Inc. and Miller-Richmond Company, which are to be paid a commission
by Landlord pursuant to separate agreements with such parties. Landlord and
Tenant hereby agree to hold each other harmless from and against any and all
claims, liabilities, costs and expenses, including reasonable attorneys' fees,
arising from any claim for any commissions or other fees by any other broker or
agent acting or purporting to have acted on behalf of such party.
5. Ratification. Landlord and Tenant acknowledge and confirm that the
Lease, as amended hereby, is in full force and effect. This Amendment shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. This Amendment shall be governed by and
construed under the laws of the State of Georgia.
6. Counterparts. This Amendment may be executed in counterparts, each
of which shall be deemed an original, and all of such counterparts together
shall constitute one and the same instrument.
[Remainder of page intentionally left blank]
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
as of the day and year first above written.
LANDLORD:
FUND II, FUND III, FUND VI AND FUND
VII ASSOCIATES, a Georgia general partnership
By: WELLS REAL ESTATE FUND II, L.P.,
Georgia limited partnership, general
partner
By:__________________________________
Leo F. Wells, III, general partner
By: Wells Partners, L.P., a Georgia limited
partnership, general partner
By: Wells Capital, Inc., a Georgia
corporation, general partner
By:__________________________________
Leo F. Wells, III, President
[CORPORATE SEAL]
By: WELLS REAL ESTATE FUND III, L.P., a
Georgia limited partnership, general
partner
By:__________________________________
Leo F. Wells, III, general partner
By: Wells Partners, L.P., a Georgia limited
partnership, general partner
By: Wells Capital, Inc., a Georgia
corporation, general partner
By:__________________________________
Leo F. Wells, III, President
[CORPORATE SEAL]
<PAGE> 5
By: WELLS REAL ESTATE FUND VI, L.P., a
Georgia limited partnership, general
partner
By:__________________________________
Leo F. Wells, III, general partner
By: Wells Partners, L.P., a Georgia limited
partnership, genral partner
By: Wells Capital, Inc., a Georgia
corporation, general partner
By:___________________________________
Leo F. Wells, III, President
[CORPORATE SEAL]
By: WELLS REAL ESTATE FUND VII, L.P., a
Georgia limited partnership, general
partner
By:__________________________________
Leo F. Wells, III, general partner
By: Wells Partners, L.P., a Georgia limited
partnership, genral partner
By: Wells Capital, Inc., a Georgia
corporation, general partner
By:___________________________________
Leo F. Wells, III, President
[CORPORATE SEAL]
<PAGE> 6
TENANT:
COLUMBIA DBS MANAGEMENT, LLC, a
Georgia limited liability company
By:__________________________[SEAL]
Title:_______________________
<PAGE> 1
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
This Employment Agreement is executed this 19th day of November, 1996,
effective as of April 1, 1996, by and between DOUGLAS S. HOLLADAY, JR. (the
"Executive"), and COLUMBIA DBS MANAGEMENT, LLC, a Georgia limited liability
company (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing management
services to a group of affiliated entities substantially all of the equity
interests of which are currently owned directly or indirectly by Columbia DBS
Holdings, LLC, a Delaware limited liability company ("Holdings") (Holdings, the
Company and all entities controlled by Holdings or the Company whether currently
existing or formed in the future are referred to collectively as the "Group").
WHEREAS, Holdings is the successor entity to DBS Holdings, L.P., a
Delaware limited partnership, that was converted into a Delaware limited
liability company by filing pursuant to Section 18-214 of the Delaware Limited
Liability Company Act and Section 17-219 of the Delaware Revised Uniform Limited
Partnership Act effective on November 19, 1996; and
WHEREAS, the Group is engaged in the business of providing services
delivered over direct broadcast satellite frequencies; and
WHEREAS, the Executive desires to provide services to the Company and
the Company desires to obtain the services of the Executive in connection with
the business of the Group;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereto, the parties hereby agree as follows:
1. Term. The term of this Agreement (the "Term") shall commence
effective April 1, 1996, and shall end on March 31, 1997, provided, however,
that commencing in 1997, the Term shall automatically be extended until March 31
of the following year, unless either (i) the Executive shall, no later than
January 31 in the year on which the Term is scheduled to end, have given notice
to the Company of his resignation, (ii) the board of managers of the Company
(the "Board") shall, no later than January 31, in the year on which the Term is
scheduled to end, have given notice to the Executive that the Executive's
performance has not been satisfactory to the Board, or (iii) the Board shall,
prior to January 31 in the year on which the Term is scheduled to end, have
determined to cease the operations of the Group.
2. Employment. During the Term, the Executive shall serve the Company
as its President and Chief Executive Officer or in such other comparable office
or offices of the Company or any other member of the Group as the Board may
designate from time to time, and shall, except as otherwise specified by the
Board, be responsible, under the general supervision of the Board, for the
overall management of the Company and the Group. The Executive shall serve in
such capacity on a full-time basis, and shall use his best efforts to promote
the business and interests of the Company and the Group, to diligently,
faithfully and to the best of his abilities perform all tasks and duties
reasonably assigned to him by the Board, to comply with
<PAGE> 2
the rules, regulations, policies and procedures of the Company, and to act and
comport himself at all times in the best interests of the Company and the Group.
The Company contemplates that the Executive's principal place of business will
be in Roswell, Georgia.
3. Salary. From April 1, 1996, through December 31, 1996, the Executive
shall be paid a salary at the rate of $13,611 per month. From January 1, 1997,
until March 31, 1998, the Executive shall be paid a salary at a rate of $15,000
per month. The Board shall review the salary of the Executive by January 31,
1998, for an increase effective April 1, 1998. By January 31 of each year
thereafter, the Board shall review the Executive for a salary increase, provided
that any such increases in salary shall be in the sole judgment and discretion
of the Board.
4. Bonuses. On or before January 31 in 1997 and in each year
thereafter, provided in each case that the Executive continues to be employed by
the Company or the Group on such date, the Company or the Group shall pay to the
Executive a bonus as determined by the Board in its discretion in light of the
Executive's performance during the fiscal year preceding the bonus.
5. Expenses. The Executive shall be reimbursed for any reasonable
out-of-pocket expenses which the Executive may incur in connection with his
services to the Company or the Group, consistent with the Company or the Group's
policies and procedures for reimbursement of expenses.
6. Benefits. During the Term, the Company shall make available to the
Executive life insurance, health and dental insurance, disability insurance,
vacation, participation in 401(k) plans, and other benefits to the extent and
upon the terms that are offered generally to employees of the Company or the
Group or to employees of Columbia Capital Corporation ("CCC"); provided,
however, that such benefits shall at a minimum include term life insurance with
a face amount of $1 million.
7. Termination.
a. The Company may terminate the employment of the Executive under this
Agreement in the event that the Board determines that the Executive (a) has
materially and substantially breached his obligations under this Agreement,
provided that the employment of the Executive shall not be terminated under this
clause unless the Executive is given notice in writing that the conduct in
question constitutes grounds for termination under this Section 7 and the
Executive is allowed at least thirty (30) days to remedy the refusal or failure,
(b) has been convicted of a felony constituting a crime of moral turpitude
(whether or not in conjunction with the performance by the Executive of his
duties under this Agreement), or (c) has through willful misconduct or gross
negligence engaged in an act or course of conduct that cause material injury to
the Company or any member of the Group (any of the foregoing constituting
"Cause"). If the employment of the Executive under this Agreement is terminated
under this Section 7(a), the Board shall give written notice to the Executive
specifying the cause of such action. Upon a termination of employment under this
Section 7(a), the Company and the Group shall be relieved of all further
obligations under this Agreement.
<PAGE> 3
b. For purposes of this Agreement, the resignation by the Executive
from the Company shall be deemed "Voluntary Termination", provided, however,
that in the event that the Board requires the Executive to relocate his
principal place of business outside of the Atlanta metropolitan area and the
Executive terminates his employment within 60 days thereafter, such termination
shall not constitute "Voluntary Termination".
8. Holdings Interest.
a. Effective on the date this Agreement is executed, the Company has
caused Holdings to issue to the Executive, and the Executive has purchased, a
member interest in Holdings (the "Purchased Interest"), as evidenced by the
limited liability company agreement of Holdings dated as of the date this
Agreement is executed (the "LLC Agreement"), in consideration for the commitment
by the Executive to contribute to Holdings, in parity with equity up to a total
amount of $200,000. Such Purchased Interest shall entitle with respect to such
contributions. The Purchased Interest shall be subject to all of the provisions
of the LLC Agreement (including the provisions permitting the issuance of
additional member interests) and this Agreement. Any interest in any successor
entity to Holdings for which the Purchased Interest may be exchanged or into
which it may be converted by merger or otherwise shall be subject to the terms
of the governing instruments of such successor entity and to the provisions of
this Agreement. Any references to the Purchased Interest in this Agreement shall
include the interests in any such successor entity into which the Purchased
Interest may be converted or for which it may be exchanged. Any references in
this Agreement to Holdings shall include such successor entity to Holdings.
b. Simultaneous with the execution of this Agreement, the Executive is
entering into a loan agreement with CCC pursuant to which CCC is agreeing to
advance to the Executive a total of $160,000, when and as necessary to fund the
equity contributions by the Executive described above in excess of the first
$40,000, with such advance secured by the Purchased Interest, and evidenced by a
promissory note bearing interest at the rate of 10% per annum without
compounding, payable in full at maturity, and maturing on the earliest to occur
of (i) April 1, 2001, or (ii) receipt by the Executive or other owner of the
Purchased Interest of proceeds form the sale of all of the Purchased Interest.
The note will be subject to a mandatory prepayment equal to (i) 100% of all cash
distributions, other that distribution to pay taxes, received by the Executive
from Holdings with respect to the Purchased Interest, plus (ii) 60% of the cash
proceeds received by the Executive from a sale of less than all of the Purchased
Interest. For this purpose, distributions to pay taxes shall mean distributions
by Holdings, expressly contemplated under its LLC Agreement or other governing
instruments, or otherwise earmarked or designated by Holdings, to enable its
owners to pay their state, federal and local income taxes on their distributive
shares of Holdings' items of income or gain.
c. The Purchased Interest shall be subject to the provisions of Section
10 of this Agreement. The Executive shall not transfer, convey, assign pledge or
encumber the Purchased Interest (other than the grant of a security interest to
CCC in accordance with Section 8(b) of this Agreement or a "Permitted Transfer,"
as defined below) prior to the termination of the Executive's employment by the
Company and the failure of the Company, as the case may be, within 90 days
thereafter, to give notice of exercise of its rights hereunder to purchase such
Purchased Interest. For purpose of this Section 8(c), a "Permitted Transfer"
means a transfer of all or portion of the Purchased Interest to any of (i) the
spouse or descendants of the
<PAGE> 4
Executive, (ii) any trust the beneficiaries of which are any one or more of the
Executive, his spouse and descendants (or such other persons as may be named
therein as beneficiaries in the event of the death of the foregoing), and (iii)
any corporation or other entity all of the equity owners of which are persons
described in clauses (i) and (ii) hereof; provided in each such case, however,
that (A) the transferee agrees in writing to be bound by the terms of the LLC
Agreement and the provisions of this Agreement applicable to such Purchased
Interest, (B) the transferee takes the Purchased Interest subject to the pledge
by the Executive to CCC pursuant to Section 8(b) of this Agreement, (C) such
transfer does not, in the reasonable judgment of the Company, have adverse tax
consequences upon the Company or the Group or the Group's partners or members or
violate any applicable securities laws and (D) the transfer otherwise complies
with the terms of the LLC Agreement.
9. Restricted Interests. The Company hereby grants to the Executive,
effective as of the date this Agreement is executed, member interests in
Holdings (the "Restricted Interests"). The terms of the Restricted Interests
shall be as set forth below:
a. The LLC Agreement shall provide that the Restricted Interests will
have, at issuance, a capital account of $0.00, that the Executive shall not be
entitled to any distributions upon the Restricted Interests until all debt and
equity contributions to Holdings have been repaid in full, that after such debt
and equity have been repaid the Executive shall be entitled to 3% of the
remaining distributions, subject to dilution with respect to capital
contributions in excess of $12.5 million. The Restricted Interests shall be
subject to all of the provisions of the LLC Agreement and this Agreement. Any
interest in any successor entity to Holdings into which the Restricted Interest
may be exchanged or converted by merger or otherwise shall be subject to the
terms of the governing instruments of such successor entity and to the
provisions of this Agreement. Any references to the Restricted Interests in this
Agreement shall include the interests in any such successor entity into which
the Restricted Interests may be converted.
b. That portion of the Restricted Interests indicated below shall vest
at the time the Group first serves the "Number of Households" indicated below,
if not vested or forfeited prior thereto:
Portion of Restricted
Interest Vested Number of Households
--------------- --------------------
1/3 250,000
2/3 500,000
all 750,000
The number of households shall be the most recent number reported by Claritas,
or such other service as the Group obtains in replacement therefore.
c. Any Restricted Interests that have not vested or been forfeited
prior to the earliest to occur of (i) the date upon which Holdings completes a
public offering of its equity securities, (ii) the date upon which CCC and its
officers, directors, stockholders and employees cease to own, directly or
indirectly, in the aggregate at least 50% of the equity interests of Holdings
held by them on the date of this Agreement, and (iii) March 31, 1998., shall
become fully vested and
<PAGE> 5
cease to be restricted on that date, provided that the Executive remains in the
employ of the Group through that date.
d. Upon termination of employment of the Executive by the Group for
Cause or by reason of Voluntary Termination, all unvested Restricted Interests
shall be forfeited. Upon termination of employment of the Executive by the Group
for any other reason, all unvested Restricted Interests shall thereupon become
fully vested and unrestricted.
e. The Restricted Interests shall be subject to the provisions of
Sections 10 of this Agreement. The Executive shall not transfer, convey, assign,
pledge or encumber any Restricted Interest prior to the vesting or forfeiture of
such Restricted Interest.
10. Repurchase by Holdings. Upon the termination of the Executive's
employment by the Company for Cause or by Voluntary Termination prior to April
1, 1998, Holdings may, by written notice given not later than 90 days after the
dated of such termination elect to repurchase, or in lieu thereof permit any
other person or persons designated by it to purchase, the Purchased Interest and
all Restricted Interests acquired by the Executive pursuant to this Agreement
that have vested prior to termination in accordance with Section 9 of this
Agreement, upon the following terms:
a. Holdings or its designee (the "Purchaser") shall pay to the
Executive fair market value for all Purchased Interest and vested Restricted
Interests then held by the Executive. Fair market value shall be determined by
agreement between the Purchaser and the Executive or, in the absence of such
agreement within 30 days after notice by Holdings of its election to repurchase,
by an appraisal conducted by three independent appraisers: one appointed by the
Purchaser, one by the Executive, and one by the first two. The Purchaser and the
Executive shall direct each appraiser to determine the fair market value of the
Purchase Interest and the vested Restricted Interests, taking into account all
relevant factors, within 60 days after their appointment, and the "fair market
value" for purposes of this Agreement shall be the average of the two appraisals
of the three that are closet to one another.
b. The Purchaser shall pay to the Executive fair market value for all
vested Restricted Interests then held by the Executive. Fair market value of the
vested Restricted Interests shall be determined by agreement or appraisal as
specified above.
c. Within 30 days after the price of the Purchased Interest and
Restricted Interests has been determined, the Purchaser shall pay such amount to
the Executive, and the Executive shall convey to the Purchaser good and clear
title, free of any lien, encumbrance, charge or claim (other than the interest
granted to CCC in accordance with Section 8(b) of this Agreement), to the
Purchased Interest and Restricted Interests. Such amount shall be paid in cash,
provided, however, that if such amount exceeds paid in cash, provided, however,
that if such amount exceeds $750,00 and the Purchaser is Holdings, then the
Purchaser shall have the right to pay $500,000 in cash or the amount necessary
to pay the Executive's taxes owed in that year with respect to the transaction,
whichever is higher, and the balance in the form of a promissory note with
interest at a floating prime rate, paid quarterly in arrears, and principal
payable in three equal annual installments.
<PAGE> 6
d. After April 1, 1998, neither the Purchased Interest nor the
Restricted Interest shall be subject to any right of repurchase hereunder.
11. Preemptive Rights. The LLC Agreement shall confer upon the
Executive preemptive rights, in parity with all other members of Holdings, with
respect to the issuance by Holdings of additional equity at such time as, and to
the extent that, the capitalization of Holdings will, after issuance of such
additional equity, exceed $10.0 million (hereinafter "Proportionate Preemptive
Rights"). In addition to the Proportionate Preemptive Rights, the Company agrees
that to the extent Columbia DBS Investors, L.P., a Delaware limited partnership
("Investors") makes capital contributions to Holdings in excess of $9,500,000
but less than $20,000,000 ("Investors Additional Capital Contribution"), the
Company shall cause Investors to permit the Executive to make (or reimburse
Investors for) a proportionate part of Investors Additional Capital Contribution
and thereby acquire an equivalent proportionate part of the additional interest
in Holdings that would otherwise have been acquired by Investors with respect to
Investors Additional Capital Contributions (hereinafter "Special Preemptive
Rights"). The proportionate part of Investors Additional Capital Contribution
and the proportionate part of the additional interest with respect to thereto
that the Executive may acquire hereunder shall equal 30% multiplied by a
fraction, the numerator of which is the capital contribution to be made by the
Executive under Section 8(a) hereof, and the denominator of which is $10
million. Neither CCC nor any member of the Group shall have any obligation to
lend any portion of the purchase price to the Executive with respect to the
exercise of the Proportionate Preemptive Rights or the Special Preemptive
Rights. Any interest purchased by the Executive pursuant to his Proportionate
Preemptive Rights or Special Preemptive Rights shall be treated as a Purchased
Interest for purposes of this Agreement (including the repurchase rights under
Section 10). The Executive shall exercise his Special Preemptive Rights within
ten (10) business days after the Company notifies the Executive that Investors
have made an Investors Additional Capital Contribution with respect to which the
Special Preemptive Rights have arisen and has specified the amount thereof. The
Executive shall exercise his Special Preemptive Rights by reimbursing Investors
for the proportionate part of Investors Additional Capital Contribution that the
Executive is permitted and elects to make within the time period set forth in
the preceding sentence. If the Executive fails to exercise his Special
Preemptive Rights within the time period and in the manner provided above, such
rights shall automatically expire with respect to all Investors Additional
Capital Contributions set forth in the Company's notice.
