<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO THE SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT 1934
FROM THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 000-22877
@ ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 06-1487156
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
ONE COMMERCIAL PLAZA
HARTFORD, CONNECTICUT 06103
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (860) 549-1674
Indicate by check (X) whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days Yes X No -----
The number of shares outstanding of @ Entertainment, Inc.'s common stock as of
March 31, 1999, was:
Common Stock 33,406,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
@ ENTERTAINMENT, INC.
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
PAGE NO.
PART I FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
@ Entertainment
Consolidated Balance Sheets 3-4
Consolidated Statements of Operations 5
Consolidated Statements of Comprehensive Loss 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8 - 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-21
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 21-22
PART II OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
</TABLE>
<PAGE>
@ ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ---------
(unaudited)
(in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 128,002 $ 13,055
Accounts receivable, net of allowance for doubtful accounts
of $1,193,000 in 1999 and $1,095,000 in 1998 6,396 7,408
Programming and broadcast rights 12,095 9,030
Other current assets 22,250 21,063
--------- ---------
Total current assets 168,743 50,556
--------- ---------
Property, plant and equipment:
Cable television systems assets 152,924 175,053
D-DTH equipment 71,977 68,419
Construction in progress 4,394 2,739
Vehicles 2,323 2,792
Other 17,637 16,119
--------- ---------
249,255 265,122
Less accumulated depreciation (53,472) (52,068)
--------- ---------
Net property, plant and equipment 195,783 213,054
Inventories for construction 7,906 8,869
Intangibles, net 36,745 43,652
Investments in affiliated companies 21,879 19,956
Other assets 16,484 12,287
--------- ---------
Total assets $ 447,540 $ 348,374
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
@ ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)/EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ---------
(unaudited)
(in thousands)
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 33,925 $ 40,464
Accrued interest 5,349 2,140
Deferred revenue 5,011 4,366
Income taxes payable 3,794 3,794
Current portion of notes payable 6,500 6,500
--------- ---------
Total current liabilities 54,579 57,264
--------- ---------
Notes payable (notes 4 and 5) 367,169 257,454
--------- ---------
Total liabilities 421,748 314,718
--------- ---------
12% cumulative redeemable preferred stock (liquidation value
$50,000,000 plus accrued and unpaid dividends;
20,002,500 preferred shares authorized;
45,000 Series A and 5,000 Series B outstanding) (note 6) 29,603 --
Commitments and contingencies (note 9)
Stockholders' (deficiency)/equity:
Common stock, $.01 par value; 70,000,000 shares authorized,
shares issued and outstanding 33,406,000 in 1999
and 33,310,000 in 1998 334 333
Paid-in capital (notes 4 and 6) 264,291 237,954
Accumulated other comprehensive loss (29,646) (467)
Accumulated deficit (238,790) (204,164)
--------- ---------
Total stockholders' (deficiency)/equity (3,811) 33,656
--------- ---------
Total liabilities and stockholders' (deficiency)/equity $ 447,540 $ 348,374
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
@ ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------------
1999 1998
-------- --------
(in thousands, except per share data)
<S> <C> <C>
Revenues $ 18,799 $ 12,686
Operating expenses:
Direct operating expenses 18,017 8,648
Selling, general and administrative expenses 15,620 13,447
Depreciation and amortization 9,405 4,949
Total operating expenses 43,042 27,044
-------- --------
Operating loss (24,243) (14,358)
Interest and investment income 1,494 850
Interest expense (11,845) (3,649)
Equity in profits of affiliated companies 1,025 270
Foreign exchange (loss)/gain, net (1,038) 73
-------- --------
Loss before income taxes and
minority interest (34,607) (16,814)
Income tax expense (19) (333)
Minority interest -- (149)
-------- --------
Net loss (34,626) (17,296)
Accretion of redeemable preferred stock (791) --
-------- --------
Net loss applicable to holders of common stock $(35,417) $(17,296)
-------- --------
-------- --------
Basic and diluted loss per common share $ (1.06) $ (0.52)
-------- --------
-------- --------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
@ ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net loss $(34,626) $(17,296)
Other comprehensive (loss)/income:
Translation adjustment (29,179) 2,549
-------- --------
Comprehensive loss $(63,805) $(14,747)
-------- --------
-------- --------
</TABLE>
See accompanying notes to unaudited consolidated financial statements
6
<PAGE>
@ ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1999 1998
--------- ---------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (34,626) $ (17,296)
Adjustments to reconcile net loss to
net cash used in operating activities:
Minority interest -- 149
Depreciation and amortization 9,405 4,949
Amortizaion of notes payable discount and issue costs 8,128 --
Equity in profits of affiliated companies (1,025) --
Other 1,006 1,338
Changes in operating assets and liabilities:
Accounts receivable 1,012 (911)
Other current assets (1,187) (5,006)
Programming and broadcast rights (3,065) --
Other assets -- (2,937)
Accounts payable (5,292) 5,856
Income taxes payable -- (377)
Accrued interest 3,209 3,317
Deferred revenue 1,195 (88)
Other current liabilities -- (826)
--------- ---------
Net cash used in operating activities (21,240) (11,832)
--------- ---------
Cash flows from investing activities:
Construction and purchase of property, plant and equipment (15,517) (23,085)
Issuance of notes receivable from affiliates -- 779
Other investments (1,753) (2,248)
Purchase of intangibles (196) (230)
Purchase of subsidiaries, net of cash received -- (10,523)
--------- ---------
Net cash used in investing activities (17,466) (35,307)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes and warrants 109,755 --
Proceeds from issuance of preferred stock and warrants 48,295 --
Costs to obtain loans (4,397) --
Repayment of notes payable -- 37
--------- ---------
Net cash provided by financing activities 153,653 37
--------- ---------
Net increase in cash and cash equivalents 114,947 (47,102)
Cash and cash equivalents at beginning of period 13,055 105,691
--------- ---------
Cash and cash equivalents at end of period $ 128,002 $ 58,589
--------- ---------
--------- ---------
Supplemental cash flow information:
Cash paid for interest $ 142 $ 25
--------- ---------
--------- ---------
Cash paid for income taxes $ 37 $ 176
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
7
<PAGE>
@ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
1. BASIS OF PRESENTATION
The information furnished by @Entertainment, Inc. and its subsidiaries
("@Entertainment" or the "Company") has been prepared in accordance with United
States generally accepted accounting principles ("U.S. GAAP") and the rules and
regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to these rules and regulations. The
accompanying consolidated balance sheets, statements of operations, statements
of comprehensive loss and statements of cash flows are unaudited but in the
opinion of management reflect all adjustments (consisting only of items of a
normal recurring nature) which are necessary for a fair statement of the
Company's consolidated results of operations and cash flows for the interim
periods and the Company's financial position as of March 31, 1999. The
accompanying unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the notes
thereto included in the Company's 1998 Annual Report on Form 10-K filed with the
SEC (the "1998 Annual Report"). The interim financial results are not
necessarily indicative of the results of the full year.
2. RECLASSIFICATIONS
Certain amounts have been reclassified in the prior period unaudited
consolidated financial statements to conform to the 1999 unaudited consolidated
financial statement presentation.
3. PER SHARE INFORMATION
Basic loss per share has been computed by dividing net loss attributable to
common stockholders by the weighted average number of common shares outstanding
during the period. The effect of potential common shares (stock options and
warrants outstanding) on earnings per share, i.e. dilutive loss per share is the
same as basic loss per share.
The following table provides a reconciliation of the numerator and denominator
in the loss per share calculation:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
-------- --------
<S> <C> <C>
Net loss attributable to common stockholders (in thousands) $(35,417) $(17,296)
Basic weighted average number of common shares outstanding (in
thousands) 33,361 33,310
Loss per share-basic and diluted $ (1.06) $ (0.52)
</TABLE>
8
<PAGE>
4. UNITS OFFERING
On January 22, 1999, the Company sold 256,800 units (collectively, the "Units")
to two initial purchasers pursuant to a purchase agreement, each Unit consisting
of $1,000 principal amount at maturity of 14 1/2% Senior Discount Notes ("the
Notes") due 2009 and four warrants (each a "Warrant"), each initially entitling
the holder thereof to purchase 1.7656 shares of common stock, par value $0.01
per share at an exercise price of $19.125 per share, subject to adjustment.
The Notes were issued at a discount to their aggregate principal amount at
maturity and, together with the Warrants generated gross proceeds to the Company
of approximately $100,003,000 of which $92,551,000 has been allocated to the
initial accreted value of the Notes and approximately $7,452,000 has been
allocated to the Warrants. The portion of the proceeds that is allocable to the
Warrants was accounted for as part of paid-in capital. The allocation was made
based on the relative fair values of the two securities at the time of issuance.
Costs associated with the Units offering of approximately $3,875,000, including
the initial purchasers' discount were capitalized and are being amortized over
the term of the Notes using the interest method. Net proceeds to the Company
after deducting initial purchasers' discount and offering expenses were
approximately $96,000,000.
The Notes are unsubordinated and unsecured obligations. Cash interest on the
Notes will not accrue prior to February 1, 2004. Thereafter cash interest will
accrue at a rate of 14.5% per annum on the principal amount and will be payable
semiannually in arrears on August 1 and February 1 of each year, commencing
August 1, 2004. The Notes will mature on February 1, 2009. At any time prior to
February 1, 2002, the Company may redeem up to a maximum of 35% of the
originally issued aggregate principal amount at maturity of the Notes at a
redemption price equal to 117.5% of the accreted value thereof at the redemption
date, plus accrued and unpaid interest, if any, to the date of redemption with
some or all of the net cash proceeds of one or more public equity offerings;
provided, however, that not less than 65% of the originally issued aggregate
principal amount at maturity of the Notes remain outstanding immediately after
giving effect to such redemption.
The Warrants initially entitle the holders thereof to purchase 1,813,665 shares
of common stock, representing, in the aggregate, approximately 5% of the
outstanding common stock on a fully-diluted basis (using the treasury stock
method) immediately after giving effect to the Units offering and the Company's
offering of Series A 12% Cumulative Preference Shares and Series B 12%
Cumulative Preference Shares (see note 6 PREFERENCE OFFERINGS). The Warrants are
exercisable at any time and will expire on February 1, 2009.
Pursuant to the Indenture governing the Notes, the Company is subject to certain
restrictions and covenants, including, without limitation, covenants with
respect to the following matters: (i) limitation on additional indebtedness;
(ii) limitation on restricted payments; (iii) limitation on issuance and sales
of capital stock of restricted subsidiaries; (iv) limitation on transactions
with affiliates; (v) limitation on liens; (vi) limitation on issuance of
guarantees of indebtedness by restricted subsidiaries; (vii)purchase of Notes
upon a change of control; (viii) limitation on sale of assets;(ix) limitation on
dividends and other payment restrictions affecting restricted subsidiaries; (x)
limitation on investments in unrestricted subsidiaries; (xi)limitation on lines
of business; and (xii) consolidations, mergers and sales of assets. The Company
is in compliance with these covenants.
9
<PAGE>
5. SERIES C NOTES OFFERING
On January 20, 1999, the Company sold $36,001,000 aggregate principal amount at
maturity of Series C Notes (collectively "the Series C Notes") due 2008. The
Series C Notes are senior unsecured obligations of the Company ranking PARI
PASSU in right of payment with all other existing and future unsubordinated
obligations of the Company. The Series C Notes were issued at a discount to
their aggregate principal amount at maturity and generated gross proceeds to the
Company of approximately $9,815,000. Net proceeds to the Company after deducting
the initial purchaser's discount and offering expenses were approximately
$9,500,000. Cash interest on the Series C Notes will not accrue prior to July
15, 2004. Thereafter cash interest will accrue at a rate of 7.0% per annum on
the principal amount at maturity, and will be payable semiannually in arrears on
July 15 and January 15 of each year commencing January 15, 2005. The Series C
Notes will mature on July 15, 2008.
Pursuant to the Series C Indenture governing the Series C Notes, the Company is
subject to certain restrictions and covenants, including, without limitation,
covenants with respect to the following matters: (i) limitation on additional
indebtedness; (ii) limitation on restricted payments; (iii) limitation on
issuance and sales of capital stock of restricted subsidiaries; (iv) limitation
on transactions with affiliates; (v) limitation on liens; (vi) limitation on
guarantees of indebtedness by restricted subsidiaries; (vii) purchase of Notes
upon a change of control; (viii) limitation on sale of assets; (ix) limitation
on dividends and other payment restrictions affecting restricted subsidiaries;
(x) limitation on investments in unrestricted subsidiaries; (xi) limitation on
lines of business; and (xii) consolidations, mergers and sales of assets. The
Company is in compliance with these covenants.
Costs associated with the Series C Notes offering of approximately $319,000 were
capitalized and are being amortized over the term of the Series C Notes using
the interest method.
6. PREFERENCE OFFERINGS
On January 22, 1999 the Company sold 50,000 (45,000 Series A and 5,000 Series B)
12% Cumulative Redeemable Preference Shares (collectively "the Preference
Shares") and 50,000 Warrants (each a "Preference Warrant") each Preference
Warrant initially entitling the holders thereof to purchase 110 shares of common
stock, par value $0.01 per share, of the Company at an exercise price of $10.00
per share, subject to adjustment. The Preference Shares together with the
Preference Warrants generated gross proceeds to the Company of $50,000,000 of
which approximately $28,812,000 has been allocated to the initial unaccreted
value of the Preference Shares (net of commissions and offering costs payable by
the Company of approximately $1,700,000), and approximately $19,483,000 has been
allocated to the Preference Warrants. Dividends (whether or not earned or
declared) will cumulate on a daily basis from the original issue date and will
be payable semi-annually in arrears on March 31 and September 30 of each year,
commencing on March 31, 1999 (each a "Dividend Payment Date") to holders of
record on the fifteenth day immediately preceding the relevant Dividend Payment
Date. The Company at its option may, but shall not be required to, redeem in
U.S. dollars for cash the Preference Shares, at any time on or after March 31,
2000, in whole or in part, at the redemption price of 112% of the sum of (i) the
Initial Liquidation Preference ($50,000,000 in the aggregate) and (ii)
accumulated and unpaid dividends, if any, to the date of redemption. On January
30, 2010, the Company will be required (subject to contractual and other
restrictions on the ability to redeem capital stock) to redeem all outstanding
Cumulative Preference Shares, at a price in U.S. dollars equal to the Initial
Liquidation Preference thereof plus all accumulated and unpaid dividends thereon
(if any) to the date of redemption. The Company will not be required to make
sinking fund payments with respect to the Cumulative Preference Shares. The
Preference Shares have been recorded at its redemption value on January 30, 2010
discounted at approximately 17.6% to March 31, 1999. The Company periodically
accretes from paid-in capital an amount that will provide for the redemption
value at January 30, 2010.