12. Representation and Warranty. The Executive represents and warrants
to the Company that the execution and delivery by the Executive of this
Agreement and his performance of his obligations hereunder will not violate,
contravene or conflict with any employment agreement, consulting agreement,
confidentiality agreement, non-competition agreement or other agreement or
contract to which he is a party or by which he may be bound.
13. Acknowledgements.
(a) The Group is in the business of marketing, selling and distributing
television services delivered over direct broadcast satellite frequencies. As
used in this Agreement, the term "Competing Business" shall mean a person or
entity engaged in any business which is the same or essentially the same as the
business of the Group and that conducts or transacts its business in any county,
city, or zip code in which the Group conducts or transacts its business.
<PAGE> 7
(b) The Group has expended, and expects to continue to expend,
substantial resources to develop business methods for marketing, distributing,
and selling services delivered over direct broadcast satellite frequencies.
Additionally, Executive has and shall receive experience and information
pertaining to the Group's business, sales and marketing methods and methods of
operation.
(c) Executive acknowledges the necessity of the restrictive covenants
set forth in this Agreement to protect the Group's legitimate interests in the
proprietary and confidential information of the Group and to protect the
customer relations and the goodwill with customers and suppliers that the Group
has established at substantial investment. Executive also acknowledges and
agrees that any violation of the restrictive covenants set forth in this
Agreement would bestow an unfair competitive advantage upon any competing
business to whom Executive might agree to render services or disclose
confidential information.
Executive acknowledges that the Group's business is highly specialized
and during his/her employment with the Group, Executive has had and/or will have
access to the various proprietary information of the Group, including, but not
limited to, technical and non-technical data; methods; techniques; processes;
finances; actual or potential customer and supplier information and lists;
marketing strategies; margins, prices, operations; existing and future services;
and other financial, sales, marketing, and operations information, whether
written or otherwise ("Proprietary Information") . Documents and information
regarding these factors are highly confidential and subject to efforts that are
reasonable under the circumstances to maintain their confidentiality.
Furthermore, this Proprietary Information is not generally known in the
industry. The Executive acknowledges that such Proprietary Information and trade
secrets are owned and shall continue to be owned solely by the Group.
(e) Executive's duties in the course of his employment with the Group
will include high level managerial functions relating to the various aspects of
the Group's business including the development and implementation of business
strategies and plans involving the areas of marketing, sales, pricing, customer
service and relations, business development and diversification.
(f) Executive's duties in the course of his employment with the Group
will include functions and duties which substantially affect the Group's
business in the cities, counties or zip codes set forth on Schedule 1 hereto and
Executive will have Proprietary Information relating to the Group's business
with regard to the cities, counties or zip codes set forth on Schedule 1 hereto.
14. Agreement Not to Compete.
Executive agrees that during his employment by the Company and for a
one (1) year period following the termination of Executive's employment with the
Company and any member of the Group, whether such termination is voluntary or
involuntary, with or without cause, Executive will not, without the prior
written consent of the Company:
(a) Accept employment or affiliate with any Competing Business
performing duties the same as or substantially similar to the duties he provided
for the Company or any member
<PAGE> 8
of the Group as set forth in Section 13(e) ("Duties") within the prohibited
geographical area as set forth on Schedule 1 hereto ("Geographical Areas"); or
(b) Accept any position or affiliation with a Competing Business, in
which Executive would, in the regular and ordinary course of business, of
necessity be called upon, required, or expected to reveal, base judgments on, or
otherwise use Proprietary Information or Trade Secrets (as hereinafter defined)
that Executive received, obtained, or acquired during, or as a consequence of,
his employment with the Group. It is the intent of the parties hereto that
Executive shall be prohibited from using the training, business goodwill, and
Proprietary Information, including Trade Secrets, gained by the Executive from
the Group, to directly injure the Group in its ability to carry on its business
and compete within the time limit set forth in this Section. Notwithstanding the
above, this Section 14(b) shall only apply to Competing Businesses which conduct
business in the cities, counties, or zip codes which the Executive's duties
substantially affected or as to which the Executive had access to confidential
information or Proprietary Information as set forth in Section 13(f).
15. Non-solicitation of Customers. The Executive Agrees that (except
for services rendered for the Group's benefit) during his employment with the
Group and for a period of two (2) years immediately following the termination of
such employment relationship, whether such termination is voluntary or
involuntary or with or without cause, the Executive shall not solicit, contact,
or call upon any customer or customer prospect of the Group, or any
representative of any customer or prospect of the Group, with a view toward sale
or providing of any service or product competitive with any service or product
sold, provided or under development by the Group during the Executive's
employment with the Group.
16. Non-disclosure of Proprietary and Confidential Information. The
Executive covenants, and agrees that, for so long as the Executive remains an
employee of the Group and for a two (2) year period following the Executive's
termination, whether such termination is voluntary or involuntary or with or
without cause, all Proprietary Information will be kept in strict confidence and
trust by the Executive. The Executive agrees that during such time he will not,
directly or indirectly, without the written consent of the Company, divulge,
use, appropriate, or disclose (except in performing his obligations with the
Group during his employment with the Group) any Proprietary Information of the
Group on his own behalf or on behalf of any person, firm, partnership,
association, corporation, business organization, entity, or enterprise.
17. Non-disclosure of Trade Secrets. The Executive agrees that until
Proprietary Information which constitutes a "Trade Secret" (as hereinafter
defined) becomes a part of the public domain by independent discovery or
development through no fault of the Executive, he will not, directly or
indirectly, use, appropriate, or disclose any trade secret (except in performing
his obligations to the Group during his employment with the Group) to benefit a
competitor, customer, individual, corporation, or other entity, without the
express, written permission of the Company. As used herein, the term "Trade
Secret" means information, including, but not limited to, technical or
non-technical data, formulas, patterns, compilations, programs, devices, methods
and techniques of doing business, drawings, designs, processes, financial data,
financial plans, product or service plans, and lists of actuator potential
customers or suppliers which: (i) derive economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain
<PAGE> 9
economic value from their disclosure or use; and (ii) are the subjects of
efforts that are reasonable under the circumstances to maintain their secrecy.
18. Ownership of Intellectual Property. Any inventions, patents,
licenses, copyrights, computer software, computer programs, or other
intellectual property developed by the Executive as part of his performance of
services on behalf of the Company shall be the property of the Company, as the
case may be.
19. Non-solicitation of Employees. The Executive agrees that (except
for the Group's benefit) during his employment with the Company or any member of
the Group and f or a period of two (2) years immediately following the
termination of such employment relationship, whether such termination is
voluntary or involuntary or with or without cause, the Executive shall not,
directly or indirectly, except with the written consent of the Company, solicit,
attempt to solicit, encourage, divert, or attempt to cause, any employee or
prospective employees of the Group to terminate and/or leave the employment of
the Group for the Executive's own behalf or on behalf of any person, firm,
partnership, association, corporation, business organization, entity, or
enterprise.
20. Company Property. The Executive agrees that under no circumstances
shall the Executive, upon or after termination of his/her employment whether
such termination is voluntary or involuntary, with or without cause, remove from
the Group Is offices or premises any of the Group's books, business records,
documents, customer lists, employee lists, pricing information, trade secrets,
or other confidential information or copies of such information without the
express, written permission of the Group. The Executive agrees that he will not
use, cause to be used, or appropriate Group property to benefit a competitor,
customer, individual (including himself), corporation, or other entity (except
in performing his obligations to the Group during his employment with the
Group), without the express, written permission of the Company.
21. Construction of Covenants. Each provision, Section, and subsection
of this Agreement is declared to be severable from every other provision,
Section, and subsection and constitutes a separate and distinct covenant.
22. Survival of Certain Terms. This Agreement governs the terms and
conditions of employment. This Agreement shall terminate at termination of
employment, except that Sections 9, 10 and 13-20 pertaining to post-employment
obligations shall remain in full force to the extent that such Sections so
provide.
23. Violations and Remedies. The Executive acknowledges that a breach
of any restrictive covenant will irreparably and continually damage the Group,
for which money damages may not be adequate. Consequently, the Executive agrees
that in the event that he breaches or threatens to breach any of the covenants,
the Company and the Group shall be entitled to: (1) preliminary and permanent
injunctions to prevent the continuation of such harm; and (2) such money damages
as may be appropriate and provable.
24. Withholding. All payments required to be made by the Company
hereunder to the Executive shall be subject to the withholding of such amounts
relating to taxes as the
<PAGE> 10
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation.
25. Injunctive Relief. The Company and the Executive agree that,
without limitation of the rights of the Company with respect to any other breach
of this Agreement, the harm to the Company arising from any breach by the
Executive of Sections 9, 10, and 13-20 of this Agreement could not adequately be
compensated for by monetary damages, and accordingly the Company or any other
member of the Group shall, in addition to any other remedies available to it at
law or in equity, be entitled to obtain preliminary and permanent injunctive
relief against such breach.
26. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Georgia, without
regard to the conflict of law provisions thereof.
27. Notices. All communications, notices and disclosures required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given upon receipt when delivered by hand, one (1) day
after dispatch when sent by certified first-class-mail, postage prepaid, return
receipt requested, or by overnight courier maintaining records of receipt; or on
the date of dispatch when sent by facsimile transmission during normal business
hours with telephone confirmation of receipt. Notices shall be addressed as
follows or to such other address as the parties hereto shall specify by written
notice:
If to the Company:
Columbia DBS Management, LLC
880 Holcomb Bridge Road
Building C-200
Suite C-200
Roswell, GA 30076
Attn: Board of Managers
Telephone: 770-645-4440
Facsimile: 770-645-9586
and:
Columbia Capital Corporation
Suite 300
201 W. Union Street
Alexandria, VA 22314-2642
Attn: Harry Hopper
Telephone: (703) 519-3581
Facsimile: (703) 519-3904
If to the Executive:
Douglas S. Holladay, Jr.
41 Palisades Road
<PAGE> 11
Atlanta, Georgia 30309
Telephone: (404) 249-7486
Facsimile: (404) 685-9422
28. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, relating
to the subject matter hereof, and there are no warranties, representations or
other agreements between the parties in connection with the subject matter
hereof, except as specifically set forth herein or, therein. No amendment,
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided thereby.
29. Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
legal representatives, successors and assigns. The obligations of the Executive
under this Agreement may not be assigned without the express written consent of
the Company or the LLC . Nothing contained herein is intended to create any
rights enforceable by any person not a party hereto or the permitted successor
or assign thereof. If any term, provision, section, clause or part of this
Agreement, or the application thereof under certain circumstances, is held
invalid or unenforceable for any reason, the remainder of this Agreement, or the
application of such term, provision, Section, clause or part under other
circumstances, shall not be affected thereby and shall remain in effect to the
greatest extent and scope that is valid and enforceable. This Agreement may be
executed in counterparts, all of which together shall constitute a single
instrument.
IN WITNESS WHEREOF, the undersigned have set their hands as of the day
and year first above written.
COLUMBIA DBS MANAGEMENT, LLC DOUGLAS S. HOLLADAY, JR.,
the Executive
By: By:
------------------------------ -----------------------------
a manager
<PAGE> 1
Exhibit 10.23
EMPLOYMENT AGREEMENT
This Employment Agreement is executed this 24th day of March, 1997, by
and between EARLE A. MACKENZIE (the "Executive"), and DTS MANAGEMENT, LLC, a
Georgia limited liability company (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing
management services to a group of affiliated entities substantially all of the
equity interests of which are currently owned directly or indirectly by Digital
Television Services, LLC, a Delaware limited liability company ("DTS") (DTS, the
Company and all entities controlled by DTS or the Company whether currently
existing or formed in the future are referred to collectively as the "Group");
WHEREAS, the Group is engaged in the business of providing
services delivered over direct broadcast satellite frequencies; and
WHEREAS, the Executive desires to provide services to the
Company and the Company desires to obtain the services of the Executive in
connection with the business of the Group;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants of the parties hereto, the parties hereby agree as follows:
1. Term. The initial term of this Agreement (the "Term") shall
commence effective as of the date hereof and shall end on March 23, 1998, unless
sooner terminated pursuant to the terms of this Agreement. This Agreement and
the Term shall be automatically renewed for successive 12 month renewal term(s),
provided that any renewal term may be terminated pursuant to the terms hereof.
2. Employment. During the Term, the Executive shall serve the
Company as its Chief Operating Officer or in such other comparable office or
offices of the Company or any other member of the Group as the Chief Executive
Officer of the Company (the "CEO") may designate from time to time, and shall,
except as otherwise specified by the CEO, be responsible, under the general
supervision of the CEO, for the overall management of the day-to-day operations
of the Company and the Group, including, but not limited to, the Company's sales
and marketing efforts, field operations and customer relations. The Executive
shall initially serve in such capacity on a part-time basis for a short period
(the duration of which shall be agreed upon with the Company's Chief Executive
Officer, but shall not exceed 6 weeks) and thereafter shall serve on a full-time
basis, and shall use his best effort to promote the business and interests of
the Company and the Group, to diligently, faithfully and to the best of his
abilities perform all tasks and duties reasonably assigned to him by the CEO, to
comply with the rules, regulations, policies and procedures of the Company, and
to act and comport himself at all times in the best
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<PAGE> 2
interests of the Company and the Group. The Company contemplates that the
Executive's principal place of business will be in Roswell, Georgia.
3. Salary. During the short period at the start of the Term
when the Executive will be serving on a part-time basis, the Executive shall be
paid a prorated salary based upon days worked and the salary rate set forth in
the next sentence. Upon the expiration of such initial period and beginning with
the time upon which the Executive begins to serve on a full-time basis, the
Executive shall be paid a salary at the rate of $6,731 bi-weekly. The CEO and
the Board of Managers of the Company (the "Board") shall review the Executive
for a salary increase on each anniversary of the effective date of this
Agreement, provided that any such increases in salary shall be in the discretion
of the CEO and the Board.
4. Bonuses. The Company and the Executive anticipate that if
the financial and operating objectives of the Company are met as of the end of
each calendar year during the Term and the Executive is employed by the Company
or the Group on such date, the Company or the Group will pay to the Executive a
bonus of $50,000 at the time and on the terms determined by the Company (such
amount shall be prorated for calendar year 1997 based upon time worked during
the initial period during which the Executive worked on a part-time basis and
the portion of the Term occurring during 1997). If the Company materially
exceeds its financial and operating objectives as of the end of any calendar
year during the Term and the Executive is employed by the Company or the Group
on such date, the Board, in its sole discretion, will evaluate whether the
target bonus identified in the previous sentence should be increased.
5. Expenses. The Executive shall be reimbursed for any
reasonable out-of-pocket expenses which the Executive may incur in connection
with his services to the Company or the Group, consistent with the Company or
the Group's policies and procedures for reimbursement of expenses.
6. Benefits. During the Term, the Company shall make available
to the Executive life insurance, health and dental insurance, disability
insurance, vacation, participation in 401(k) plans, and other benefits to the
extent and upon the terms that are offered generally to employees of the Company
or the Group.
7. Termination. Anything herein to the contrary
notwithstanding, the Company may (a) terminate the employment of the Executive
under this Agreement at any time without notice for Cause (as defined below)
(except that the employment of Executive shall not be terminated under clause
(i) in the definition of Cause unless the Executive is given written notice that
the conduct in question constitutes grounds for termination and the Executive is
allowed at least 30 days to remedy the breach) and (b) terminate the employment
of the Executive under this Agreement at any time without Cause provided that
the Company shall provide written notice to the Executive at least fifteen (15)
days prior to the date of any such intended termination without Cause. Upon
termination of employment under this Section 7, the Company and the Group shall
be relieved of all further obligations under this Agreement except to the extent
set forth in Section 8 below. For the purposes of this Agreement, "Cause" shall
be defined to mean any circumstance
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<PAGE> 3
where the Board determines that the Executive (i) has materially and
substantially breached his obligations under this Agreement, (ii) has been
convicted of a felony constituting a crime of moral turpitude (whether or not in
conjunction with the performance by the Executive of his duties under this
Agreement), or (iii) has through willful misconduct or gross negligence engaged
in an act or course of conduct that causes material injury to the Company or any
member of the Group.
8. Severance. If and only if the Company terminates the
employment of the Executive hereunder without Cause, the Executive shall
continue to receive his then current base salary for a total period of six (6)
months after the date of termination at the bi-weekly rate at which the
Executive is paid his base salary as of such date, which amount shall be paid
bi-weekly at the same time as the Company would have otherwise made payments to
the Executive hereunder.