7. ACQUISITIONS
On February 25, 1999, @ Entertainment purchased for approximately $1.8 million a
30% interest in Mazowiecki Klub Sportowy Sportowa Spolka Akcyjna, a joint
stock company which owns Hoop Pekaes Pruszkow, a Polish basketball team. In
connection with this purchase @ Entertainment has agreed to act as a sponsor for
Hoop Pekaes Pruszkow.
On March 31, 1999, a subsidiary of PCI purchased certain cable television system
assets for an aggregate consideration of approximately $509,000. The acquisition
was accounted for using the purchase method, whereby the purchase price was
allocated among the fixed assets acquired based on their fair value on the date
of acquisition and any excess to goodwill. The purchase price exceeded fair
value of the assets acquired by approximately $108,000.
8. STOCK OPTIONS
In February 1999 a number of the Company's employees were granted options to
purchase 750,000 shares of common stock at a price of $14.30 per share, vesting
ratably over a three-year period starting from January 1, 2000. The exercise
price of such options exceeded the quoted market price for the Company's shares
on the date of grant.
10
<PAGE>
In February 1999, a former employee of the Company exercised his options to buy
96,000 shares of common stock at $1.99 per share.
9. COMMITMENTS AND CONTINGENCIES
PROGRAMMING, BROADCAST AND EXHIBITION RIGHTS
The Company has entered into long-term programming agreements and agreements for
the purchase of certain exhibition or broadcast rights with a number of third
party content providers for its digital direct-to-home ("D-DTH") and cable
systems. The agreements have terms which range from one to seven years and
require that the license fees be paid either at a fixed amount payable at the
time of execution or based upon a guaranteed minimum number of subscribers
connected to the system each month. At March 31, 1999, the Company had an
aggregate minimum commitment in relation to these agreements of approximately
$212,360,000 over the next seven years, approximating $37,547,000 for the
remainder of 1999, $35,231,000 in 2000, $38,816,000 in 2001, $41,703,000 in
2002, $30,753,000 in 2003 and $28,310,000 in 2004 and thereafter.
PURCHASE COMMITMENTS
As of March 31, 1999, the Company had an aggregate minimum commitment toward the
purchase of the Reception Systems from Philips of approximately $106,236,000 up
to June 30, 2000.
LITIGATION AND CLAIMS
From time to time, the Company is subject to various claims and suits arising
out of the ordinary course of business. While the ultimate result of all such
matters is not presently determinable, based upon current knowledge and facts,
management does not expect that their resolution will have a material adverse
effect on the Company's consolidated financial position or results of
operations. (See also note 10 ARBITRATION RELATING TO TELEWIZYJNA KORPORACJA
PARTYCYPACYJNA)
10. ARBITRATION RELATING TO TELEWIZYJNA KORPORACJA PARTYCYPACYJNA
On April 17, 1998, the Company signed a binding letter of intent with Telewizyna
Korporacja Partycypacyjna ("TKP"), the parent company of Canal+ Polska, to form
a joint venture for the purpose of bringing together @ Entertainment's Wizja TV
programming service and the Canal+ Polska premium pay-television channel and
providing for the joint development and operation of a digital direct-to-home
television service in Poland.
The definitive agreements were not agreed and executed by the parties by the
date set forth in the letter of intent (the "Signature Date"). Therefore, the
Company terminated the letter of intent on June 1, 1998. TKP and its
shareholders have informed the Company that they believe the Company did not
have the right to terminate the letter of intent. Under the terms of the letter
of intent, TKP is obligated to pay the Company a $5,000,000 break-up fee if the
definitive agreements were not executed by the Signature Date, unless failure to
obtain such execution was caused by the Company's breach of any of its
obligations under the letter of intent. If there were any such breach by the
Company, the Company would be obligated to pay TKP $10,000,000. However, if any
breach of the letter of intent by TKP caused the definitive agreements not to be
executed, TKP would be obligated to pay the Company a total of $10,000,000
(including the $5,000,000 break-up fee). In the event that TKP fails to pay the
Company any of the above-referenced amounts owed to the Company, TKP's
shareholders are responsible for the payment of such amounts.
The Company has demanded monies from TKP as a result of the failure to execute
the definitive agreements by the Signature Date. While the Company was waiting
for the expiration of the 10-day period for payment of the break-up fee, TKP
initiated arbitration proceedings before a three-member arbitration panel in
Geneva, Switzerland. In their claim, TKP and its shareholders have alleged that
the Company breached its obligations to negotiate in good faith and to use its
best efforts to agree and execute the definitive agreements and claimed the
Company is obligated to pay TKP $10,000,000 pursuant to the letter of intent.
The Company has submitted its answer and counterclaims against TKP and its
shareholders. The Company does not believe that the outcome of the arbitration
proceedings will have a material adverse effect on the Company's business,
financial condition or results of operations.
11
<PAGE>
11. SEGMENT INFORMATION
The Company and its subsidiaries operate in three business segments: (1) cable
television, (2) digital direct-to-home television and programming, and (3)
corporate. The Company accounts for intersegment sales and transfers as if the
sales or transfers were to third parties, that is, at current market prices. In
addition to other operating statistics, the Company measures its financial
performance by EBITDA, an acronym for earnings before interest, taxes,
depreciation and amortization. The Company defines EBITDA to be net loss
adjusted for interest and investment income, depreciation and amortization,
interest expense, foreign currency gains and losses, equity in losses of
affiliated companies, income taxes and minority interest. The items excluded
from EBITDA are significant components in understanding and assessing the
Company's financial performance. The Company believes that EBITDA and related
measures of cash flow from operating activities serve as important financial
indicators in measuring and comparing the operating performance of media
companies. EBITDA is not a U.S.GAAP measure of loss or cash flow from operations
and should not be considered as an alternative to cash flows from operations as
a measure of liquidity.
SELECTED SEGMENT DATA
(UNAUDITED IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
D-DTH AND
CABLE PROGRAMMING CORPORATE TOTAL
----- ----------- --------- -----
THREE MONTHS ENDED MARCH 31, 1999
<S> <C> <C> <C> <C>
Revenues from external customers $ 14,783 $ 4,016 $ -- $ 18,799
Intersegment revenues -- 5,132 -- 5,132
Operating loss (4,264) (18,318) (1,661) (24,243)
EBITDA 1,685 (14,865) (1,658) (14,838)
Segment total assets 169,711 139,389 138,440 447,540
THREE MONTHS ENDED MARCH 31, 1998
Revenues from external customers $ 12,093 $ 593 $ -- $ 12,686
Intersegment revenues -- -- -- --
Operating loss (936) (10,634) (2,788) (14,358)
EBITDA 3,899 (10,520) (2,788) (9,409)
Segment total assets 196,789 60,607 46,401 303,797
</TABLE>
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis provides information concerning the
results of operations and financial condition of the Company. Such discussion
and analysis should be read in conjunction with the accompanying unaudited
consolidated financial statements of the Company. Additionally, the following
discussion and analysis should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
audited consolidated financial statements included in Part II of the Company's
1998 Annual Report. The following discussion focuses on material trends, risks
and uncertainties affecting the results of operations and financial condition of
the Company.