9. Representation and Warranty. The Executive represents and
warrants to the Company that the execution and delivery by the Executive of this
Agreement and his performance of his obligations hereunder will not violate,
contravene or conflict with any employment agreement, consulting agreement,
confidentiality agreement, noncompetition agreement or other agreement or
contract to which he is a party or by which he may be bound.
10. Acknowledgements.
(a) The Group is in the business of marketing, selling and
distributing television services delivered over direct broadcast satellite
frequencies. As used in this Agreement, the term "Competing Business" shall mean
a person or entity engaged in any business which is the same or essentially the
same as the business of the Group and that conducts or transacts its business in
any county, city, or zip code in which the Group conducts or transacts its
business.
(b) The Group has expended, and expects to continue to expend,
substantial resources to develop business methods for marketing, distributing,
and selling services delivered over direct broadcast satellite frequencies.
Additionally, Executive has and shall receive experience and information
pertaining to the Group's business, sales and marketing methods and methods of
operation.
(c) Executive acknowledges the necessity of the restrictive
covenants set forth in this Agreement to protect the Group's legitimate
interests in the proprietary and confidential information of the Group and to
protect the customer relations and the goodwill with customers and suppliers
that the Group has established at substantial investment. Executive also
acknowledges and agrees that any violation of the restrictive covenants set
forth in this Agreement would bestow an unfair competitive advantage upon any
competing business to whom Executive might agree to render services or disclose
confidential information.
(d) Executive acknowledges that the Group's business is highly
specialized and during his employment with the Group, Executive has had and/or
will have access to the various proprietary information of the Group, including,
but not limited to, technical and nontechnical
3
<PAGE> 4
data; methods; techniques; processes; finances; actual or potential customer and
supplier information and lists; marketing strategies; margins, prices,
operations; existing and future services; and other financial, sales, marketing,
and operations information, whether written or otherwise ("Proprietary
Information"). Documents and information regarding these factors are highly
confidential and subject to efforts that are reasonable under the circumstances
to maintain their confidentiality. Furthermore, this Proprietary Information is
not generally known in the industry. The Executive acknowledges that such
Proprietary Information and trade secrets are owned and shall continue to be
owned solely by the Group.
(e) Executive's duties in the course of his employment with
the Group will include high level managerial functions relating to the various
aspects of the Group's business including the development and implementation of
business strategies and plans involving the areas of marketing, sales, pricing,
customer service and relations, business development and diversification.
(f) Executive's duties in the course of his employment with
the Group will include functions and duties which substantially affect the
Group's business in the cities, counties and zip codes which are included within
the National Rural Telecommunications Cooperative's systems within which the
Company or any member of the Group (as now or may in the future be constituted)
is or may be licensed to operate (the "Geographical Areas").
11. Agreement Not to Compete. Executive agrees that during his
employment by the Company and for a two (2) year period following the
termination of Executive's employment with the Company and any member of the
Group, whether such termination is voluntary or involuntary, with or without
Cause, Executive will not, without the prior written consent of the Company:
(a) Accept employment or affiliate with any Competing Business
performing duties the same as or substantially similar to the duties he provided
for the Company or any member of the Group as set forth in Sections 2 and 10(e)
("Duties") within any counties and/or zip codes in which, as of the date of this
Agreement, the Company and the Group (as it is constituted as of the date
hereof) actively conduct business; or
(b) Accept any position or affiliation with a Competing
Business, in which Executive would, in the regular and ordinary course of
business, of necessity be called upon, required, or expected to reveal, base
judgments on, or otherwise use Proprietary Information or Trade Secrets (as
hereinafter defined) that Executive received, obtained, or acquired during, or
as a consequence of, his employment with the Company. It is the intent of the
parties hereto that Executive shall be prohibited from using the training,
business goodwill, and Proprietary Information, including Trade Secrets, gained
by the Executive from the Company, to directly injure the Company in its ability
to carry on its business and compete within the time limit set forth in this
Section. Notwithstanding the above, this Section 11(b) shall only apply to
Competing Businesses which conduct business in the cities, counties, and zip
codes which Executive's duties substantially affected or as to which Executive
had access to confidential or Proprietary Information.
4
<PAGE> 5
12. Non-solicitation of Customers. The Executive agrees that
(except for services rendered for the Company's benefit) during his employment
with the Company and for a period of two (2) years immediately following the
termination of such employment relationship, whether such termination is
voluntary or involuntary or with or without Cause, the Executive shall not
himself or through others solicit, contact, or call upon any customer or
customer prospect of the Company or the Group, or any representative of any
customer or prospect of the Company or the Group, with a view toward sale or
providing of any service or product competitive with any service or product
sold, provided or under development by the Company or the Group during the
Executive's employment with the Company. Provided, however, the restrictions set
forth in this Section shall apply only to customers or prospects of the Company
or the Group, or representatives of the customers or prospects of the Company or
the Group, with which the Executive had contact during the Executive's
employment and engagement with the Company.
13. Non-disclosure of Proprietary and Confidential
Information. The Executive covenants and agrees that, for so long as the
Executive remains an employee of the Group and for a two (2) year period
following the Executive's termination, whether such termination is voluntary or
involuntary or with or without Cause, all Proprietary Information will be kept
in strict confidence and trust by the Executive. The Executive agrees that
during such time he will not, directly or indirectly, without the written
consent of the Company, divulge, use, appropriate, or disclose (except in
performing his obligations with the Group during his employment with the Group)
any Proprietary Information of the Group on his own behalf or on behalf of any
person, firm, partnership, association, corporation, business organization,
entity or enterprise.
14. Non-disclosure of Trade Secrets. The Executive agrees that
until Proprietary Information which constitutes a "Trade Secret" (as hereinafter
defined) becomes a part of the public domain by independent discovery or
development through no fault of the Executive, he will not, directly or
indirectly, use, appropriate, or disclose any trade secret (except in performing
his obligations to the Group during his employment with the Group) to benefit a
competitor, customer, individual, corporation, or other entity, without the
express, written permission of the Company. As used herein, the term "Trade
Secret" means information, including, but not limited to, technical or
non-technical data, formulas, patterns, compilations, programs, devices, methods
and techniques of doing business, drawings, designs, processes, financial data,
financial plans, product or service plans, and lists of actual or potential
customers or suppliers which: (i) derive economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by other persons who can obtain economic value from their disclosure or
use; and (ii) are the subjects of efforts that are reasonable under the
circumstances to maintain their secrecy.
15. Ownership of Intellectual Property. Any inventions,
patents, licenses, copyrights, computer software, computer programs, or other
intellectual property developed by the Executive as part of his performance of
services on behalf of the Company shall be the property of the Company, as the
case may be.
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<PAGE> 6
16. Non-solicitation of Employees. The Executive agrees that
(except for the Group's benefit) during his employment with the Company or any
member of the Group and for a period of two (2) years immediately following the
termination of such employment relationship, whether such termination is
voluntary or involuntary or with or without Cause, the Executive shall not,
directly or indirectly, except with the written consent of the Company, solicit,
attempt to solicit, encourage, divert, or attempt to cause any employee or
prospective employees of the Group to terminate and/or leave the employment of
the Group for the Executive's own behalf or on behalf of any person, firm,
partnership, association, corporation, business organization, entity, or
enterprise.
17. Company Property. The Executive agrees that under no
circumstances shall the Executive, upon or after termination of his employment
whether such termination is voluntary or involuntary, with or without Cause,
remove from the Group's offices or premises any of the Group's books, business
records, documents, customer lists, employee lists, pricing information, trade
secrets, or other confidential information or copies of such information without
the express, written permission of the Group. The Executive agrees that he will
not use, cause to be used, or appropriate Group property to benefit a
competitor, customer individual (including himself), corporation, or other
entity (except in performing his obligations to the Group during his employment
with the Group), without the express, written permission of the Company.
18. Construction of Covenants. Each provision, Section, and
subsection of this Agreement is declared to be severable from every other
provision, Section, and subsection and constitutes a separate and distinct
covenant.
19. Survival of Certain Terms. This Agreement governs the
terms and conditions of employment. This Agreement shall terminate at
termination of employment, except that Sections 8 and 10-17 pertaining to
post-employment obligations shall remain in full force to the extent that such
Sections so provide.
20. Violations and Remedies. The Executive acknowledges that a
breach of any restrictive covenant, will irreparably and continually damage the
Group, for which money damages may not be adequate. Consequently, the Executive
agrees that in the event that he breaches or threatens to breach any of the
covenants, the Company and the Group shall be entitled to: (1) preliminary and
permanent injunctions to prevent the continuation of such harm; and (2) such
money damages as may be appropriate and provable.
21. Withholding. All payments required to be made by the
Company hereunder to the Executive shall be subject to the withholding of such
amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation.
22. Injunctive Relief. The Company and the Executive agree
that, without limitation of the rights of the Company with respect to any other
breach of this Agreement, the harm to the company arising from any breach by the
Executive of Sections 10-17 of this
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<PAGE> 7
Agreement could not adequately be compensated for by monetary damages, and
accordingly the Company or any other member of the Group shall, in addition to
any other remedies available to it at law or in equity, be entitled to obtain
preliminary and permanent injunctive relief against such breach.
23. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Georgia,
without regard to the conflict of law provisions thereof.
24. Notices. All communications, notices and disclosures
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given upon receipt when delivered by hand, one
(1) day after dispatch when sent by certified first-class mail, postage prepaid,
return receipt requested, or by overnight courier maintaining records of
receipt; or on the date of dispatch when sent by facsimile transmission during
normal business hours with telephone confirmation of receipt. Notices shall be
addressed as follows or to such other address as the parties hereto shall
specify by written notice:
If to the Company:
DTS Management, LLC
880 Holcomb Bridge Road
Building C-200
Suite C-200
Roswell, GA 30076
Attn: Board of Managers
Telephone: 770-645-4440
Facsimile: 770-645-9586
If to the Executive:
Earle A. Mackenzie
3420 Aubusson Trace
Alpharetta, Georgia 30202
Telephone: (770) 998-5906
Facsimile: ______________
25. Entire Agreement; Amendments. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter hereof
and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, relating
to the subject matter hereof, and there are no warranties, representations or
other agreements between the parties in connection with the subject matter
hereof, except as specifically set forth herein or therein. No amendment,
supplement, modification, waiver or
7
<PAGE> 8
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall constitute a waiver of any other provision of this Agreement, whether or
not similar, nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided thereby.
26. Miscellaneous. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, legal representatives, successors and assigns. The obligations
of the Executive under this Agreement may not be assigned. Nothing contained
herein is intended to create any rights enforceable by any person not a party
hereto or the permitted successor or assign thereof. If any term, provision,
Section, clause or part of this Agreement, or the application thereof under
certain circumstances, is held invalid or unenforceable for any reason, the
remainder of this Agreement, or the application of such term, provision,
Section, clause or part under other circumstances, shall not be affected thereby
and shall remain in effect to the greatest extent and scope that is valid and
enforceable. This Agreement may be executed in counterparts, all of which
together shall constitute a single instrument.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the undersigned have set their hands as of
the day and year first above written.
DTS MANAGEMENT, LLC EARLE A. MACKENZIE,
the Executive
By: /s/ Douglas Holladay By: /s/ Earle A. MacKenzie
-------------------- -----------------------
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<PAGE> 1
EXHIBIT 10.24
EMPLOYMENT AGREEMENT
This Employment Agreement is executed this 19th day of November, 1996,
effective as of April 1, 1996, by and between WILLIAM J. DORRAN (the
"Executive"), and COLUMBIA DBS MANAGEMENT, LLC, a Georgia limited liability
company (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing management
services to a group of affiliated entities substantially all of the equity
interests of which are currently owned directly or indirectly by Columbia DBS
Holdings, LLC, a Delaware limited liability company ("Holdings") (Holdings, the
Company and all entities controlled by Holdings or the Company whether currently
existing or formed in the future are referred to collectively as the "Group").
WHEREAS, Holdings is the successor entity to DBS Holdings, L.P., a
Delaware limited partnership, that was converted into a Delaware limited
partnership, that was converted into a Delaware limited liability company by
filing pursuant to Section 18-214 of the Delaware Limited Liability Company Act
and Section 17-219 of the Delaware Revised Uniform Limited Partnership Act
effective on November __, 1996; and
WHEREAS, the Group is engaged in the business of providing services
delivered over direct broadcast satellite frequencies; and
WHEREAS, the Executive desires to provide services to the Company and
the Company desires to obtain the services of the Executive in connection with
the business of the Group;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereto, the parties hereby agree as follows:
1. Term. The term of this Agreement (the "Term") shall commence
effective April 1, 1996, and shall end on March 31, 1997, provided, however,
that commencing in 1997, the Term shall automatically be extended until March 31
of the following year, unless either (i) the Executive shall, no later than
January 31 in the year on which the Term is scheduled to end, have given notice
to the Company of his resignation, (ii) the board of managers of year on which
the Term is scheduled to end, have given notice to the Executive that the
Executive's performance has not been satisfactory to the Board, or (iii) the
Board shall, prior to January 31 in the year on which the Term is scheduled to
end, have determined to cease the operations of the Group.
2. Employment. During the Term, the Executive shall serve the Company
as a Senior Vice President or in such other comparable office or offices of the
Company or any other member of the Group as the Board may designate from time to
time, and shall, except as otherwise specified by the Board, be responsible,
under the general supervision of the Board and the President, for certain
marketing and operational oversight and business development responsibilities.
The Executive shall serve in such capacity on a full-time basis, and shall use
his best efforts to promote the business and interests of the Company and the
Group, to diligently, faithfully and to the best of his abilities perform all
tasks and duties reasonably
<PAGE> 2
assigned to him by the Board or the President, to comply with the rules,
regulations, policies and procedures of the Company, and to act and comport
himself at all times in the best interests of the Company and the Group.
3. Salary. During the Term the Executive shall be paid an annual salary
of not less than $120,000. The Board shall review the salary of the Executive
not less often than annually, provided that any increases in such salary shall
be in the sole judgment and discretion of the Board.
4. Bonuses. On or before January 31 in 1997 and in each year
thereafter, provided in each case that the Executive continues to be employed by
the Company or the Group on such date, the Company or the Group shall pay to the
Executive a bonus as determined by the Board in its discretion in light of the
Executive's performance during the fiscal year preceding the bonus. For 1996,
the bonus shall not be less than $15,000 and not more than $25,000.
5. Expenses. The Executive shall be reimbursed for any reasonable
out-of-pocket expenses which the Executive may incur in connection with his
services to the Company or the Group, consistent with the Company or the Group's
policies and procedures for reimbursement of expenses.
6. Benefits. During the Term, the Company shall make available to the
Executive life insurance, health and dental insurance, disability insurance,
vacation, participation in 401 (k) plans, and other benefits to the extent and
upon the terms that are offered generally to employees of the Company or the
Group or to employees of Columbia Capital Corporation ("CCC"); provided,
however, that such benefits shall at a minimum include term life insurance with
a face amount of $1 million. For purposes of vesting, time in service and
similar consideration under such plans, the Executive shall be deemed to have
commenced employment on April 1, 1996.
7. Termination.
a. The Company may terminate the employment of the Executive under this
Agreement in the event that the Board determine that the Executive (a) has
materially and substantially breached his obligations under this Agreement,
provided that the employment of the Executive shall not be terminated under this
conduct in question constitutes grounds for termination under this Section 7 (a)
and the Executive is allowed at least thirty (30) days to remedy the refusal or
failure, (b) has been convicted of a felony constituting a crime of moral
turpitude (whether or not in conjuction with the performance by the Executive of
his duties under this Agreement), or (c) has through willful misconduct or gross
negligence engaged in an act or course of conduct that causes material injury to
the Company or any member of the Group (any of the foregoing constituting
"Cause"). If the employment of the Executive under this Agreement is terminated
under this Section 7(a), the Board shall give written notice to the Executive
specifying the cause of such action. Upon a termination of employment under this
Section 7(a), the Company and the Group shall be relieved of all further
obligations under this Agreement.
b. For purposes of this Agreement, the resignation by the Executive
from the Company shall be deemed a "Voluntary Termination."
<PAGE> 3
c. In the event that the Company terminate the employment of the
Executive other than for Cause, but not in the event of a Voluntary Termination,
the Company shall pay to the Executive, in lieu of and in full satisfaction of
any salary, bonuses, or other compensation that would otherwise be payable
hereunder for periods after the date of such termination, a severance payment in
the amount of one year's base salary (at the rate in effect at the time of
termination), paid in 12 equal monthly installments commencing on the date one
month after the date of termination.
8. Holdings Interest.
a. Effective on the date this Agreement is executed, the Company has
caused Holdings to issue to the Executive, and the Executive has purchased, a
member interest in Holdings (the "Purchased Interest"), as evidenced by the
limited liability company agreement of Holdings dated as of the date this
Agreement is executed (the "LLC Agreement"), in consideration for the commitment
by the Executive to contribute to Holdings, in parity with equity contributions
by the other members of Holdings when and as required by Holdings in accordance
with the LLC Agreement, equity up to a total amount of $200,000. Such Purchased
Interest shall entitle the Executive to 2% of the distributions to which the
contributors of the first $10 million of capital to Holdings are entitled with
respect to such contributions. The Purchased Interest shall be subject to all of
the provisions of the LLC Agreement (including the provisions permitting the
issuance of additional member interests) and this Agreement. Any interest in any
successor entity to Holdings for which the Purchased Interest may be exchanged
or into which it may be converted by merger or otherwise shall be subject to the
terms of the governing instruments of such successor entity and to the
provisions of this Agreement. Any references to the Purchased Interest in this
Agreement shall include the interest in any such successor entity into which the
Purchased Interest may be converted or for which it may be exchanged. Any
references in this Agreement to Holdings shall include such successor entity to
Holdings.
b. Simultaneous with the execution of this Agreement, the Executive is
entering into a loan agreement CCC pursuant to which CCC is agreeing to advance
to the Executive a total of $190,000, when and as necessary to fund the equity
contributions by the Executive described above in excess of the first $10,000,
with such advanced secured by the Purchased Interest, and evidenced by a
promissory note bearing interest at the rate of 10% per annum without
compounding, payable in full at maturity, and maturing on the earliest to occur
of (i) April 1, 2001, or (ii) receipt by the Executive or other owner of the
Purchased Interest of proceeds from the sale of all of the Purchase Interest.
The note will be subject to a mandatory prepayment equal to (i) 100% of all cash
distributions, other than distribution to pay taxes, receive by the Executive
from Holdings with respect to the Purchased Interest, plus (ii) 60% of the cash
proceeds received by the Executive from a sale of less then all of the Purchased
Interest. For this purpose, distributions to pay taxes shall mean distributions
by Holdings expressly contemplated under its LLC Agreement or other governing
instruments, or otherwise earmarked or designated by Holdings, to enable its
owners to pay their state, federal and local income taxes on their distributive
shares of Holdings' items of income or gain.
c. The Purchased Interest shall be subject to the provisions of Section
10 of this Agreement. The Executive shall not transfer, convey, assign, pledge
or encumber the Purchased Interest (other than the grant of a security interest
to CCC in accordance with Section 8(b) of this Agreement or a "Permitted
Transfer," as defined below) prior to the termination of the
<PAGE> 4
Executive's employment by the Company and the failure of the Company, as the
case may be, within 90 days thereafter, to give notice of exercise of its rights
hereunder to purchase such Purchased Interest. For purposes of this Section
8(c), a "Permitted Transfer" means a transfer of all or a portion of the
Purchased Interest to any of (i) the spouse or descendants of the Executive,
(ii) any trust the beneficiaries of which are any one or more of the Executive,
his spouse and descendants (or other persons as may be named therein as
beneficiaries in the event of the death of the foregoing), and (iii) any
corporation or other entity all of the equity owners of which are persons
described in clauses (i) and (ii) hereof; provided in each case, however, that
(A) the transferee agrees in writing to be bound by the terms of the LLC
Agreement and the provisions of this Agreement applicable to such Purchased
Interest, (B) the transferee takes the Purchased Interest subject to the pledge
by the Executive to CCC pursuant to Section 8(b) of this Agreement, (C) such
transfer does not, in the reasonable judgment of the Company, have adverse tax
consequences upon the Company or the Group or the Group's partners or members or
violate any applicable securities laws and (D) the transfer otherwise complies
with the terms of the LLC Agreement.
9. Restricted Interests. The Company hereby grants to the Executive,
effective as of the date this Agreement is executed, member interests in the
Holdings (the "Restricted Interests"). The terms of the Restricted Interests
shall be as set forth below:
a. The LLC Agreement shall provide that the Restricted Interests will
have, at issuance, a capital account of $0.00, that the Executive shall not be
entitled to any distributions upon the Restricted Interests until all debt and
equity contributions to Holdings have been repaid in full, that after such debt
and equity have been repaid the Executive shall be entitled to 2.5% of the
remaining distributions, subject to dilution with respect to capital
contributions in excess of $10.0 million. The Restricted Interests shall be
subject to all of the provisions of the LLC Agreement and this Agreement. Any
interest in any successor entity to Holding into which the Restricted Interest
may be exchanged or converted by merger or otherwise shall be subject to the
terms of the governing instruments of such successor entity and to the
provisions of this Agreement. Any references to the Restricted Interests in this
Agreement shall include the interests in any such successor entity into which
the Restricted Interests may be converted.
b. Restricted Interests with the "Percentage Interests" indicated below
shall vest at all the times specified below:
Percent Date
------- ----
1% The date on which the Company first
serves 200,000 households.
1% September 1, 1996
0.5% September 1, 1997
The number of households shall be the most recent number reported by Claritas,
or such other service as the Group obtains in replacement therefore.
c. Any Restricted Interests that have not vested or been forfeited
prior to the earliest to occur of (i) the date upon which Holdings completes a
public offering of its equity securities, (ii) the date upon which CCC and its
officers, directors, stockholders and employees cease to own, directly or
indirectly, in the aggregate at least 50% of the equity interests of Holdings
held
<PAGE> 5
by them on the date of this Agreement, and (iii) March 31, 1998, shall become
fully vested and cease to be restricted on that date, provided that the
Executive remains in the employ of the Group through that date.
d. Upon termination of employment of the Executive by the Group for
Cause or by reason of Voluntary Termination, all unvested Restricted Interests
shall be forfeited. Upon termination of employment of the Executive by the
Group for any other reason, all unvested Restricted Interests shall thereupon
become fully vested and unrestricted.
e. The Restricted Interests shall be subject to the provisions of
Section 10 of this Agreement. The Executive shall not transfer, convey, assign,
pledge or encumber any Restricted Interest prior to the vesting or forfeiture
of such Restricted Interest.
10. Repurchase by Holdings. Upon the termination of the Executive's
employment by the Company for Cause or by Voluntary Termination prior to April
1, 1998, Holdings may, by written notice given not later than 90 days after the
date of such termination elect to repurchase, or in lieu thereof permit any
other person or persons designated by its to purchase, the Purchased Interest
and all Restricted Interests acquired by the Executive pursuant to this
Agreement that have vested prior to termination in accordance with Section 9 of
this Agreement, upon the following terms:
a. Holdings or its designee (the "Purchaser") shall pay to the
Executive fair market value for all Purchased Interest and vested Restricted
Interest then held by the Executive. Fair market value shall be determined by
agreement between the Purchaser and the Executive or, in the absence of such
agreement within 30 days after notice by Holdings of its election to repurchase,
by an appraisal conducted by three independent appraisers: one appointed by the
Purchaser, one by the Executive, and one by the first two. The Purchaser and the
Executive shall direct each appraiser to determine the fair market value of the
Purchased Interest and the vested Restricted Interests, taking into account all
relevant factors, within 60 days after their appointment, and the "fair market
value" for purpose of this Agreement shall be the average of the two appraisals
of the three that are closets to one another.
b. The Purchaser shall pay to the Executive fair market value for all
vested Restricted Interests then held by the Executive. Fair market value of the
vested Restricted Interests shall be determined by agreement or appraisal as
specified above.
c. Within 30 days after the price of the Purchased Interest and
Restricted Interests has been determined, the Purchaser shall pay such amount to
the Executive, and the Executive shall convey to the Purchaser good and clear
title, free of any lien, encumbrance, charge or claim (other than the interest
granted to CCC in accordance with Section 8(b) of this Agreement), to the
Purchased Interest and Restricted Interests. Such amount shall be paid in cash,
provided, however, that if such amount exceeds $750,000 and the Purchaser is
Holdings, then the Purchaser shall have the right to pay $500,000 in cash or the
amount necessary to pay the Executive's taxes owed in that year with respect to
the transaction, whichever is higher, and the balance in the. form of a
promissory note with interest at a floating prime rate,. paid quarterly in
arrears, and principal payable in three equal annual installments.
<PAGE> 6
d. After April 1, 1998, neither the Purchased Interest nor the
Restricted Interest shall be subject to any right of repurchase hereunder.
11. Preemptive Rights. The LLC Agreement shall confer upon the
Executive preemptive rights, in parity with all other members of Holdings, with
respect to the issuance by Holdings of additional equity at such time as, and to
the extent that, the capitalization of Holdings will, after issuance of such
additional equity, exceed $10.0 million (hereinafter "Proportionate Preemptive
Rights").
12. Representation and Warranty. The Executive represents and warrants
to the Company that the execution and delivery by the Executive of this
Agreement and his performance of his obligations hereunder will not violate,
contravene or conflict with any employment agreement, consulting agreement,
confidentiality agreement, non-competition agreement or other agreement or
contract to which he is a party or by which he may be bound.
13. Acknowledgements.
(a) The Group is in the business of marketing, selling and distributing
television services delivered over direct broadcast satellite frequencies. As
used in this Agreement, the term "Competing Business" shall mean a person or
entity engaged in any business which is the same or essentially the same as the
business of the Group and that conducts or transacts its business in any county,
city, or zip code in which the Group conducts or transacts its business.
(b) The Group has expended, and expects to continue to expend,
substantial resources to develop business methods for marketing, distributing,
and selling services delivered over direct broadcast satellite frequencies.
Additionally, Executive has and shall receive experience and information
pertaining to the Group's business, sales and marketing methods and methods of
operation.
(c) Executive acknowledges the necessity of the restrictive covenants
set forth in this Agreement to protect the Group's legitimate interests in the
proprietary and confidential information of the Group and to protect the
customer relations and the goodwill with customers and suppliers that the Group
has established at substantial investment. Executive also acknowledges and
agrees that any violation of the restrictive covenants set forth in this
Agreement would bestow an unfair competitive advantage upon any competing
business to whom Executive might agree to render services or disclose
confidential information.
Executive acknowledges that the Group's business is highly specialized
and during his/her employment with the Group, Executive has had and/or will have
access to the various proprietary information of the Group, including, but not
limited to, technical and non-technical data; methods; techniques; processes;
finances; actual or potential customer and supplier information and lists;
marketing strategies; margins, prices, operations; existing and future services;
and other financial, sales, marketing, and operations information, whether
written or otherwise ("Proprietary Information"). Documents and information
regarding these factors are highly confidential and subject to efforts that are
reasonable under the circumstances to maintain
<PAGE> 7
their confidentiality. Furthermore, this Proprietary Information is not
generally known in the industry. The Executive acknowledges that such
Proprietary Information and trade secrets are owned and shall continue to be
owned solely by the Group.
(e) Executive's duties in the course of his employment with the Group
will include high level managerial functions relating to the various aspects of
the Group's business including the development and implementation of business
strategies and plans involving the areas of marketing, sales, pricing, customer
service and relations, business development and diversification.
(f) Executive's duties in the course of his employment with the Group
will include functions and duties which substantially affect the Group's
business in the cities, counties or zip codes set forth on Schedule 1 hereto and
Executive will have Proprietary Information relating to the Group's business
with regard to the cities, counties or zip codes set forth on Schedule 1 hereto.
14. Agreement Not to Compete.
Executive agrees that during his employment by the Company and for a
one (1) year period following the termination of Executive's employment with the
Company and any member of the Group, whether such termination is voluntary or
involuntary, with or without cause, Executive will not, without the prior
written consent of the Company:
(a) Accept employment or affiliate with any Competing Business
performing duties the same as or substantially similar to the duties he provided
for the Company or any member of the Group as set forth in Section 13(e)
("Duties") within the prohibited geographical area as set forth on Schedule 1
hereto ("Geographical Areas"); or
(b) Accept any position or affiliation with a Competing Business, in
which Executive would, in the regular and ordinary course of business, of
necessity be called upon, required, or expected to reveal, base judgments on, or
otherwise use Proprietary Information or Trade Secrets (as hereinafter defined)
that Executive received, obtained, or acquired during, or as a consequence of,
his employment with the Group. It is the intent of the parties hereto that
Executive shall be prohibited from using the training, business goodwill, and
Proprietary Information, including Trade Secrets, gained by the Executive from
the Group, to directly injure the Group in its ability to carry on its business
and compete within the time limit set forth in this Section. Notwithstanding the
above, this Section 14(b) shall only apply to Competing Businesses which conduct
business in the cities, counties, or zip codes which the Executive's duties
substantially affected or as to which the Executive had access to confidential
information or Proprietary Information as set forth in Section 13(f).
15. Non-solicitation of Customers. The Executive Agrees that (except
for services rendered for the Group's benefit) during his employment with the
Group and for a period of two (2) years immediately following the termination of
such employment relationship, whether such termination is voluntary or
involuntary or with or without cause, the Executive shall not solicit, contact,
or call upon any customer or customer prospect of the Group, or any
representative of
<PAGE> 8
any customer or prospect of the Group, with a view toward sale or providing of
any service or product competitive with any service or product sold, provided or
under development by the Group during the Executive's employment with the Group.
16. Non-disclosure of Proprietary and Confidential Information. The
Executive covenants, and agrees that, for so long as the Executive remains an
employee of the Group and for a two (2) year period following the Executive's
termination, whether such termination is voluntary or involuntary or with or
without cause, all Proprietary Information will be kept in strict confidence and
trust by the Executive. The Executive agrees that during such time he will not,
directly or indirectly, without the written consent of the Company, divulge,
use, appropriate, or disclose (except in performing his obligations with the
Group during his employment with the Group) any Proprietary Information of the
Group on his own behalf or on behalf of any person, firm, partnership,
association, corporation, business organization, entity, or enterprise.
17. Non-disclosure of Trade Secrets. The Executive agrees that until
Proprietary Information which constitutes a "Trade Secret" (as hereinafter
defined) becomes a part of the public domain by independent discovery or
development through no fault of the Executive, he will not, directly or
indirectly, use, appropriate, or disclose any trade secret (except in performing
his obligations to the Group during his employment with the Group) to benefit a
competitor, customer, individual, corporation, or other entity, without the
express, written permission of the Company. As used herein, the term "Trade
Secret" means information, including, but not limited to, technical or
non-technical data, formulas, patterns, compilations, programs, devices, methods
and techniques of doing business, drawings, designs, processes, financial data,
financial plans, product or service plans, and lists of actuator potential
customers or suppliers which: (i) derive economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from their disclosure or
use; and (ii) are the subjects of efforts that are reasonable under the
circumstances to maintain their secrecy.
18. Ownership of Intellectual Property. Any inventions, patents,
licenses, copyrights, computer software, computer programs, or other
intellectual property developed by the Executive as part of his performance of
services on behalf of the Company shall be the property of the Company, as the
case may be.
19. Non-solicitation of Employees. The Executive agrees that (except
for the Group's benefit) during his employment with the Company or any member of
the Group and f or a period of two (2) years immediately following the
termination of such employment relationship, whether such termination is
voluntary or involuntary or with or without cause, the Executive shall not,
directly or indirectly, except with the written consent of the Company, solicit,
attempt to solicit, encourage, divert, or attempt to cause, any employee or
prospective employees of the Group to terminate and/or leave the employment of
the Group for the Executive's own behalf or on behalf of any person, firm,
partnership, association, corporation, business organization, entity, or
enterprise.
20. Company Property. The Executive agrees that under no circumstances
shall the Executive, upon or after termination of his/her employment whether
such termination is voluntary or involuntary, with or without cause, remove from
the Group Is offices or premises
<PAGE> 9
any of the Group's books, business records, documents, customer lists, employee
lists, pricing information, trade secrets, or other confidential information or
copies of such information without the express, written permission of the Group.
The Executive agrees that he will not use, cause to be used, or appropriate
Group property to benefit a competitor, customer, individual (including
himself), corporation, or other entity (except in performing his obligations to
the Group during his employment with the Group) , without the express, written
permission of the Company.
21. Construction of Covenants. Each provision, Section, and subsection
of this Agreement is declared to be severable from every other provision,
Section, and subsection and constitutes a separate and distinct covenant.
22. Survival of Certain Terms. This Agreement governs the terms and
conditions of employment. This Agreement shall terminate at termination of
employment, except that Sections 9, 10 and 13-20 pertaining to post-employment
obligations shall remain in full force to the extent that such Sections so
provide.
23. Violations and Remedies. The Executive acknowledges that a breach
of any restrictive covenant will irreparably and continually damage the Group,
for which money damages may not be adequate. Consequently, the Executive agrees
that in the event that he breaches or threatens to breach any of the covenants,
the Company and the Group shall be entitled to: (1) preliminary and permanent
injunctions to prevent the continuation of such harm; and (2) such money damages
as may be appropriate and provable.
24. Withholding. All payments required to be made by the Company
hereunder to the Executive shall be subject to the withholding of such amounts
relating to taxes as the Company may reasonably determine it should withhold
pursuant to any applicable law or regulation.
25. Injunctive Relief. The Company and the Executive agree that,
without limitation of the rights of the Company with respect to any other breach
of this Agreement, the harm to the Company arising from any breach by the
Executive of Sections 9, 10, and 13-20 of this Agreement could not adequately be
compensated for by monetary damages, and accordingly the Company or any other
member of the Group shall, in addition to any other remedies available to it at
law or in equity, be entitled to obtain preliminary and permanent injunctive
relief against such breach.
26. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Georgia, without
regard to the conflict of law provisions thereof.
27. Notices. All communications, notices and disclosures required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given upon receipt when delivered by hand, one (1) day
after dispatch when sent by certified first-class-mail, postage prepaid, return
receipt requested, or by overnight courier maintaining records of receipt; or on
the date of dispatch when sent by facsimile transmission during normal business
hours with telephone confirmation of receipt. Notices shall be addressed as
follows or to such other address as the parties hereto shall specify by written
notice:
<PAGE> 10
If to the Company:
Columbia DBS Management, LLC
880 Holcomb Bridge Road
Building C-200
Suite C-200
Roswell, GA 30076
Attn: President
Telephone: 770-645-4440
Facsimile: 770-645-9586
and:
Columbia Capital Corporation
Suite 300
201 W. Union Street
Alexandria, VA 22314-2642
Attn: Harry Hopper
Telephone: (703) 519-3581
Facsimile: (703) 519-3904
If to the Executive:
William J. Dorran
1371 Bay Street
San Francisco, CA 94123
Telephone: (415) 928-1163
Facsimile: (415) 928-1163
28. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, relating
to the subject matter hereof, and there are no warranties, representations or
other agreements between the parties in connection with the subject matter
hereof, except as specifically set forth herein or, therein. No amendment,
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided thereby.
29. Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
legal representatives, successors and assigns. The obligations of the Executive
under this Agreement may not be assigned without the express written consent of
the Company or the LLC . Nothing contained herein is intended to create any
rights enforceable by any person not a party hereto or the permitted successor
or assign thereof. If any term, provision, section, clause or part of this
Agreement, or the application thereof under certain circumstances, is held
invalid or unenforceable for any reason, the remainder of this Agreement, or the
application of such term, provision, Section,
<PAGE> 11
clause or part under other circumstances, shall not be affected thereby and
shall remain in effect to the greatest extent and scope that is valid and
enforceable. This Agreement may be executed in counterparts, all of which
together shall constitute a single instrument.
IN WITNESS WHEREOF, the undersigned have set their hands as of the day
and year first above written.
COLUMBIA DBS MANAGEMENT, LLC WILLIAM J. DORRAN,
the Executive
By: By:
------------------------- -------------------------
a manager
<PAGE> 1
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
This Employment Agreement is executed this 19th day of November, 1996,
effective as of April 15, 1996, by and between DONALD A. DOERING (the
"Executive"), and COLUMBIA DBS MANAGEMENT, LLC, a Georgia limited liability
company (the "Company")
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing management
services to a group of affiliated entities substantially all of the equity
interests of which are currently owned directly or indirectly by Columbia DBS
Holdings, LLC, a Delaware limited liability company ("Holdings") (Holdings, the
Company and all entities controlled by Holdings or the Company whether currently
existing or formed in the future are referred to collectively as the "Group").
WHEREAS, Holdings is the successor entity to DBS Holdings, L.P., a
Delaware limited partnership that was converted into a Delaware limited
liability company by filing pursuant to Section 18-214 of the Delaware Limited
Liability Company Act and Section 17-219 of the Delaware Revised Uniform Limited
Partnership Act effective on November 19th, 1996; and
WHEREAS, the Group is engaged in the business of providing services
delivered over direct broadcast satellite frequencies; and
WHEREAS, the Executive desires to provide services to the Company and
the Company desires to obtain the services of the Executive in connection with
the business of the Group;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereto, the parties hereby agree as follows:
1. Term. The term of this Agreement (the "Term") shall commence
effective April 1, 1996, and shall end on March 31, 1997, provided, however,
that commencing in 1997, the Term shall automatically be extended until March 31
of the following year, unless either (i) the Executive shall, no later than
January 31 in the year on which the Term is scheduled to end, have given notice
to the Company of his resignation, (ii) the board of managers of the Company
(the "Board") shall, no later than January 31, in the year on which the Term is
scheduled to end, have given notice to the Executive that the Executive's
performance has not been satisfactory to the Board, or (iii) the Board shall,
prior to January 31 in the year on which the Term is scheduled to end, have
determined to cease the operations of the Group.
2. Employment. During the Term, the Executive shall serve the Company
as its Chief Financial Officer or in such other comparable office or offices of
the Company or any other member of the Group as the Board may designate form
time to time, and shall, except as otherwise specified by the Board, be
responsible, under the general supervision of the Board, for the overall
management of the Company and the Group. The Executive shall serve in such
capacity on a full-time basis, and shall use his best efforts to promote the
business and interests of the Company and
<PAGE> 2
the Group, to diligently, faithfully and to the best of his abilities perform
all tasks and duties reasonably assigned to him by the Board, to comply with the
rules, regulations, polices and procedures of the Company, and to act and
comport himself at all times in the best interests of the Company and the Group.
The Company contemplates that the Executive's principal place of business will
be in Roswell, Georgia.
3. Salary. During the Term the Executive shall be paid an annual salary
of not less than $120,000. The Board shall review the salary of the Executive
not less often than annually, provided that any increases in such salary shall
be in the sole judgment and discretion of the Board.
4. Bonuses. On or before January 31 in 1997 and in each year
thereafter, provided in each case that the Executive continues to be employed by
the Company or the Group on such date, the Company or the Group shall pay to the
Executive a bonus as determined by the Board in its discretion in light of the
Executive's performance during the fiscal year preceding the bonus. The bonus
payable in January 1997 for the year ended December 31, 1996, shall be between
$15,000 and $25,000.
5. Expenses. The Executive shall be reimbursed for any reasonable
out-of-pocket expenses which the Executive may incur in connection with his
services to the Company or the Group, consistent with the Company or the Group's
policies and procedures for reimbursement of expenses.
6. Benefits. During the Term, the Company shall make available to the
Executive life insurance, health and dental insurance, disability insurance,
vacation, participation in 401(k) plans, and other benefits to the extent and
upon the terms that are offered generally to employees of the Company or the
Group or to employees of Columbia Capital Corporation ("CCC"); provided,
however, that such benefits shall at a minimum include term life insurance with
a face amount of $1 million. For purposes of vesting, time in service and
similar considerations under such plans, the Executive shall be deemed to have
commenced employment on April 15, 1996.
7. Termination.
a. The Company may terminate the employment of the Executive under this
Agreement in the event that the Board determines that the Executive (a) has
materially and substantially breached his obligations under this Agreement,
provided that the employment of the Executive shall not be terminated under this
clause (a) has materially and substantially breached his obligation under this
Agreement, provided that the employment of the Executive shall not be terminated
under this clause (a) unless the Executive is given notice in writing that the
conduct in question constitutes grounds for termination under this Section 7 and
the Executive is allowed at least thirty (30) days to remedy the refusal or
failure, (b) has been convicted of a felony constituting a crime of moral
turpitude (whether or not in conjunction with the performance by the Executive
of his duties under this Agreement), or (c) has through willful misconduct or
gross negligence engaged in an act or course of conduct that cause material
injury to the Company or any member of the Group (any of the foregoing
constituting "Cause"). If the employment of the Executive under this Agreement
is
<PAGE> 3
terminated under this Section 7(a), the Board shall give written notice to the
Executive specifying the cause of such action. Upon a termination of employment
under this Section 7(a), the Company and the Group shall be relieved of all
further obligations under this Agreement.
b. For purposes of this Agreement, the resignation by the Executive
from the Company shall be deemed "Voluntary Termination", provided, however,
that in the event that the Board requires the Executive to relocated his
principal place of business outside of the Atlanta metropolitan area and the
Executive terminates his employment within 60 days thereafter, such termination
shall not constitute "Voluntary Termination".
8. Holdings Interest.
a. Effective on the date this Agreement is executed, the Company has
caused Holdings to issue to the Executive, and the Executive has purchased, a
member interest in Holdings (the "Purchased Interest"), as evidenced by the
limited liability company agreement of Holdings dated as of the date this
Agreement is executed (the "LLC Agreement"), in consideration for the commitment
by the Executive to contribute to Holdings, in parity with equity up to a total
amount of $100,000. Such Purchased Interest shall entitle the Executive to 1% of
the distributions to which the contributors of the first $10 million of capital
to Holdings are entitled with respect to such contributions. The Purchased
Interest shall be subject to all of the provisions of the LLC Agreement
(including the provisions permitting the issuance of additional member
interests) and this Agreement. Any interest in any successor entity to Holdings
for which the Purchased Interest may be exchanged or into which it may be
converted by merger or otherwise shall be subject to the terms of the governing
instruments of such successor entity and to the provisions of this Agreement.
Any references to the Purchased Interest in this Agreement shall include the
interests in any such successor entity into which the Purchased Interest may be
converted or for which it may be exchanged. Any references in this Agreement to
Holdings shall include such successor entity to Holdings.
b. Simultaneous with the execution of this Agreement, the Executive is
entering into a loan agreement with CCC pursuant to which CCC is agreeing to
advance to the Executive a total of $80,000, when and as necessary to fund the
equity contributions by the Executive described above in excess of the first
$20,000, with such advance secured by the Purchased Interest, and evidenced by a
promissory note bearing interest at the rate of 10% per annum without
compounding, payable in full at maturity, and maturing on the earliest to occur
of (i) April 1, 2001, or (ii) receipt by the Executive or other owner of the
Purchased Interest of proceeds form the sale of all of the Purchased Interest.
The note will be subject to a mandatory prepayment equal to (i) 100% of all cash
distributions, other that distribution to pay taxes, received by the Executive
from Holdings with respect to the Purchased Interest, plus (ii) 60% of the cash
proceeds received by the Executive from a sale of less than all of the Purchased
Interest. For this purpose, distributions to pay taxes shall mean distributions
by Holdings, expressly contemplated under its LLC Agreement or other governing
instruments, or otherwise earmarked or designated by Holdings, to enable its
owners to pay their state, federal and local income taxes on their distributive
shares of Holdings' items of income or gain.
<PAGE> 4
c. The Purchased Interest shall be subject to the provisions of Section
10 of this Agreement. The Executive shall not transfer, convey, assign pledge or
encumber the Purchased Interest (other than the grant of a security interest to
CCC in accordance with Section 8(b) of this Agreement or a "Permitted Transfer,"
as defined below) prior to the termination of the Executive's employment by the
Company and the failure of the Company, as the case may be, within 90 days
thereafter, to give notice of exercise of its rights hereunder to purchase such
Purchased Interest. For purpose of this Section 8(c), a "Permitted Transfer"
means a transfer of all or portion of the Purchased Interest to any of (i) the
spouse or descendants of the Executive, (ii) any trust the beneficiaries of
which are any one or more of the Executive, his spouse and descendants (or such
other persons as may be named therein as beneficiaries in the event of death of
the foregoing), and (iii) any corporation or other entity all of the equity
owners of which are persons described in clauses (i) and (ii) hereof; provided
in each such case, however, that (A) the transferee agrees in writing to be
bound by the terms of the LLC Agreement and the provisions of this Agreement
applicable to such Purchased Interest, (B) the transferee takes the Purchased
Interest subject to the pledge by the Executive to CCC pursuant to Section 8(b)
of this Agreement, (C) such transfer does not, in the reasonable judgment of the
Company, have adverse tax consequences upon the Company or the Group or the
Group's partners or members or violate any applicable securities laws and (D)
the transfer otherwise complies with the terms of the LLC Agreement.
9. Restricted Interests. The Company hereby grants to the Executive,
effective as of the date this Agreement is executed, member interests in
Holdings (the "Restricted Interests"). The terms of the Restricted Interests
shall be as set forth below:
a. The LLC Agreement shall provide that the Restricted Interests will
have, at issuance, a capital account of $0.00, that the Executive shall not be
entitled to any distributions upon the Restricted Interests until all debt and
equity contributions to Holdings have been repaid in full, that after such debt
and equity have been repaid in full, that after such debt and equity have been
repaid the Executive shall be entitled to 1.5% of the remaining distributions,
subject to dilution with respect to capital contributions in excess of $12.5
million. The Restricted Interests shall be subject to all of the provisions of
the LLC Agreement and this Agreement. Any interest in any successor entity to
Holdings into which the Restricted Interest may be exchanged or converted by
merger or otherwise shall be subject to the terms of the governing instruments
of such successor entity and to the provisions of this Agreement. Any references
to the Restricted Interests in this Agreement shall include the interests in any
such successor entity into which the Restricted Interests may be converted.
b. Restricted Interests with the "Percentage Interests" indicated below
shall vest on the dates indicated below, if not vested or forfeited prior
thereto:
<PAGE> 5
Percentage Interest Date
------------------- ----
0.5% March 31, 1997
0.5% March 31, 1998
0.5% March 31, 1999
c. Any Restricted Interests that have not vested or been forfeited
prior to the earliest to occur of (i) the date upon which Holdings completes a
public offering of its equity securities, (ii) the date upon which CCC and its
officers, directors, stockholders and employees cease to own, directly or
indirectly, in the aggregate at least 50% of the equity interests of Holdings
held by them on the date of this Agreement, and (iii) March 31, 1999, shall
become fully vested and cease to be restricted on that date, provided that the
Executive remains in the employ of the Group through that date.
d. Upon termination of employment of the Executive by the Group for
Cause or by reason of Voluntary Termination, all unvested Restricted Interests
shall be forfeited. Upon termination of employment of the Executive by the Group
for any other reason, all unvested Restricted Interests shall thereupon become
fully vested and unrestricted.
e. The Restricted Interests shall be subject to the provisions of
Section 10 of this Agreement. The Executive shall not transfer, convey, assign,
pledge or encumber any restricted Interest prior to the vesting or forfeiture of
such Restricted Interest.
10. Repurchase by Holdings. Upon the termination of the Executive's
employment by the company for Cause or by Voluntary Termination prior to April
1, 1999, Holdings may, by written notice given not later than 90 days after the
date of such termination elect to repurchase, or in lieu thereof permit any
other person or persons designated by it to purchase, the Purchased Interest and
all Restricted Interests acquired by the Executive pursuant to this Agreement
that have vested prior to termination in accordance with Section 9 of this
Agreement, upon the following terms:
a. Holdings or its designee (the "Purchaser") shall pay to the
Executive fair market value for all Purchased Interest and market value shall be
determined by agreement between the Purchaser and the Executive or, in the
absence of such agreement within 30 days after notice by Holdings of its
election to repurchase, by an appraisal conducted by three independent
appraisers: one appointed by the Purchaser, one by the Executive, and one by the
first two. The Purchaser and the Executive shall direct each appraiser to
determine the fair market value of the Purchased Interest and the vested
Restricted Interests, taking into account all relevant factors, within 60 days
after their appointment, and the "fair market value" for purposes of this
Agreement shall be the average of the two appraisals of the three that are
closest to one another.
<PAGE> 6
b. The Purchaser shall pay to the Executive fair market value for all
vested Restricted Interests then held by the Executive. Fair market value of the
vested Restricted Interests shall be determined by agreement or appraisal as
specified above.
c. Within 30 days after the price of the Purchased Interest and
Restricted Interests has been determined, the Purchase shall pay such amount to
the Executive, and the Executive shall convey to the Purchaser good and clear
title, free of any lien, encumbrance, charge or claim (other than the interest
granted to CCC in accordance with Section 8(b) of this Agreement), to the
Purchased Interest and Restricted Interests. Such amount shall be paid in cash,
provided, however, that if such amount exceeds $750,000 and the Purchaser is
Holdings, then the Purchaser shall have the right to pay $500,000 in cash or the
amount necessary to pay the Executive's taxes owed in that year with respect to
the transaction, whichever is higher, and the balance in the form of a
promissory note with interest at a floating prime rate, paid quarterly in
arrears, and principal payable in three equal annual installments.
d. After April 1, 1999, neither the Purchased Interest nor the
Restricted Interest shall be subject to any right of repurchase hereunder.
11. Preemptive Rights. The LLC Agreement shall confer upon the
Executive preemptive rights, in parity with all other members of Holdings, with
respect to the issuance by Holdings of additional equity at such time as, and to
the extent that, the capitalization of Holdings will, after issuance of such
additional equity, exceed $10.0 million (hereinafter "Proportionate Preemptive
Rights"). In addition to the Proportionate Preemptive Rights, the Company agrees
that to the extent Columbia DBS Investors, L.P., a Delaware limited partnership
("Investors") makes capital contributions to Holdings in excess of $9,500,000
but less than $10,000,000 ("Investors Additional Capital Contribution"), the
Company shall cause Investors to permit the Executive to make (or reimburse
Investors for) a proportionate part of Investors Additional Capital Contribution
and thereby acquire an equivalent proportionate part of the additional interest
in Holdings that would otherwise have been acquired by Investors with respect to
Investors Additional Capital Contribution (hereinafter "Special Preemptive
Rights"). The proportionate part of Investors Additional Capital Contribution
and the proportionate part of the additional interest with respect thereto that
the Executive may acquire hereunder shall equal 30% multiplied by a fraction,
the numerator of which is the capital contribution to be made by the Executive
under Section 8(a) hereof, and the denominator of which is $10 million. Neither
CCC nor any member of the Group shall have any obligation to lend any portion of
the purchase price to the Executive with respect to the exercise of the
Proportionate Preemptive Rights or the Special Preemptive rights. Any interest
purchased by the Executive pursuant to his Proportionate Preemptive rights or
Special Preemptive Rights shall be treated as a Purchased Interest for purposes
of this Agreement (including the repurchase rights under Section 10). The
Executive shall exercise his Special Preemptive Rights within ten (10) business
days after the Company notifies the Executive that Investors have made an
Investors Additional Capital Contribution with respect to which the Special
Preemptive Rights have arisen and has specified the amount thereof. The
Executive shall exercise his Special Preemptive Rights by reimbursing Investors
for the proportionate part of Investors Additional Capital Contribution that the
Executive is permitted and elects to make within the time period set forth in
the preceding
<PAGE> 7
sentence. If the Executive fails to exercise his Special Preemptive Rights
within the time period and in the manner provided above, such rights shall
automatically expire with respect to all Investors Additional Capital
Contributions set forth in the Company's notice.
12. Representation and Warranty. The Executive represents and warrants
to the Company that the execution and delivery by the Executive of this
Agreement and his performance of his obligations hereunder will not violate,
contravene or conflict with any employment agreement, consulting agreement,
confidentiality agreement, non-competition agreement or other agreement or
contract to which he is a party or by which he may be bound.