Certain statements in this Quarterly Report on Form 10-Q constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, that are not historical facts but rather reflect
the Company's current expectations concerning future results and events. The
words "believes," "expects," "intends," "plans," "anticipates," "likely,"
"will", "may", "shall" and similar expressions identify such forward-looking
statements. 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 entities in which the Company has
interests), or industry results, to differ materially from future results,
performance or achievements expressed or implied by such forward-looking
statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements which reflect management's view only as of the date of this Quarterly
Report on Form 10-Q. The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements which may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events, conditions or circumstances.
The risks, uncertainties and other factors that might cause such differences
include but are not limited to: (i) general economic conditions in Poland and in
the pay television business in Poland; (ii) changes in regulations the Company
operates under; (iii) uncertainties inherent in new business strategies,
including the Company's satellite television business, new product launches and
development plans, which the Company has not used before; (iv) rapid technology
changes; (v) changes in, or failure or inability to comply with government
regulations; (vi) the development and provision of programming for new
television and telecommunications technologies; (vii) the continued strength of
competitors in the multichannel video programming distribution industry and
satellite services industry and the growth of satellite delivered programming;
(viii) future financial performance, including availability, terms and
deployment of capital; (ix) the ability of vendors to deliver required
equipment, software and services on schedule at the budgeted cost; (x) the
Company's ability to attract and hold qualified personnel; (xi) changes in the
nature of strategic relationships with joint ventures; (xii) the overall market
acceptance of those products and services, including acceptance of the pricing
of those products and services; (xiii) possible interference by satellites in
adjacent orbital positions with the satellites currently being used for the
Company's satellite television business; and (xiv) acquisition opportunities.
OVERVIEW
Until the limited launch of the Company's D-DTH business on July 1, 1998 and
subsequent full-scale launch on September 18, 1998, the Company's revenues were
derived entirely from its cable television business and programming related
thereto. The Company's revenue increased 48% from $12.7 million in the three
months ended March 31, 1998 to $18.8 million in the three months ended March 31,
1999. This increase was due primarily to internal growth in subscribers through
increased penetration and new network expansion, increases in cable subscription
rates, the launch of the Wizja TV D-DTH programming package, and advertising
sales.
Prior to June 1997, the Company's expenses were primarily incurred in connection
with its cable television business and programming related thereto. Since June
1997, the Company has been incurring, in addition to expenses related to its
cable television and programming businesses, expenses in connection with the
operation of its D-DTH business and Wizja TV.
The Company generated an operating loss of $24.2 million for the three months
ended March 31, 1999, primarily due to the significant costs associated with the
Company's D-DTH and programming businesses and the development, production and
acquisition of programming for Wizja TV.
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<PAGE>
The Company divides operating expenses into (i) direct operating expenses, (ii)
selling, general and administrative expenses, and (iii) depreciation and
amortization. Direct operating expenses consist of programming expenses,
maintenance and related expenses necessary to service, maintain and operate the
Company's cable systems and D-DTH programming platform, billing and collection
expenses and customer service expenses. Selling, general and administrative
expenses consist principally of administrative costs, including office related
expenses, professional fees and salaries, wages and benefits of non-technical
employees, advertising and marketing expenses, bank fees and bad debt expense.
Depreciation and amortization consist of depreciation of property, plant and
equipment and amortization of intangible assets.
SEGMENT RESULTS OF OPERATIONS
The Company classifies its business into three segments: (1) cable television,
(2) digital direct-to-home television and programming, and (3) corporate.
Information about the operations of the Company in these different business
segments is set forth below based on the nature of the services offered. In
addition to other operating statistics, the Company measures its financial
performance by EBITDA, an acronym for earnings before interest, taxes,
depreciation and amortization. The Company defines EBITDA to be net loss
adjusted for interest and investment income, depreciation and amortization,
interest expense, foreign currency gains and losses, equity in losses of
affiliated companies, income taxes and minority interest. The items excluded
from EBITDA are significant components in understanding and assessing the
Company's financial performance. The Company believes that EBITDA and related
measures of cash flow from operating activities serve as important financial
indicators in measuring and comparing the operating performance of media
companies. EBITDA is not a U.S. GAAP measure of loss or cash flow from
operations and should not be considered as an alternative to cash flows from
operations as a measure of liquidity.
The following table presents the segment results of the Company's operations for
the three months ended March 31, 1999 and 1998.
SEGMENT RESULTS OF OPERATIONS
(unaudited, in millions of U.S. dollars)
<TABLE>
<CAPTION>
REVENUES OPERATING LOSS EBITDA
-------- -------------- ------
THREE MONTHS ENDED MARCH 31, 1999 1998 1999 1998 1999 1998
---------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CABLE 14.8 12.1 (4.3) (0.9) 1.7 3.9
D-DTH AND PROGRAMMING 9.1 0.6 (18.2) (10.7) (14.8) (10.5)
CORPORATE AND OTHER -- -- (1.7) (2.8) (1.7) (2.8)
INTER SEGMENT ELIMINATION (1) (5.1) -- -- -- -- --
---- ---- ----- ----- ----- ----
TOTAL 18.8 12.7 (24.2) (14.4) (14.8) (9.4)
---- ---- ----- ----- ----- ----
---- ---- ----- ----- ----- ----
</TABLE>
(1) Includes $5,102,000 of Wizja programming charged to the Cable Segment by the
D-DTH and Programming Segment in the three months ended March 31, 1999.
CABLE SEGMENT OVERVIEW
The Company's revenues in its cable segment have been and will continue to be
derived primarily from monthly subscription fees for cable television services
and one-time installation fees for connection to its cable television networks.
The Company charges cable subscribers fixed monthly fees for their choice of
service packages and for other services, such as premium channels, tuner rentals
and additional outlets, all of which are included in monthly subscription fees.
Through its cable segment, the Company currently offers broadcast, intermediate
(in limited areas) and basic packages of cable service. At March 31, 1999,
approximately 74.5% of the Company's cable subscribers received its basic
package. For the three months ended March 31, 1999, approximately 97% of the
Company's cable revenue was derived from monthly subscription fees compared to
approximately 92% for the three months ended March 31, 1998. Revenue from
installation fees is deferred to the extent it exceeds direct selling costs and
then amortized to income over the estimated average period that new subscribers
are expected to remain connected to the Company's cable system.
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<PAGE>
During 1998 and the first quarter of 1999, management completed several
strategic actions in support of its cable business and operating strategy. On
June 5, 1998, the Company began providing the Wizja TV programming package, with
its initial 11 channel primarily Polish-language programming, to its basic cable
subscribers. Since that date, the basic Wizja TV package has been expanded to 24
channels. Management believes that this selection of high quality primarily
Polish-language programming will provide it with a significant competitive
advantage in increasing its cable subscriber penetration rates.
The Company has implemented a pricing strategy designed to increase revenue per
cable subscriber and to achieve real profit margin increases in U.S. dollar
terms. The Company has increased the monthly price for the "basic" package to
reflect the increased channel availability, and premium channels such as the HBO
Poland service (a Polish-language version of HBO's premium movie channel) will
each be offered to cable customers for an additional monthly charge. The Company
expects that it may continue to experience increases in its churn rate above
historical levels during the implementation of its current pricing strategy. For
the three months ended March 31, 1999, the Company's churn rate increased to
4.1%. For the three months ended March 31, 1999, the Company experienced churn
in the HBO Poland service with penetration falling by 12,966 subscribers or
27.4% from March 31, 1998. The Company is planning to encrypt the HBO Poland
service on cable and install analog decoders for all premium channel subscribers
during 1999.
An analysis of quarterly cable subscriber growth is presented in the table
below:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1999 1998 1998 1998 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Homes Passed 1,624,119 1,591,981 1,565,287 1,546,540 1,505,256
Basic Subscribers 706,179 698,342 658,584 660,067 627,713
Subscriber Growth (three month period)
Organic 38,226 (1) 70,935 41,904 57,007 26,868
Through Acquisitions -- -- (10,245) (2) 1,363 16,360
Churn (30,389) (31,177) (33,142) (26,016) (22,145)
---------- ---------- ---------- ---------- ----------
TOTAL NET GROWTH 7,837 39,758 (1,483) 32,354 21,083
---------- ---------- ---------- ---------- ----------
Basic penetration 43.5% 43.9% 42.1% 42.7% 41.7%
Intermediate subscribers 33,587 40,037 42,538 43,204 48,077
---------- ---------- ---------- ---------- ----------
BASIC AND INTERMEDIATE SUBSCRIBERS 739,766 738,379 701,122 703,271 675,790
---------- ---------- ---------- ---------- ----------
Broadcast subscribers 208,457 196,961 186,334 167,859 154,860
---------- ---------- ---------- ---------- ----------
TOTAL SUBSCRIBERS 948,223 935,340 887,456 871,130 830,650
---------- ---------- ---------- ---------- ----------
Premium subscribers - HBO 34,332 36,615 39,035 45,674 47,298
Premium penetration - HBO 4.9% 5.2% 5.9% 6.9% 7.5%
Basic revenue / basic sub./month $ 6.20 $ 5.69 $ 5.19 $ 4.99 $ 5.19
Total revenue/ basic sub/month $ 6.97 $ 6.75 $ 6.42 $ 6.08 $ 6.42
</TABLE>
(1) The increase in basic subscribers for the three months ended March 31,
1999 included 4,121 subscribers in Szczecin that switched from the
"intermediate" to the "basic" package.
(2) As part of the purchase of a minority interest in one of the Company's
cable systems, the Company sold an isolated part of that system to the
previous owner.
15
<PAGE>
CABLE TELEVISION REVENUE. Revenue increased $2.7 million or 22.3% from $12.1
million in the three months ended March 31, 1998 to $14.8 million in the three
months ended March 31, 1999. This increase was primarily attributable to a 9.5%
increase in the number of basic and intermediate subscribers from approximately
676,000 at March 31, 1998 to approximately 740,000 at March 31, 1999, as well as
an increase in monthly subscription rates. The increase in basic and
intermediate subscribers was primarily due to build-out of the Company's
existing cable networks.
Revenue from monthly subscription fees represented 91.6% and 97.2% of cable
television revenue for the three months ended March 31, 1998 and 1999,
respectively. During the three months ended March 31, 1999, the Company
generated approximately $0.6 million of premium subscription revenue as a result
of providing the HBO Poland service pay movie channel to cable subscribers as
compared to $0.8 million for the three months ended March 31, 1998.
DIRECT OPERATING EXPENSES. Direct operating expenses increased $6.4 million, or
173.0%, from $3.7 million for the three months ended March 31, 1998 to $10.1
million for the three months ended March 31, 1999, principally as a result of
the purchase of the Wizja TV programming package for approximately $5.1 million
from the Company's D-DTH and Programming segment as well as the increased size
of the Company's cable television system. Direct operating expenses increased
from 30.6% of revenues for the three months ended March 31, 1998 to 68.3% of
revenues for the three months ended March 31, 1999. However, without
considering the programming cost for the purchase of the Wizja programming
package recorded in 1999 the comparison would have been 30.6% and 33.8% for
the three months ended March 31, 1998 and 1999 respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $1.5 million or 33% from $4.5 million for the
three months ended March 31, 1998 to $3.0 million for the three months ended
March 31, 1999. This decrease was attributable to operating efficiencies
realized by the Company in the three months ended March 31, 1999. As a
percentage of revenue, selling, general and administrative expenses decreased
from 37.2% for the three months ended March 31, 1998 to approximately 20.3% for
the three months ended March 31, 1999.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense rose $1.1
million, or 22.9%, from $4.8 million for the three months ended March 31, 1998
to $5.9 million for the three months ended March 31, 1999, principally as a
result of depreciation and amortization of additional cable television systems
and related goodwill acquired and the continued build-out of the Company's cable
networks. Depreciation and amortization expense as a percentage of revenues
increased from 40.0% for the three months ended March 31, 1998 to 40.2% for the
three months ended March 31, 1999.
Each of these factors contributed to an operating loss of $0.9 million and $4.2
million for the three months ended March 31, 1998 and 1999, respectively.
D-DTH AND PROGRAMMING SEGMENT OVERVIEW
D-DTH. The principal objectives of the Company for the D-DTH and programming
segment is to develop, acquire and distribute high-quality Polish-language
programming that can be commercially exploited throughout Poland through D-DTH
and cable television exhibition, and to develop and maximize advertising sales.
The Company's D-DTH roll-out strategy was to lease D-DTH Reception Systems to
initial subscribers at promotional prices in the start-up phase of its D-DTH
service. The launch of its D-DTH service has been supported by the Company's
development of the Wizja TV programming package, which the Company believes
addresses the demand for high-quality Polish-language programming in Poland.
Subsequent to March 31, 1999 the Company began selling, instead of leasing D-DTH
reception systems to consumers.
As of March 31, 1999, the Company had sold to Philips' authorized retailers
approximately 137,600 D-DTH packages, which include the rental of the D-DTH
reception system, installation and a one-year subscription to the Company's
D-DTH service. As of March 31, 1999, Philips had sold and installed
approximately 130,000 of these packages to consumers. In September 1998, the
number of Philips authorized electronics retailers distributing the Wizja TV
package increased from 70 to 550, and since November more than 1,200 retailers
have been distributing the Wizja TV package. Each store is staffed with
personnel specifically trained by the Company to provide information on the
Wizja TV packages. Installation personnel are also trained to complete each
customer's installation within 48 hours of order placement.