13. Acknowledgments.
(a) The Group is in the business of marketing, selling and distributing
television services delivered over direct broadcast satellite frequencies. As
used in this Agreement, the term "Competing Business" shall mean a person or
entity engaged in any business which is the same or essentially the same as the
business of the Group and that conducts or transacts its business in any county,
city, or zip code in which the Group conducts or transacts its business.
(b) The Group has expended, and expects to continue to expend,
substantial resources to develop business methods for marketing, distributing,
and selling services delivered over direct broadcast satellite frequencies.
Additionally, Executive has and shall receive experience and information
pertaining to the Group's business, sales and marketing methods and methods of
operation.
(c) Executive acknowledges the necessity of the restrictive covenants
set forth in this Agreement to protect the Group's legitimate interests in the
proprietary and confidential information of the Group and to protect the
customer relations and the goodwill with customers and suppliers that the Group
has established at substantial investment. Executive also acknowledges and
agrees that any violation of the restrictive covenants set forth in this
Agreement would bestow an unfair competitive advantage upon any competing
business to whom Executive might agree to render services or disclose
confidential information.
Executive acknowledges that the Group's business is highly specialized
and during his/her employment with the Group, Executive has had and/or will have
access to the various proprietary information of the Group, including, but not
limited to, technical and non-technical data; methods; techniques; processes;
finances; actual or potential customer and supplier information and lists;
marketing strategies; margins, prices, operations; existing and future services;
and other financial, sales, marketing, and operations information, whether
written or otherwise ("Proprietary Information") . Documents and information
regarding these factors are highly confidential and subject to efforts that are
reasonable under the circumstances to maintain their confidentiality.
Furthermore, this Proprietary Information is not generally known in the
industry. The Executive acknowledges that such Proprietary Information and trade
secrets are owned and shall continue to be owned solely by the Group.
<PAGE> 8
(e) Executive's duties in the course of his employment with the Group
will include high level managerial functions relating to the various aspects of
the Group's business including the development and implementation of business
strategies and plans involving the areas of marketing, sales, pricing, customer
service and relations, business development and diversification.
(f) Executive's duties in the course of his employment with the Group
will include functions and duties which substantially affect the Group's
business in the cities, counties or zip codes set forth on Schedule 1 hereto and
Executive will have Proprietary Information relating to the Group's business
with regard to the cities, counties or zip codes set forth on Schedule 1 hereto.
14. Agreement Not to Compete.
Executive agrees that during his employment by the Company and for a
two (2) year period following the termination of Executive's employment with the
Company and any member of the Group, whether such termination is voluntary or
involuntary, with or without cause, Executive will not, without the prior
written consent of the Company:
(a) Accept employment or affiliate with any Competing Business
performing duties the same as or substantially similar to the duties he provided
for the Company or any member of the Group as set forth in Section 13(e)
("Duties") within the prohibited geographical area as set forth on Schedule 1
hereto ("Geographical Areas"); or
(b) Accept any position or affiliation with a Competing Business, in
which Executive would, in the regular and ordinary course of business, of
necessity be called upon, required, or expected to reveal, base judgments on, or
otherwise use Proprietary Information or Trade Secrets (as hereinafter defined)
that Executive received, obtained, or acquired during, or as a consequence of,
his employment with the Group. It is the intent of the parties hereto that
Executive shall be prohibited from using the training, business goodwill, and
Proprietary Information, including Trade Secrets, gained by the Executive from
the Group, to directly injure the Group in its ability to carry on its business
and compete within the time limit set forth in this Section. Notwithstanding the
above, this Section 14(b) shall only apply to Competing Businesses which conduct
business in the cities, counties, or zip codes which the Executive's duties
substantially affected or as to which the Executive had access to confidential
information or Proprietary Information as set forth in Section 13(f).
15. Non-solicitation of Customers. The Executive Agrees that (except
for services rendered for the Group's benefit) during his employment with the
Group and for a period of two (2) years immediately following the termination of
such employment relationship, whether such termination is voluntary or
involuntary or with or without cause, the Executive shall not solicit, contact,
or call upon any customer or customer prospect of the Group, or any
representative of any customer or prospect of the Group, with a view toward sale
or providing of any service or product competitive with any service or product
sold, provided or under development by the Group during the Executive's
employment with the Group.
<PAGE> 9
16. Non-disclosure of Proprietary and Confidential Information. The
Executive covenants, and agrees that, for so long as the Executive remains an
employee of the Group and for a two (2) year period following the Executive's
termination, whether such termination is voluntary or involuntary or with or
without cause, all Proprietary Information will be kept in strict confidence and
trust by the Executive. The Executive agrees that during such time he will not,
directly or indirectly, without the written consent of the Company, divulge,
use, appropriate, or disclose (except in performing his obligations with the
Group during his employment with the Group) any Proprietary Information of the
Group on his own behalf or on behalf of any person, firm, partnership,
association, corporation, business organization, entity, or enterprise.
17. Non-disclosure of Trade Secrets. The Executive agrees that until
Proprietary Information which constitutes a "Trade Secret" (as hereinafter
defined) becomes a part of the public domain by independent discovery or
development through no fault of the Executive, he will not, directly or
indirectly, use, appropriate, or disclose any trade secret (except in performing
his obligations to the Group during his employment with the Group) to benefit a
competitor, customer, individual, corporation, or other entity, without the
express, written permission of the Company. As used herein, the term "Trade
Secret" means information, including, but not limited to, technical or
non-technical data, formulas, patterns, compilations, programs, devices, methods
and techniques of doing business, drawings, designs, processes, financial data,
financial plans, product or service plans, and lists of actuator potential
customers or suppliers which: (i) derive economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from their disclosure or
use; and (ii) are the subjects of efforts that are reasonable under the
circumstances to maintain their secrecy.
18. Ownership of Intellectual Property. Any inventions, patents,
licenses, copyrights, computer software, computer programs, or other
intellectual property developed by the Executive as part of his performance of
services on behalf of the Company shall be the property of the Company, as the
case may be.
19. Non-solicitation of Employees. The Executive agrees that (except
for the Group's benefit) during his employment with the Company or any member of
the Group and f or a period of two (2) years immediately following the
termination of such employment relationship, whether such termination is
voluntary or involuntary or with or without cause, the Executive shall not,
directly or indirectly, except with the written consent of the Company, solicit,
attempt to solicit, encourage, divert, or attempt to cause, any employee or
prospective employees of the Group to terminate and/or leave the employment of
the Group for the Executive's own behalf or on behalf of any person, firm,
partnership, association, corporation, business organization, entity, or
enterprise.
20. Company Property. The Executive agrees that under no circumstances
shall the Executive', upon or after termination of his/her employment whether
such termination is voluntary or involuntary, with or without cause, remove from
the Group Is offices or premises any of the Group's books, business records,
documents, customer lists, employee lists, pricing information, trade secrets,
or other confidential information or copies of such information without the
express,
<PAGE> 10
written permission of the Group. The Executive agrees that he will not use,
cause to be used, or appropriate Group property to benefit a competitor,
customer, individual (including himself), corporation, or other entity (except
in performing his obligations to the Group during his employment with the
Group), without the express, written permission of the Company.
21. Construction of Covenants. Each provision, Section, and subsection
of this Agreement is declared to be severable from every other provision,
Section, and subsection and constitutes a separate and distinct covenant.
22. Survival of Certain Terms. This Agreement governs the terms and
conditions of employment. This Agreement shall terminate at termination of
employment, except that Sections 9, 10 and 13-20 pertaining to post-employment
obligations shall remain in full force to the extent that such Sections so
provide.
23. Violations and Remedies. The Executive acknowledges that a breach
of any restrictive covenant will irreparably and continually damage the Group,
for which money damages may not be adequate. Consequently, the Executive agrees
that in the event that he breaches or threatens to breach any of the covenants,
the Company and the Group shall be entitled to: (1) preliminary and permanent
injunctions to prevent the continuation of such harm; and (2) such money damages
as may be appropriate and provable.
24. Withholding. All payments required to be made by the Company
hereunder to the Executive shall be subject to the withholding of such amounts
relating to taxes as the Company may reasonably determine it should withhold
pursuant to any applicable law or regulation.
25. Injunctive Relief. The Company and the Executive agree that,
without limitation of the rights of the Company with respect to any other breach
of this Agreement, the harm to the Company arising from any breach by the
Executive of Sections 9, 10, and 13-20 of this Agreement could not adequately be
compensated for by monetary damages, and accordingly the Company or any other
member of the Group shall, in addition to any other remedies available to it at
law or in equity, be entitled to obtain preliminary and permanent injunctive
relief against such breach.
26. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Georgia, without
regard to the conflict of law provisions thereof.
27. Notices. All communications, notices and disclosures required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given upon receipt when delivered by hand, one (1) day
after dispatch when sent by certified first-class-mail, postage prepaid, return
receipt requested, or by overnight courier maintaining records of receipt; or on
the date of dispatch when sent by facsimile transmission during normal business
hours with telephone confirmation of receipt. Notices shall be addressed as
follows or to such other address as the parties hereto shall specify by written
notice:
<PAGE> 11
If to the Company:
Columbia DBS Management, LLC
880 Holcomb Bridge Road
Building C-200
Suite C-200
Roswell, GA 30076
Attn: President
Telephone: 770-645-4440
Facsimile: 770-645-9586
and:
Columbia Capital Corporation
Suite 300
201 W. Union Street
Alexandria, VA 22314-2642
Attn: Harry Hopper
Telephone: (703) 519-3581
Facsimile: (703) 519-3904
If to the Executive:
Donald Doering
560 Pennroyal Lane
Alpharetta, GA 30201
Telephone: (770) 772-0417
Facsimile: ( ) -
28. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, relating
to the subject matter hereof, and there are no warranties, representations or
other agreements between the parties in connection with the subject matter
hereof, except as specifically set forth herein or, therein. No amendment,
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided thereby.
29. Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
legal representatives, successors and assigns. The obligations of the Executive
under this Agreement may not be assigned without the express written consent of
the Company or the LLC . Nothing contained herein is intended to create
<PAGE> 12
any rights enforceable by any person not a party hereto or the permitted
successor or assign thereof. If any term, provision, section, clause or part of
this Agreement, or the application thereof under certain circumstances, is held
invalid or unenforceable for any reason, the remainder of this Agreement, or the
application of such term, provision, Section, clause or part under other
circumstances, shall not be affected thereby and shall remain in effect to the
greatest extent and scope that is valid and enforceable. This Agreement may be
executed in counterparts, all of which together shall constitute a single
instrument.
IN WITNESS WHEREOF, the undersigned have set their hands as of the day
and year first above written.
COLUMBIA DBS MANAGEMENT, LLC DONALD A. DOERING,
the Executive
By: By:
---------------------------- ------------------------
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANTS
<TABLE>
<CAPTION>
Subsidiaries of Digital Television Services, LLC
INTEREST
OF DIGITAL
JURISDICTION OF TELEVISION
ENTITY FORM OF ORGANIZATION ORGANIZATION SERVICES, LLC
- ------ -------------------- ------------ ---------------
<S> <C> <C> <C>
DTS Capital, Inc. corporation Delaware 100%
DTS Management, LLC limited liability Georgia 100% member
company interest
</TABLE>
<TABLE>
<CAPTION>
Subsidiaries of DTS Management, LLC
INTEREST
JURISDICTION OF OF DTS
ENTITY FORM OF ORGANIZATION ORGANIZATION MANAGEMENT, LLC
- ------ -------------------- ------------ ---------------
<S> <C> <C> <C>
Digital Television Services of limited liability Delaware 100% member
California, LLC company interest
Digital Television Services of limited liability Georgia 100% member
Colorado, LLC company interest
Digital Television Services of limited liability Georgia 100% member
Georgia, LLC company interest
Digital Television Services of limited liability Georgia 100% member
Kansas, LLC company interest
Digital Television Services of limited liability Georgia 100% member
Kentucky, LLC company interest
Digital Television Services of limited liability Georgia 100% member
New Mexico, LLC company interest
Digital Television Services of limited liability Georgia 100% member
New York I, LLC company interest
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
JURISDICTION OF INTEREST
ENTITY FORM OF ORGANIZATION ORGANIZATION OF DTS
- ------ -------------------- ------------ ------
<S> <C> <C> <C>
Digital Television Services of limited liability Georgia 100% member
South Carolina I, LLC company interest
Digital Television Services of limited liability Georgia 100% member
Vermont, LLC company interest
Spacenet, Inc. corporation New Mexico 100%
</TABLE>
- ---------------
Subsidiaries of Other Registrants
The Registrants, other than Digital Television Services, LLC and DTS
Management, LLC, have no subsidiaries.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
Registration Statement of our report on the consolidated balance sheet of
Digital Television Services, LLC and Subsidiaries as of December 31, 1996 and
the related consolidated statements of operations, members equity, and cash
flows for the period from inception (January 30, 1996) through December 31,
1996 dated February 28, 1997 (except with respect to the matters discussed in
Note 10 as to which the date is July 30, 1997), our report on the balance sheets
of Direct Programming Services Limited Partnership as of December 31, 1995 and
1996 and the related statements of operations, changes in partners' capital,
and cash flows for the years ended December 31, 1994, 1995 and 1996 dated
February 21, 1997, our report on the balance sheets of Kansas DBS, L.L.C. as of
December 31, 1995 and 1996 and the related statements of operations, changes in
accumulated deficit, and cash flows for the years ended December 31, 1995 and
1996 dated February 21, 1997, our report on the statements of assets and
liabilities and accumulated deficit of the DBS Operations of NRTC System No.
0422 as of December 31, 1995 and 1996 and the related statements expenses over
revenues and changes in accumulated deficit and cash flows for the years then
ended dated February 21, 1997, our report on the statement of assets and
liabilities and accumulated earnings of the DBS Operations of NRTC System No.
0073 as of December 31, 1996 and the related statements revenues over expenses
and changes in accumulated earnings and cash flows for the year then ended
dated February 21, 1997, our report on the balance sheet of Northeast DBS
Enterprises, L.P. as of December 31, 1996, and the related statements of
operations, changes in partners' capital and cash flows for the year then ended
dated February 21, 1997, our report on the statements of assets and liabilities
and accumulated deficit of the DBS Operations of NRTC System No. 0001 as of
December 31, 1995 and November 26, 1996 and the related statements of expenses
over revenues and changes in accumulated deficit and cash flows for the year
ended December 31, 1995 and for the period from January 1, 1996 through
November 26, 1996 dated March 4, 1997, and our report on the statements of
assets and liabilities and accumulated deficit of the DBS Operations of NRTC
System No. 1025 as of December 31, 1995 and August 28, 1996 and the related
statements of expenses over revenues and changes in accumulated deficit and
cash flows for the period from March 10, 1995 (inception) through December 31,
1995 and the period from January 1, 1996 through August 28, 1996 dated March 4,
1997, and to all references to our Firm included in or made as part of this
Registration Statement.
/s/ Arthur Andersen L.L.P.
Atlanta, Georgia
September 24, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Offering Memorandum
of our report dated February 23, 1996 accompanying the financial statements of
Northeast DBS Enterprises, L.P. included in the Registration Statement. It
should be noted that we have not audited any financial statements of the
company subsequent to December 31, 1995 or performed any audit procedures
subsequent to the date of our report.
/s/ Fishbein & Company, P.C.
Fishbein & Company, P.C.
Elkins Park, Pennsylvania
September 24, 1997
<PAGE> 1
EXHIBIT 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
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)
----------
DIGITAL TELEVISON SERVICES, LLC
DTS CAPITAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 54-1787646
Delaware 58-2332106
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
and affiliate guarantors
DTS MANAGEMENT, LLC Georgia 58-2255906
DIGITAL TELEVISION
SERVICES OF CALIFORNIA, LLC Delaware 54-1792385
DIGITAL TELEVISION
SERVICES OF COLORADO, LLC Georgia 58-2255909
DIGITAL TELEVISION
SERVICES OF GEORGIA, LLC Georgia 58-2278248
DIGITAL TELEVISION
SERVICES OF KANSAS, LLC Georgia 58-2269693
DIGITAL TELEVISION
SERVICES OF KENTUCKY, LLC Georgia 58-2263782
DIGITAL TELEVISION
SERVICES OF NEW MEXICO, LLC Georgia 58-2255917
DIGITAL TELEVISION
SERVICES OF NEW YORK I, LLC Georgia 58-2255915
DIGITAL TELEVISION
SERVICES OF SOUTH
CAROLINA I, LLC Georgia 58-2261740
DIGITAL TELEVISION
SERVICES OF VERMONT, LLC Georgia 58-2272519
SPACENET, INC. New Mexico 85-0418709
880 Holcomb Bridge Road
Building C-200
Roswell, Georgia 30076
(Address of principal executive offices) (Zip code)
----------
12 1/2% Senior Subordinated Notes due 2007
(Title of the indenture securities)
================================================================================
<PAGE> 2
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 2 Rector Street, New York,
State of New York N.Y. 10006, and
Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza,
New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-2-
<PAGE> 3
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 23rd day of September, 1997.
THE BANK OF NEW YORK
By: /s/ VIVIAN GEORGES
-------------------------------
Name: VIVIAN GEORGES
Title: ASSISTANT VICE PRESIDENT
-3-
<PAGE> 4
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And
Foreign and Domestic Subsidiaries, a member
of the Federal Reserve System, at the close
of business March 31, 1997, published in
accordance with a call made by the Federal
Reserve Bank of this District pursuant to
the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell .... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................... 32,895,077
LESS: Allowance for loan and
lease losses ..................... 633,877
LESS: Allocated transfer risk
reserve .......................... 429
Loans and leases, net of unearned
income, allowance, and reserve ... 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
------------
Total assets ......................... $ 54,746,131
============
LIABILITIES
Deposits:
In domestic offices ................ $ 25,614,961
Noninterest-bearing ................ 10,564,652
Interest-bearing ................... 15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing ................ 560,944
Interest-bearing ................... 14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase 2,093,286
Demand notes issued to the U.S. ......
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
------------
Total liabilities .................... 50,560,708
============
EQUITY CAPITAL
Common stock ......................... 942,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... (19,449)
Cumulative foreign currency transla-
tion adjustments ................... (13,034)
------------
Total equity capital ................. 4,185,423
------------
Total liabilities and equity
capital ............................ $ 54,746,131
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Alan R. Griffith
J. Carter Bacot Directors
Thomas A. Renyi
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001035722
<NAME>DIGITAL TELEVISION SERVICES, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045973
<NAME>DTS CAPITAL, INC.
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045975
<NAME>DTS MANAGEMENT, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045976
<NAME>DIGITAL TELEVISION SERVICES OF CALIFORNIA, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045977
<NAME>DIGITAL TELEVISION SERVICES OF COLORADO, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045978
<NAME>DIGITAL TELEVISION SERVICES OF GEORGIA, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045987
<NAME>DIGITAL TELEVISION SERVICES OF KANSAS, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045980
<NAME>DIGITAL TELEVISION SERVICES OF KENTUCKY, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045981
<NAME>DIGITAL TELEVISION SERVICES OF NEW MEXICO, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045982
<NAME>DIGITAL TELEVISION SERVICES OF NEW YORK I, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045983
<NAME>DIGITAL TELEVISION SERVICES OF SOUTH CAROLINA, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045984
<NAME>DIGITAL TELEVISION SERVICES OF VERMONT, LLC
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF DIGITAL TELEVISION SERVICES, LLC
AND SUBSIDIARIES AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (SEE
REGISTRATION STATEMENT PAGES F-10 AND F-11). THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001045985
<NAME>SPACENET, INC.
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-30-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,874,957 1,595,955
<SECURITIES> 0 0
<RECEIVABLES> 4,140,927 1,055,540
<ALLOWANCES> 255,546 6,750
<INVENTORY> 1,155,217 244,544
<CURRENT-ASSETS> 7,979,727 3,123,442
<PP&E> 1,719,307 478,445
<DEPRECIATION> 234,758 44,339
<TOTAL-ASSETS> 150,348,634 42,162,173
<CURRENT-LIABILITIES> 21,819,375 9,629,952
<BONDS> 91,989,794 17,542,883
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,455,850 14,905,723
<TOTAL-LIABILITY-AND-EQUITY> 150,348,634 42,162,173
<SALES> 18,494,423 3,408,809
<TOTAL-REVENUES> 18,494,423 3,408,809
<CGS> 11,567,234 2,269,811
<TOTAL-COSTS> 11,567,234 2,269,811
<OTHER-EXPENSES> 12,764,968 3,815,845
<LOSS-PROVISION> 243,727 63,789
<INTEREST-EXPENSE> 4,307,874 817,603
<INCOME-PRETAX> (10,328,878) (3,535,259)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,328,878) (3,535,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,328,878) (3,535,259)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
for Tender of all Outstanding
Series A 12 1/2% Senior Subordinated Notes Due 2007
in Exchange for
Series B 12 1/2% Senior Subordinated Notes Due 2007
of
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ______________, 1997 (THE "EXPIRATION DATE"),
UNLESS EXTENDED BY DIGITAL TELEVISION SERVICES, LLC AND DTS CAPITAL, INC.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Facsimile Transmissions: By Hand or Overnight Delivery:
(Eligible Institutions Only)
The Bank of New York (212) 571-3080 The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, New York 10286 Confirm by Telephone Corporate Trust Services Window
Attn: Reorganization Section (212) 815- Ground Level
New York, New York 10286
For Information Call: Attn: Reorganization Section
(212) 815-
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated
____________, 1997 (the "Prospectus") of Digital Television Services, LLC (the
"Company") and DTS Capital , Inc. ("Capital" and, together with the Company, the
"Issuers") which, together with this Letter of Transmittal (the "Letter of
Transmittal"), constitutes the Issuers' offer (the "Exchange Offer") to exchange
$1,000 in principal amount of Series B 12 1/2% Senior Subordinated Notes Due
2007 (the "Exchange Notes") of the Issuers for each $1,000 in principal amount
of outstanding Series A 12 1/2% Senior Subordinated Notes Due 2007 (the "Private
Notes") of the Issuers. The terms of the Exchange Notes are identical in all
material respects (including principal amount, interest rate and maturity) to
the terms of the Private Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes will have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and, therefore,
will not bear legends restricting the transfer thereof.
The Exchange Offer is being made pursuant to the Registration Rights
Agreement dated as of July 30, 1997 (the "Registration Rights Agreement"), and
all Private Notes validly tendered will be accepted for exchange. Any Private
Notes not tendered will remain outstanding and continue to accrue interest, but
will not retain any rights under the Registration Rights Agreement except in
certain circumstances set forth in the Registration Rights Agreements. Holders
electing to have Private Notes exchanged pursuant to the Exchange Offer will be
required to surrender such Private Notes, together with this Letter of
Transmittal, to the Exchange Agent at the address specified herein prior to the
close of business on the Expiration Date. Holders will be entitled to withdraw
their election at any time prior to 5:00 p.m., New York City time, on the
Expiration Date by sending to the Exchange Agent at the address specified herein
a facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Private Notes delivered for exchange and a statement that
such Holder is withdrawing this election to have such Private Notes exchanged.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED WITH THIS
LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR
FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE
DIRECTED TO THE EXCHANGE AGENT.
<PAGE> 2
[ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
-----------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
---------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
-------------------------------------------------------------
Address:
-------------------------------------------------------------
List below the Private Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the Certificate
Numbers and Principal Amounts should be listed on a separate signed
schedule affixed hereto.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
DESCRIPTION OF PRIVATE NOTES TENDERED HEREWITH
- -----------------------------------------------------------------------------------------------------------------
Name(s) and Addresses Aggregate Principal
of Registered Holder(s) Certificate Amount Represented Principal Amount
(Please fill in) Number(s) by Notes Tendered
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------------
*Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount
represented by the Private Notes. See Instruction 2.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be used if certificates for Private
Notes are to be forwarded herewith. Unless the context requires otherwise, the
term "Holder" for purposes of this Letter of Transmittal means any person in
whose name Private Notes are registered or any other person who has obtained a
properly completed bond power and any other required documents from the
registered holder.
Holders whose Private Notes are not immediately available or who cannot
deliver their Private Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date may tender their Private Notes
according to the guaranteed delivery procedure set forth in the Prospectus under
the captions "The Exchange Offer - Terms of the Exchange Offer - Procedures for
Tendering" and "- Terms of the Exchange Offer - Guaranteed Delivery Procedures."
2
<PAGE> 3
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuers the above-described principal amount
of Private Notes. Subject to, and effective upon, the acceptance for exchange of
the Private Notes tendered herewith, the undersigned hereby exchanges, assigns
and transfers to, or upon the order of, the Issuers all right, title and
interest in and to such Private Notes. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Exchange
Agent acts as the agent of the undersigned in connection with the Exchange
Offer) to cause the Private Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Private Notes and to acquire Exchange
Notes issuable upon the exchange of such tendered Private Notes, and that, when
the same are accepted for exchange, the Issuers will acquire good and
unencumbered title to the tendered Private Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
undersigned also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Issuers to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Private Notes.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Issuers) as more particularly set forth in the Prospectus,
the Issuers may not be required to exchange any of the Private Notes tendered
hereby and, in such event, the Private Notes not exchanged will be returned to
the undersigned at the address shown below the signature of the undersigned.
By tendering, each Holder of Private Notes represents to the Issuers
that: (i) the Exchange Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is such Holder; (ii) neither the
Holder of Private Notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes; (iii) if the Holder is not a broker-dealer or is a broker-dealer
but will not receive Exchange Notes for its own account in exchange for Private
Notes, neither the Holder nor any such other person is engaged in or intends to
participate in a distribution of the Exchange Notes; and (iv) neither the Holder
nor any such other person is an "affiliate" of the Issuers within the meaning of
Rule 405 under the Securities Act or, if such Holder is an "affiliate," such
Holder will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable. If the tendering Holder is a
broker-dealer (whether or not it is also an "affiliate" of the Issuers within
the meaning of Rule 405 under the Securities Act) that will receive Exchange
Notes for its own account in exchange for Private Notes, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
All authority herein conferred or agreed to be conferred shall survive
the death, bankruptcy or incapacity of the undersigned, and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives of the undersigned. Tendered Private
Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the Expiration Date by following the procedures set forth herein.
Certificates for all Exchange Notes delivered in exchange for tendered
Exchange Notes and any Exchange Notes delivered herewith but not exchanged, in
each case registered in the name of the undersigned, shall be delivered to the
undersigned at the address shown below the signature of the undersigned.
3
<PAGE> 4
TENDERING HOLDER(S) SIGN HERE
----------------------------------
----------------------------------
Signature(s) of Holder(s)
Date: ____________________, 1997
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) for Private Notes or by any person(s) authorized to become
registered Holder(s) by endorsements and documents transmitted herewith. If
signature by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, please set forth the full title of such person.) See Instruction 3.
Name(s):
---------------------------------
---------------------------------
(Please Print)
Capacity
(full title):
-----------------------------------------------------------------
Address:
-----------------------------------------------------------------
(Including Zip Code)
Area Code and
Telephone No.:
-----------------------------------------------------------------
Tax Id. No.:
-----------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 3)
Authorized Signature:
Name:
-----------------------------------------------------------------
Title:
-----------------------------------------------------------------
Address:
-----------------------------------------------------------------
Name of Firm:
-----------------------------------------------------------------
Area Code and
Telephone No.:
-----------------------------------------------------------------
Dated: , 1997
--------------------------
4
<PAGE> 5
- --------------------------------------------------------------------------------
PAYORS' NAMES: DIGITAL TELEVISION SERVICES, LLC AND DTS CAPITAL, INC.
- --------------------------------------------------------------------------------
Name (If joint names, list first and circle the name of
the person or entity whose taxpayer
SUBSTITUTE identification number appears in Part I below.)
FORM W-9
----------------------------------------------------------------
Address
Department of
the Treasury
----------------------------------------------------------------
Internal City, state and zip code
Revenue
Service
----------------------------------------------------------------
PART I - PLEASE PROVIDE YOUR Social Security Number
TAXPAYER IDENTIFICATION NUMBER or Employer
("TIN") IN THE BOX AT RIGHT AND Identification Number
CERTIFY BY SIGNING AND DATING BELOW
----------------------------------------------------------------
PART II - If exempt from backup withholding, check the
box to the right. Also provide your TIN in Part I and
sign and date this form in Part III. [ ]
----------------------------------------------------------------
PART III - Under penalties of perjury, I certify
that: The number shown on this form is my correct
taxpayer identification number (or I am waiting for a
number to be issued to me), AND I am not subject to
backup withholding: (a) I am exempt from backup
withholding; or (b) I have not been notified by the
Internal Revenue Service that I am subject to backup
withholding as a result of a failure to report all
interest or dividends; or (c) the IRS has notified me
that I am no longer subject to backup withholding.
----------------------------------------------------------------
CERTIFICATION INSTRUCTIONS. You must cross out item 2
above if you have been notified by the IRS that you are
currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
SIGNATURE DATE:
-------------------------- -------------
- --------------------------------------------------------------------------------
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
5
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
Certificates for all physically delivered Private Notes, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at any of its addresses set forth herein on
or prior to the Expiration Date.
THE METHOD OF DELIVERY OF PRIVATE NOTES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE.
Holders whose Private Notes are not immediately available or who cannot
deliver their Private Notes and all other required documents to the Exchange
Agent on or prior to the Expiration Date may tender their Private Notes
pursuant to the guaranteed delivery procedure set forth in the Prospectus
under "The Exchange Offer - Terms of the Exchange Offer - Guaranteed Delivery
Procedures." Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution (as defined in Instruction 3); (ii) on or
prior to the Expiration Date, the Exchange Agent must have received from such
Eligible Institution a letter or facsimile transmission setting forth the name
and address of the tendering Holder, the name(s) in which such Private Notes
are registered and the certificate number(s) of the Private Notes to be
tendered; and (iii) all tendered Private Notes as well as this Letter of
Transmittal and all other documents required by this Letter of Transmittal
must be received by the Exchange Agent within five New York Stock Exchange
trading days after the date of execution of such letter or facsimile
transmission, all as provided in the Prospectus under the caption "The
Exchange Offer - Terms of the Exchange Offer - Guaranteed Delivery
Procedures."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the Private Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Private Notes will be
accepted in denominations of $1,000 and integral multiples in excess thereof.
If less than the entire principal amount of Private Notes evidenced by a
submitted certificate is tendered, the tendering Holder must fill in the
principal amount tendered in the column entitled "Principal Amount Tendered."
A newly issued certificate for the principal amount of Private Notes submitted
but not tendered will be sent to such Holder as soon as practicable after the
Expiration Date. All Private Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated. To withdraw a tender
of Private Notes in the Exchange Offer, a written or facsimile transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the Expiration Date.
Any such notice of withdrawal must: (i) specify the name of the person having
deposited the Private Notes to be withdrawn (the "Depositor"); (ii) identify
the Private Notes to be withdrawn (including the certificate number or numbers
and principal amount of such Private Notes); (iii) contain a statement that
such holder is withdrawing its election to have such Private Notes exchanged;
(iv) be signed by the Holder in the same manner as the original signature on
the Letter of Transmittal by which such Private Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Private Notes register the
transfer of such Private Notes in the name of the person withdrawing the
tender; and (v) specify the name in which any such Private Notes are to be
registered, if different from that of the Depositor. If Private Notes have
been tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Issuers,
whose determination shall be final and binding on all parties. Any Exchange
Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer, and no Exchange Notes will be issued with
respect thereto unless the Private Notes so withdrawn are validly retendered.
Any Private Notes which have been tendered but which are not accepted for
exchange will be returned to the Holder thereof without cost to such Holder as
soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Private Notes may be retendered by
following one of the procedures described herein at any time prior to the
business day prior to the Expiration Date.
6
<PAGE> 7
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered Holder(s) of the Private Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of
certificates without alteration, enlargement or any change whatsoever.
If tendered Private Notes are registered in the name of the signer of
the Letter of Transmittal and the Exchange Notes to be issued in exchange
therefor are to be issued (and any untendered Private Notes are to be
reissued) in the name of the registered holder (including any participant in
The Depository Trust Company (also referred to as a book-entry facility) whose
name appears on a security listing as the owner of Private Notes), the
signature of such signer need not be guaranteed. In any other case, the
tendered Private Notes must be endorsed or accompanied by written instruments
of transfer in form satisfactory to the Issuers and duly executed by the
registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor institution" as defined by Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended (any of the
foregoing hereinafter referred to as an "Eligible Institution").
If the Exchange Notes or Private Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Private Notes, the signature in the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
If any of the Private Notes tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Private Notes registered in different names are
tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Private Notes.
When this Letter of Transmittal is signed by the registered Holder or
Holders of Private Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Private Notes listed, such Private Notes
must be endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Issuers and duly executed by the
registered Holder or Holders, in either case signed exactly as the name or
names of the registered Holder or Holders appear(s) on the Private Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and, unless waived by the Issuers, proper evidence
satisfactory to the Issuers of their authority so to act must be submitted.
4. TRANSFER TAXES. The Issuers shall pay all transfer taxes, if any,
applicable to the exchange of Private Notes pursuant to the Exchange Offer.
If, however, certificates representing Exchange Notes, or Private Notes for
principal amounts not tendered or accepted for exchange, are to be delivered
to, or are to be issued in the name of, any person other than the registered
Holder of the Private Notes tendered hereby, or if a transfer tax is imposed
for any reason other than the exchange of Private Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered Holder or any other person) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering Holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Private Notes listed in this Letter
of Transmittal.
5. WAIVER OF CONDITIONS. The Issuers reserve the absolute right to
waive, in whole or in part, any of the conditions to the Exchange Offer set
forth in the Prospectus.
7
<PAGE> 8
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTEs. Any Holder whose Private
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for tendering and other questions relating to the Exchange
Offer, as well as requests for assistance or additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange
Agent at the address and telephone number set forth above and in the
Prospectus.
8. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of Letters of Transmittal or
Private Notes will be resolved by the Issuers, whose determination will be
final and binding. The Issuers reserve the absolute right to reject any or all
Letters of Transmittal or tenders that are not in proper form or the
acceptance of which would, in the opinion of the Issuers' counsel, be
unlawful. The Issuers also reserves the right to waive any irregularities or
conditions of tender as to the particular Notes covered by any Letter of
Transmittal or tendered pursuant to such Letter of Transmittal. None of the
Issuers, the Exchange Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. The Issuers'
interpretation of the terms and conditions of the Exchange Offer shall be
final and binding.
9. DEFINITIONS. Capitalized terms used in this Letter of Transmittal
and not otherwise defined have the meanings given in the Prospectus.
10. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder of any Private Notes which are accepted for exchange must
provide the Issuers (as payors) with its correct taxpayer
identification number ("TIN"), which, in the case of a holder who is an
individual, is his or her social security number. If the Issuers are is
not provided with the correct TIN, the holder may be subject to a $50
penalty imposed by the Internal Revenue Service. (If withholding
results in an overpayment of taxes, a refund may be obtained.) Certain
holders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements; however, these holders still must submit the Substitute
Form W-9. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to
backup withholding. The Form must be signed, even if the holder is exempt from
backup withholding. If the Private Notes are registered in more than one name
or are not in the name of the actual owner, consult the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for information on which TIN to report.