PROGRAMMING. The Company, both directly and through other joint ventures,
produces television programming for distribution. The Company has developed a
multi-channel, primarily Polish-language programming platform under the brand
name Wizja TV. Wizja TV's current channel line-up includes four channels, Atomic
TV, Wizja 1, Wizja Pogoda and Twoja Wizja, that are owned and operated by the
Company, and 20 channels that are produced by third parties, 11 of which are
broadcast under exclusive agreements for pay television in Poland.
The Company currently distributes Atomic TV and intends to distribute the Wizja
TV programming package to third party cable operators in Poland on a
per-subscriber fee basis. The Company exchanged letters and continue
negotiations with two major cable
16
<PAGE>
associations in Poland, representing an aggregate of approximately 2.6 million
subscribers (including the Company's cable subscribers), with the objective of
making the Wizja TV programming package available for distribution within the
cable networks of other providers which are members of the associations.
The Company expects to incur substantial operating losses and negative cash
flows related to the launch of its D-DTH business for at least the next two
years while it develops and expands its D-DTH subscriber base. To date, the
Company has relied primarily on funds raised in its initial public equity
offering in August 1997, its 14 1/2% Senior Discount Notes offering in July
1998, its Series C Senior Discount Notes offering in January 1999, its 14 1/2%
Senior Discount Notes offering in January 1999, and its Cumulative Preference
Shares offering in January 1999 to fund the development of its D-DTH business.
The Company's D-DTH business plan requires substantial capital expenditures to
fund, among other things, the promotional incentives that are anticipated to be
required to expand its D-DTH business. The Company's business plan anticipates
spending up to approximately $150 million to provide D-DTH reception systems to
the 380,000 initial subscribers at a price that is significantly decreased by
promotional incentives in order to increase the number of subscribers.
An analysis of D-DTH subscribers is presented in the table below:
@ ENTERTAINMENT, INC.
Summary of Selected Operating Statistics
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30,
D-DTH 1999 1998 1998
------- ------- ------
<S> <C> <C> <C>
Satellite receiver packages sold to dealers 137,629 125,167 34,699
Installed subscribers 130,000 95,378 23,390
Churn -- --
TOTAL SUBSCRIBERS 130,000 95,378 23,390
Premium subscribers - HBO - promotional (1) 56,162 76,633 23,390
Premium subscribers - HBO - paying 58,705 15,555 --
HBO churn (2) 15,133 3,190 --
HBO churn 25.8% 20.5% --
</TABLE>
(1) From July 5, 1998 to March 31, 1999 the Company offered a three-month
trial period of the HBO Poland service to each new D-DTH subscriber.
From April 1, 1999, this was changed to a one-month trial period of the
HBO Poland service for each new D-DTH subscriber.
(2) The churn figures relate only to paying subscribers.
D-DTH AND PROGRAMMING REVENUE. D-DTH and programming revenue amounted to $0.6
million and $9.1 million for the three months ended March 31, 1998 and 1999,
respectively. Since the Company only commenced the broadcast of its Wizja TV
programming package over its cable systems on June 5, 1998 and through its D-DTH
service in July 1998, no subscription revenue related to this segment existed
for the three months ended March 31, 1998.
Revenue from monthly subscription fees, after elimination of inter-segment
revenue from Poland Communications, Inc., a wholly owned subsidiary of the
Company ("PCI"), represented 89% of D-DTH and programming revenue for the three
months ended March 31, 1999. Advertising revenue for the three months ended
March 31, 1999 represented 11% of D-DTH and programming revenue after the
inter-segment elimination.
Revenue from the supply of the Wizja TV programming package to the Company's
cable systems, which eliminates on consolidation, represented $5.1 million of
D-DTH and programming revenue for the three months ended March 31, 1999.
17
<PAGE>
DIRECT OPERATING EXPENSES. Direct operating expenses increased $8.1 million, or
165.3%, from $4.9 million for the three months ended March 31, 1998 to $13.0
million for the three months ended March 31, 1999. These increases principally
were the result of a $9.1 million increase in programming costs and a $1.0
million decrease in maintenance expenses associated with the establishment of a
satellite up-link and studio facility located in Maidstone, United Kingdom, and
costs associated with the lease of three transponders on the Astra satellites
which provide the capability to deliver the Company's Polish-language
programming platform to cable and D-DTH customers in Poland. The decrease in
maintenance expenses was the result of non-recurring start-up costs for the
Wizja TV programming platform. Direct operating expenses amounted to 142.9% of
revenues for the three months ended March 31, 1999 compared to 122.4% revenues
for the three months ended March 31, 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $4.8 million or 77.4% from $6.2 million for
the three months ended March 31, 1998 to $11.0 million for the three months
ended March 31, 1999. As a percentage of revenue, selling, general and
administrative expenses amounted to approximately 127% for the three months
ended March 31, 1999. The increase in selling, general and administrative
expenses over the corresponding 1998 period was attributable mainly to sales and
marketing expenses associated with promotion of the Company's D-DTH service and
Wizja TV programming platform, an increase in the number of administrative staff
associated with the Maidstone facility and the Wizja TV programming platform, as
well as an increase in professional fees associated with obtaining long-term
programming contracts and broadcast/exhibition rights.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization charges of D-DTH
tangible assets increased $3.3 million from $0.1 million for the three months
ended March 31, 1998 to $3.4 million for the three months ended March 31, 1999.
Depreciation and amortization expense as a percentage of revenues amounted to
38% for the three months ended March 31, 1999. This primarily relates to D-DTH
production equipment and decoders leased to consumers.
Each of these factors contributed to an operating loss of $18.3 million for the
three months ended March 31, 1999, compared to an operating loss of $10.6
million for the three months ended March 31, 1998.
CORPORATE SEGMENT OVERVIEW
Corporate segment consists of corporate overhead costs. The Company continues to
evaluate opportunities for improving its operations and reducing its cost
structure. Corporate expenses amounted to $1.7 million for the three months
ended March 31, 1999 as compared to $2.8 million for the corresponding period in
1998, the reduction being due to non-recurring fees and costs related to merger
negotiations in 1998.
NON-OPERATING RESULT
INTEREST EXPENSE. Interest expense increased $8.1 million, or 218.9%, from $3.7
million for the three months ended March 31, 1998 to $11.8 million for the three
months ended March 31, 1999. Interest expense increased mainly as a result of
the accretion of interest of the $252 million aggregate principal amount at
maturity of the Company's 14 1/2% Senior Discount Notes due 2008, which were
issued on July 14, 1998, $256.8 million aggregate principal amount at maturity
of the Company's 14 1/2% Senior Discount Notes due 2009, which were issued on
January 22, 1999 and $36.0 million aggregate principal amount at maturity of the
Company's 7% Series C Senior Discount Notes due 2008 issued on January 20, 1999.
INTEREST AND INVESTMENT INCOME. Interest and investment income increased $0.6
million, or 66.7%, from $0.9 million for the three months ended March 31, 1998
to $1.5 million for the three months ended March 31, 1999, primarily due to
investment of part of the proceeds from the notes and preferred stock issuances.