The Issuers reserve the right in their sole discretion to take whatever
steps are necessary to comply with its obligation regarding backup
withholding.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
CERTIFICATES FOR PRIVATE NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO
THE EXPIRATION DATE.
#8226 (5.1)
8
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for
Tender of all Outstanding
Series A 12 1/2% Senior Subordinated Notes
in Exchange for
Series B 12 1/2% Senior Subordinated Notes Due 2007
of
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
(Not To Be Used For Signature Guarantees)
Registered holders of outstanding Series A 12 1/2% Senior Subordinated
Notes Due 2007 (the "Private Notes") of Digital Television Services, LLC
(the"Company") and DTS Capital, Inc. ("Capital" and, together with the Company,
the "Issuers") who wish to tender their Private Notes in exchange for a like
principal amount of Series B 12 1/2% Senior Subordinated Notes Due 2007 (the
"Exchange Notes") of the Issuers and, in each case, whose Private Notes are not
immediately available or who cannot deliver their Private Notes and Letter of
Transmittal (and any other documents required by the Letter of Transmittal) to
The Bank of New York (the "Exchange Agent") prior to the Expiration Date may use
this Notice of Guaranteed Delivery or one substantially equivalent hereto. This
Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight delivery) or mailed to the Exchange Agent. See "The
Exchange Offer --Terms of the Exchange Offer -- Guaranteed Delivery Procedures"
in the Prospectus.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ____________, 1997 (the "EXPIRATION
DATE"), UNLESS EXTENDED BY DIGITAL TELEVISION SERVICES,
LLC AND DTS CAPITAL, INC.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Facsimile Transmissions: By Hand or Overnight Delivery
(Eligible Institutions Only)
The Bank of New York (212) 571-3080 The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, New York 10286 Confirm by Telephone: Corporate Trust Services Window
Attn: Reorganization Section (212) 815- Ground Level
New York, New York 10286
For Information Call: Attn: Reorganization Section
(212) 815-
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear in
the applicable space provided on the Letter of Transmittal for Guarantee of
Signatures.
<PAGE> 2
Ladies & Gentlemen:
The undersigned hereby tender(s) to the Issuers upon the terms and
subject to the conditions set forth in the Exchange Offer and the Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate principal
amount of Private Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus.
The undersigned understands that tenders of Private Notes will be
accepted only in principal amounts equal to $1,000 or integral multiples
thereof. Tenders of Private Notes may also be withdrawn if the Exchange Offer is
terminated without any such Private Notes being exchanged thereunder or as
otherwise provided in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death, bankruptcy or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
Signature(s) of Registered Owner(s) or
Authorized Signatory: _________________________
-----------------------------------------------
Principal Amount of Private Notes Tendered:
-----------------------------------------------
Certificate No(s). of Private Notes (if available):
------------------------------------------------
------------------------------------------------
Name(s) of Registered Holder(s):
------------------------------------------------
------------------------------------------------
Address(es):
--------------------------------
------------------------------------------------
Area Code and Telephone No.:
------------------------------------------------
------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Private Notes exactly as its (their) name(s) appear on certificates
for Private Notes or on a security position listing the owners of Private Notes,
or by person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): ______________________________________________________________________
Capacity:______________________________________________________________________
Address(es): __________________________________________________________________
__________________________________________________________________
DO NOT SEND PRIVATE NOTES WITH THIS FORM. PRIVATE NOTES SHOULD BE SENT TO THE
EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
- --------------------------------------------------------------------------------
<PAGE> 3
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or corespondent in the United
States or an "eligible guarantor institution" as defined by Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (any of the
foregoing hereinafter referred to as an "Eligible Institution"), hereby (a)
represents that each holder of Private Notes on whose behalf this tender is
being made "own(s)" the Private Notes covered hereby within the meaning of Rule
14e-4 under the Exchange Act, (b) represents that such tender of Private Notes
complies with such Rule 14e-4, and (c) guarantees that, within five New York
Stock Exchange trading days from the date of this Notice of Guaranteed Delivery,
certificates representing the Old Notes covered hereby in proper form for
transfer or confirmation of book-entry transfer of such Private Notes into the
Exchange Agent's account at The Depository Trust Company, in each case with
delivery of a Letter of Transmittal (or a facsimile thereof) properly completed
and duly executed, with any required signature guarantees, or Agent's Message,
in the case of book-entry delivery, and any other required documents will be
deposited by the undersigned with the Exchange Agent.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF
TRANSMITTAL AND PRIVATE NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE
TIME SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO
THE UNDERSIGNED.
Name of Firm:
Address:_______________________________
_______________________________________
Area Code and Telephone No.:___________
Authorized Signature:
_______________________________________
Name:__________________________________
Title:_________________________________
Date:__________________________________
- --------------------------------------------------------------------------------
#8214 (word)
<PAGE> 1
EXHIBIT 99.3
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
Offer to Exchange
its
Series B 12 1/2% Senior Subordinated Notes Due 2007
for any and all of its Outstanding
Series A 12 1/2% Senior Subordinated Notes Due 2007
TO: BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
Digital Television Services, LLC (the "Company") and DTS Capital, Inc.
("Capital" and, together with the Company, the "Issuers") is offering to
exchange (the "Exchange Offer"), upon and subject to the terms and conditions
set forth in the Prospectus dated ____________, 1997 (the "Prospectus") and the
enclosed Letter of Transmittal (the "Letter of Transmittal"), its registered
Series B 12 1/2% Senior Subordinated Notes due 2007 (the "Exchange Notes") for
any and all of its outstanding Series A 12 1/2% Senior Subordinated Notes due
2007 (the "Private Notes"). The Exchange Offer is being made in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement dated as of July 30, 1997 between the Issuers and the other
signatories thereto.
We are requesting that you contact your clients for whom you hold
Private Notes regarding the Exchange Offer. For your information and for
forwarding to your clients for whom you hold Private Notes registered in your
name or in the name of your nominee, or who hold Private Notes registered in
their own names, we are enclosing the following documents:
1. Prospectus dated _____________________, 1997;
2. The Letter of Transmittal for your use and for the information
of your clients;
3. Notice of Guaranteed Delivery to be used to accept the
Exchange Offer if certificates for Private Notes are not
immediately available or time will not permit all required
documents to reach the Exchange Agent prior to the Expiration
Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose
account you hold Private Notes registered in your name or the
name of your nominee, with space provided for obtaining such
clients' instructions with regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9; and
6. Return envelopes addressed to The Bank of New York, the
Exchange Agent, for the Private Notes.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON ______________, 1997 (THE "EXPIRATION DATE"),
UNLESS EXTENDED BY THE COMPANY. THE PRIVATE NOTES TENDERED PURSUANT TO THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE 5:00 P.M., NEW YORK CITY
TIME, ON THE EXPIRATION DATE IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH IN
THE LETTER OF TRANSMITTAL.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Private Notes should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and Prospectus.
<PAGE> 2
If holders of Private Notes wish to tender, but it is impracticable for
them to forward their certificates for Private Notes prior to the expiration of
the Exchange Offer or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures described in the Prospectus under "The Exchange Offer -- Terms of the
Exchange Offer -- Guaranteed Delivery Procedures."
The Issuers will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Private Notes held by them as nominee or in a fiduciary
capacity. The Issuers will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Private Notes pursuant to the Exchange Offer,
except as set forth in Instruction 4 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed to
the Exchange Agent for the Private Notes, at its address and telephone number
set forth on the front of the Letter of Transmittal.
Very truly yours,
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
OTHER PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU
OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF
EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS
EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
#8038
<PAGE> 1
EXHIBIT 99.4
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
Offer to Exchange
its
Series B 12 1/2% Senior Subordinated Notes Due 2007
for any and all of its Outstanding
Series A 12 1/2% Senior Subordinated Notes Due 2007
To Our Clients:
Enclosed for your consideration are the Prospectus dated _____________,
1997 (the "Prospectus") and the related Letter of Transmittal (which together
with the Prospectus constitute the "Exchange Offer") in connection with the
offer by Digital Television Services, LLC (the "Company") and DTS Capital, Inc.
("Capital" and, together with the Company, the "Issuers"), to exchange its
Series B 12 1/2% Senior Subordinated Notes due 2007 (the "Exchange Notes") for
any and all of its outstanding Series A 12 1/2% Senior Subordinated Notes due
2007 (the "Private Notes"), upon the terms and subject to the conditions set
forth in the Exchange Offer.
We are the registered holder of Private Notes held for your account. An
exchange of the Private Notes can be made only by us as the registered holder
and pursuant to your instructions. The Letter of Transmittal is furnished to you
for your information only and cannot be used by you to exchange the Private
Notes held by us for your account. The Exchange Offer provides a procedure for
holders to tender by means of guaranteed delivery.
We request information as to whether you wish us to exchange any or all
of the Private Notes held by us for your account upon the terms and subject to
the conditions of the Exchange Offer.
Your attention is directed to the following:
1. The Exchange Notes will be exchanged for the Private Notes at the
rate of $1,000 principal amount of Exchange Notes for each $1,000 principal
amount of Private Notes. The Exchange Notes will bear interest (as do the
Private Notes) at a rate equal to 12 1/2% per annum from their date of issuance.
Interest on the Exchange Notes is payable semi-annually on February 1 and August
1, commencing February 1, 1998. Holders of Private Notes that are accepted for
exchange will receive, in cash, accrued interest thereon to, but not including,
the date of issuance of the Exchange Notes. Such interest will be paid with the
first interest payment on the Exchange Notes. Interest on the Private Notes
accepted for exchange will cease to accrue on the day prior to the issuance of
the Exchange Notes. The form and terms of the Exchange Notes are the same in all
material respects as the form and terms of the Private Notes (which they
replace) except that the Exchange Notes have been registered under the
Securities Act of 1933, as amended (the "Securities Act").
2. Based on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), Exchange Notes issued pursuant to the Exchange Offer in
exchange for Private Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or a "broker" or "dealer" registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) without compliance with the registration
and prospectus delivery provisions of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes.
3. The Exchange Offer is not conditioned on any minimum principal
amount of Private Notes being tendered.
<PAGE> 2
4. Notwithstanding any other term of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept for
exchange, or exchange Exchange Notes for, any Private Notes not already accepted
for exchange, and may terminate or amend the Exchange Offer before the
acceptance of such Private Notes, if any of the conditions described in the
Prospectus under "The Exchange Offer -- Conditions" exist.
1. Tendered Private Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on __________________, 1997 by following the
procedures set forth in the Letter of Transmittal.
6. Any transfer taxes applicable to the exchange of the Private Notes
pursuant to the Exchange Offer will be paid by the Issuers, except as otherwise
provided in Instruction 4 of the Letter of Transmittal.
If you wish to have us tender any or all of your Private Notes, please
so instruct us by completing, detaching and returning to us the instruction form
attached hereto. An envelope to return your instructions is enclosed. If you
authorize a tender of your Private Notes, the entire principal amount of Private
Notes held for your account will be tendered unless otherwise specified on the
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf by the Expiration Date.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED
FROM OR ON BEHALF OF, HOLDERS OF THE PRIVATE NOTES IN ANY JURISDICTION IN WHICH
THE MAKING OF THE EXCHANGE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN
COMPLIANCE WITH ANY PROVISION OF ANY APPLICABLE SECURITIES LAW.
2
<PAGE> 3
DIGITAL TELEVISION SERVICES, LLC
DTS CAPITAL, INC.
Offer to Exchange
its
Series B 12 1/2% Senior Subordinated Notes Due 2007
for any and all of its Outstanding
Series A 12 1/2% Senior Subordinated Notes Due 2007
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus and the related Letter of Transmittal in connection with the Exchange
Offer by the Issuers to exchange Exchange Notes for Private Notes.
This will instruct you to tender the principal amount of Private Notes
indicated below held by you for the account of the undersigned, upon the terms
and subject to the conditions set forth in the Prospectus and the related Letter
of Transmittal.
The undersigned represents that: (i) the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary course of its
business; (ii) it is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of such Exchange Notes; and (iii) it is not an "affiliate," as
defined under Rule 405 of the Securities Act, of the Issuers or, if it is an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
If the undersigned is a "broker" or "dealer" registered under the
Exchange Act that acquired Private Notes for its own account pursuant to its
market-making or other trading activities (other than Private Notes acquired
directly from the Company), the undersigned understands and acknowledges that it
may be deemed to be an "underwriter" within the meaning of the Securities Act
and, therefore, must deliver a prospectus relating to the Exchange Notes meeting
the requirements of the Securities Act in connection with any resales by it of
Exchange Notes acquired for its own account in the Exchange Offer.
Notwithstanding the foregoing, the undersigned does not thereby admit that it is
an "underwriter" within the meaning of the Securities Act.
You are hereby instructed to tender all Private Notes held for the
account of the undersigned unless otherwise indicated below:
Do not tender any Private Notes.
Tender Private Notes in the principal amount of _________________.
SIGNATURE:
---------------------------------------
Name of Beneficial Owner (please print)
By:
---------------------------------
Signature
---------------------------------
Address
---------------------------------
Zip Code
---------------------------------
Area Code and Telephone Number
Dated: , 1997
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#8033
<PAGE> 1
EXHIBIT 99.5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. Social Security numbers have nine digits separated by two hyphens (i.e.,
000-00-0000). Employer identification numbers have nine digits separated by only
one hyphen (i.e., 00-0000000). The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
GIVE THE
SOCIAL SECURITY OR EMPLOYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT NUMBER OF
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. An individual's account............................... The individual
2. Two or more individuals (joint account)............... The actual owner of the account or, if
combined funds, any one of the individuals(1)
3. Husband and wife (joint account)...................... The actual owner of the account or, if joint funds,
either person(1)
4. Custodian account of a minor (Uniform Gift to
Minors Act). ....................................... The minor(2)
5. Adult and minor (joint account)....................... The adult or, if the minor is the only contributor, the minor(1)
6. Account in the name of guardian or committee for a
designated ward, minor or incompetent person........ The ward, minor or incompetent person (3)
7. a. The usual revocable savings trust account
(grantor is also trustee)....................... The grantor-trustee(1)
b. So-called trust account that is not a legal
or valid trust under state law.................. The actual owner(1)
8. Sole proprietorship account........................... The owner(4)
9. A valid trust, estate or pension trust................ The legal entity(5) (Do not furnish the identifying number of
the personal representative or trustee unless the legal entity
itself is not designated in the account title.)
10. Corporate account..................................... The corporation
11. Religious, charitable or educational organization
account. ............................................ The organization
12. Partnership account................................... The partnership
13. Association, club or other tax-exempt
organization. ....................................... The organization
14. A broker or registered nominee........................ The broker or nominee
A broker or registered nominee
15. Account with the Department of Agriculture in the
name of a public entity (such as a state or local
government, school district or prison) that
receives agricultural program payments.............. The public entity
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE> 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know
your number, obtain Form SS-5, Application for A Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
C A corporation.
C A financial institution.
C An organization exempt from tax under Section 501(a) of the
Internal Revenue Code or an individual retirement plan.
C The United States or any agency or instrumentality thereof.
C A State, the District of Columbia, a possession of the United
States or any subdivision or instrumentality thereof.
C A foreign government, a political subdivision of a foreign
government or any agency or instrumentality thereof.
C An international organization or any agency or instrumentality
thereof.
C A dealer in securities or commodities required to register in
the United States or a possession of the United States.
C A real estate investment trust.
C A common trust fund operated by a bank under Section 584(a) of
the Internal Revenue Code.
C An exempt charitable remainder trust or a non-exempt trust
described in Section 4947(a)(1) of the Internal Revenue Code.
C An entity registered at all times under the Investment Company
Act of 1940.
C A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
C Payments to nonresident aliens subject to withholding under
Section 1441 of the Internal Revenue Code.
C Payments to partnerships not engaged in a trade or business in
the United States and which have at least one nonresident
partner.
C Payments of patronage dividends where the amount renewed is
not paid in money.
C Payments made by certain foreign organizations.
2
<PAGE> 3
Payments made to a nominee.
Payments of interest not generally subject to backup withholding
include the following:
C Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this
interest is $600 or more and is paid in the course of the
payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
C Payments of tax-exempt interest (including exempt-interest
dividends under Section 852 of the Internal Revenue Code).
C Payments described in Section 6049(b)(5) of the Internal
Revenue Code to non-resident aliens.
C Payments on tax-free covenant bonds under Section 1451 of the
Internal Revenue Code.
C Payments made by certain foreign organizations.
C Payments made to a nominee.
Exempt payees described above must still complete the Substitute Form
W-9 enclosed herewith to avoid possible erroneous backup withholding. FILE THIS
FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE EXEMPT
ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE
INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments, other than interest, dividends and patronage
dividends, that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under Sections 6041,
6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N of the Internal Revenue Code.
PRIVACY ACT NOTICE. Section 6109 of the Internal Revenue Code requires
most recipients of dividend, interest, or other payments to give taxpayer
identification numbers to payers who must report the payments to the Internal
Revenue Service. The Internal Revenue Service uses the numbers for
identification purposes and to help verify the accuracy of the recipient's tax
return. Payers must be given the numbers whether or not recipients are required
to file tax returns. Payers must generally withhold 31% of taxable interest,
dividend and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If
you fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure which is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
3