EQUITY IN PROFITS OF AFFILIATED COMPANIES. The Company recorded $1.0 million of
equity in profits of affiliated companies for the three months ended March 31,
1999 compared to $0.3 of equity in profits of affiliated companies for the three
months ended March 31, 1998. The profit, which relates to write-up of funds
provided to Fox Kids Poland, amounted to approximately net $1.3 million expensed
in 1998 and $0.3 million amortization of goodwill of the Company's 50%
investment in Twoj Styl, a publishing company.
FOREIGN EXCHANGE LOSS, NET. For the three months ended March 31, 1999, foreign
exchange loss amounted to $1.0 million, primarily due to the 12.6% appreciation
of the U.S. dollar against the Polish zloty in the first quarter of 1999.
MINORITY INTEREST. Minority interest in subsidiary loss was $0.1 million for the
three months ended March 31, 1998, compared to minority interest in subsidiary
income of null for the corresponding period in 1999.
NET LOSS. For the three months ended March 31, 1998 and 1999, the Company had
net losses of $17.3 million and $33.6 million, respectively. These losses were
the result of the factors discussed above.
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<PAGE>
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS. Net loss applicable to common
stockholders increased from a loss of $17.3 million for the three months ended
March 31, 1998 to a loss of $34.4 million for the three months ended March 31,
1999 due to the accreted dividends on preferred stock and the factors discussed
above. For the three months ended March 31, 1999, net loss applicable to common
stockholders included $0.8 million related to the accretion of redeemable
preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
The Company has met its cash requirements in recent years primarily with (i)
capital contributions and loans from certain of the Company's principal
stockholders, (ii) borrowings under available credit facilities, (iii) cash
flows from operations, (iv) the sale by PCI of $130 million of 9 7/8% Senior
Notes due 2003 and 9 7/8% Series B Senior Notes due 2003 (collectively, the "PCI
Notes"), (v) the sale of approximately $200 million of common stock through the
Company's initial public equity offering in August 1997 and (vi) the sale of
$252 million at maturity of 14 1/2% Senior Discount Notes due 2008 in July 1998.
On January 19, 1999 the Company sold $36,001,321 principal amount at maturity of
its Series C Senior Discount Notes due 2008 to an initial purchaser pursuant to
a purchase agreement for gross proceeds of approximately $9.8 million. The
Series C Senior Discount Notes were issued pursuant to an indenture.
On January 22, 1999 the Company also sold $256.8 million principal amount at
maturity of its 14 1/2% Senior Discount Notes due 2009 to initial purchasers
pursuant to a purchase agreement for gross proceeds of approximately $96.0
million. The 14 1/2% Senior Discount Notes were issued pursuant to an indenture.
Pursuant to the indentures governing the PCI Notes, the 14 1/2% Senior Discount
Notes sold on July 14, 1998 and the Series C Senior Discount Notes sold on
January 19, 1999 and the 14 1/2% Senior Discount Notes sold on January 22, 1999,
the Company is subject to certain restrictions and covenants, including, without
limitation, covenants with respect to the following matters:
a) limitation on indebtedness;
b) limitation on restricted payments;
c) limitation on issuances and sale of capital stock of restricted
subsidiaries;
d) limitation on transactions with affiliates;
e) limitation on liens;
f) limitation of guarantees of indebtedness by subsidiaries;
g) purchase of the notes upon a change of control;
h) limitation on sale of assets;
i) limitation on dividends and other payment restrictions affecting
restricted subsidiaries;
j) limitation on investments in unrestricted subsidiaries;
k) consolidations, mergers, and sale of assets; and
l) limitation on lines of business.
The Company is in compliance with these covenants.
On January 22, 1999 the Company also sold Series A 12% Cumulative Preference
Shares, Series B 12% Cumulative Preference Shares and Warrants to Morgan
Grenfell Private Equity Ltd. and to certain members of the Chase Family, with
gross proceeds of approximately $48.2 million.
The Company had negative cash flows from operating activities for the three
months ended March 31, 1998 and 1999 of $11.8 million and $20.3 million,
respectively, due to the significant operating costs associated with the
promotion and operation of its D-DTH service and the Wizja TV programming
package.
Cash used for the purchase and build-out of the Company's cable television
networks, D-DTH equipment and the purchase of other property, plant and
equipment was $18.0 million in the three months ended March 31, 1999 and $23.1
million in the corresponding period in 1998. The decrease primarily relates to
the purchase of fixed assets related to the development of the Maidstone uplink
facility for the three months ended March 31, 1998. Cash used for the
acquisition of subsidiaries, net of cash received, was $0 million and $10.8
million for the three months ended March 31, 1999 and 1998, respectively.
19
<PAGE>
At March 31, 1999, the Company was committed to pay at least approximately $539
million in guaranteed payments (including but not limited to payments for the
D-DTH Reception Systems and payments of guaranteed minimum amounts due under
programming agreements and satellite transponder leases) over the next nine
years, of which at least approximately $225 million was committed through the
end of 2000. These payments may increase if the Company enters into additional
programming agreements.
The Company intends to use:
- - the net proceeds of its sale of the 14 1/2% Senior Discount Notes due
2009, which was approximately $96.0 million (after deducting offering
expenses and the initial purchasers' discount),
- - the net proceeds of the sale of the Series A 12% Cumulative Preference
Shares, the Series B 12% cumulative Preference Shares and Warrants,
which was approximately $48.2 million (after deducting offering
expenses and commissions), and
- - the net proceeds of the sale of the Series C Senior Discount Notes,
which was approximately $9.5 million (after deducting offering expenses
and the initial purchaser's discount)
for the following purposes:
- - to fund capital expenditures, operating losses and working capital
primarily related to the development and operation of its D-DTH
business, and
- - for general corporate purposes and certain other investments, including
the possible acquisition of cable television networks and certain
minority interests in subsidiaries which are held by unaffiliated third
parties.
In the event that the Company and TKP are able to reach an agreement regarding a
joint venture, investment or some other form of cooperation, the Company's use
of net proceeds from these three recent offerings may be reallocated and some
portion thereof may be used to fund participation in a joint venture.
The Company believes that the net proceeds of these three recent offerings and
cash on hand will provide the Company with sufficient capital to fulfill its
current business plan and to fund these commitments until it achieves positive
cash flow from operations. The Company expects that it will require additional
external funding for its business development plan in years subsequent to 1999
if it continues to provide D-DTH reception systems (other than the 380,000
initial subscribers) at the promotional prices the Company is now charging in
the start-up phase of its D-DTH service. The Company will need to attract a
substantial number of additional D-DTH subscribers beyond the 380,000 initial
subscribers in order to repay principal and interest on its outstanding notes.
Future sources of financing for the Company could include public or private debt
or equity offerings or bank financing or any combination thereof, subject to the
restrictions contained in the indentures governing the Company's senior
indebtedness.
Moreover, if the Company's plans or assumptions change, if its assumptions prove
inaccurate, if it consummates unanticipated investments in or acquisitions of
other companies, if it experiences unexpected costs or competitive pressures, or
if the net proceeds from its recent offerings, existing cash, and projected cash
flow from operations prove to be insufficient, the Company may need to obtain
greater amounts of additional financing. While it is the Company's intention to
enter only into new financing or refinancing that it considers advantageous,
there can be no assurance that such sources of financing would be available to
the Company in the future, or, if available, that they could be obtained on
terms acceptable to the Company.
YEAR 2000 COMPLIANCE
The Company's cable television, D-DTH and programming operations are dependent
upon computer systems and other technological devices with imbedded
microprocessor chips that are intended to utilize dates and process data beyond
December 31, 1999. In January 1997, the Company developed a plan to address the
impact that potential year 2000 problems may have on Company operations and to
implement necessary changes to address such problems (the "Y2K Plan"). During
the course of the development of its Y2K Plan, the Company has identified
certain critical operations, which need to be year 2000 compliant for the
Company to operate effectively. These critical operations include accounting and
billing systems, customer service and service delivery systems, and field and
headend devices.
Largely as a result of its high rate of growth over the past few years, the
Company has entered into an agreement to purchase a new system to replace its
current accounting system and an agreement to purchase specialized billing
software for the Company's new customer service and billing center. The vendors
of new the accounting system and of the billing software have confirmed to
20
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the Company that these products are year 2000 compliant. The Company has
completed the testing phase of the new accounting system, and the implementation
phase was substantially completed at the end of 1998. The Company has
implemented the new billing software for D-DTH subscribers and expects
implementation of the billing software to be completed for the majority of its
cable subscribers by the end of 1999.
The Company believes that its most significant year 2000 risk is its dependency
upon third party programming, software, services and equipment, because the
Company does not have the ability to control third parties in their assessment
and remediation procedures for potential year 2000 problems. Should these
parties not be prepared for year 2000 conversion, their products or services may
fail and may cause interruptions in, or limitations upon, the Company's
provision of the full range of its D-DTH and/or cable service to its customers.
In an effort to prevent any such interruptions or limitations, the Company is in
the process of communicating with each of its material third party suppliers of
programming, software, services and equipment to determine the status of their
year 2000 compliance programs. The Company expects to complete this process by
September 30, 1999, and it anticipates that all phases of its Y2K Plan will be
completed by December 31, 1999.
The Company has not yet developed a contingency plan to address the situation
that may result in the Company or its third party suppliers are unable to
achieve year 2000 compliance with regard to any products or services utilized in
the Company's operations. The Company does not intend to decide on the
development of such a contingency until has gathered all of the relevant Year
2000 compliance data from its third party suppliers.
The Company has not yet determined the full cost of its Y2K Plan and its related
impact on the financial condition of the Company. The Company has to date not
incurred any replacement and remediation costs for equipment or systems as a
result of year 2000 non-compliance. Rather, due to the rapid growth and
development of its cable system and its D-DTH service, the Company had made
substantial capital investments in equipment and systems for reasons other than
year 2000 concerns. The total cost of the Company's new accounting system and
billing software package is estimated to be approximately $2,400,000.
The Company believes that any year 2000 compliance issues it may face can be
remedied without a material financial impact on the Company, but no assurance
can be made in this regard until all of the data has been gathered from the
Company's third party suppliers. At this date the Company cannot predict the
financial impact on its operations if year 2000 problems are caused by products
or services supplied to the Company by such third parties.
CURRENT OR ACCUMULATED EARNINGS AND PROFITS
For the three months ended March 31, 1999, the Company had no current or
accumulated earnings and profits. Therefore, none of the interest which accreted
during the three months ended March 31, 1999 with respect to the Company's 14
1/2% Senior Discount Notes due 2008 and its 14 1/2% Series B Discount Notes due
2008, will be deemed to be a "Dividend Equivalent Portion" as such term is
defined in Section 163(e)(5)(B) of the Internal Revenue Code, as amended.
IMPACT OF NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" which establishes
standards of accounting for these transactions. SFAS No. 133 is effective for
the Company beginning on July 1, 1999. The Company currently has no derivative
instruments or hedging activities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
The principal market risk (i.e., the risk of loss arising from adverse changes
in market rates and prices) to which the Company is exposed is foreign exchange
rate risk from fluctuations in the Polish zloty currency exchange rate. The
Company's long term debt is primarily subject to a fixed rate, and therefore
variations in the interest rate do not have a material impact on net interest
expense.
FOREIGN EXCHANGE AND OTHER INTERNATIONAL MARKET RISKS
Operating in international markets involves exposure to movements in currency
exchange rates. Currency exchange rate movements typically affect economic
growth, inflation, interest rates, governmental actions and other factors. These
changes, if material, can cause the Company to adjust its financing and
operating strategies. The discussion of changes in currency exchange rates below
does not incorporate these other important economic factors.
International operations constitute 100% of the Company's consolidated operating
loss for the quarter ended March 31, 1999. Some of the Company's operating
expenses and capital expenditures are expected to continue to be denominated in
or indexed in U.S. dollars. By contrast, substantially all of the Company's
revenues are denominated in zloty. Therefore, any devaluation of the
21
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zloty against the U.S. dollar that the Company is unable to offset through price
adjustments will require it to use a larger portion of its revenue to service
its U.S. dollar denominated obligations and contractual commitments.
The Company estimates that a further 10% change in foreign exchange rates would
impact reported operating loss by approximately $0.4 million. In other terms a
10% depreciation of the Polish zloty and British pound against the U.S. dollar,
would result in a $0.4 million decrease in the reported operating loss. This was
estimated using 10% of the Company's operating loss after adjusting for unusual
impairment and other items including U.S. dollar denominated or indexed
expenses. The Company believes that this quantitative measure has inherent
limitations because, as discussed in the first paragraph of this section, it
does not take into account any governmental actions or changes in either
customer purchasing patterns or the Company's financing or operating strategies.
The Company does not generally hedge translation risk. While the Company may
consider entering into transactions to hedge the risk of exchange rate
fluctuations, there is no assurance that it will be able to obtain hedging
arrangements on commercially satisfactory terms. Therefore, shifts in currency
exchange rates may have an adverse effect on the Company's financial results and
on its ability to meet its U.S. dollar denominated debt obligations and
contractual commitments.
Poland has historically experienced high levels of inflation and significant
fluctuations in the exchange rate for the zloty. The Polish government has
adopted policies that slowed the annual rate of inflation from approximately
250% in 1990 to approximately 20% in 1996, approximately 14.9% in 1997, and
approximately 11.8% in 1998. The rate of inflation for the three months ended
March 31, 1999 was approximately 6.2%. The exchange rate for the zloty has
stabilized and the rate of devaluation of the zloty has generally decreased
since 1991 and the zloty has appreciated against the U.S. dollar by
approximately 0.4% for the year ended December 31, 1998. For the first quarter
of 1999 the zloty has depreciated against the U.S. dollar by approximately 13%.
Inflation and currency exchange fluctuations may have, a material adverse effect
on the business, financial condition and results of operations of the Company.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation from time to time in the ordinary
course of business. In management's opinion, the litigation in which the
Company is currently involved, individually and in the aggregate, is not
material to the Company's business, financial condition or results of
operations. See also Note 10 to the unaudited consolidated financial
statements, for a description of the Company's arbitration relating to TKP.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS:
On January 20, 1999, the Company sold $36,001,321 aggregate principal amount at
maturity of its Series C Notes due 2008 to Merrill Lynch International. The
Series C Notes are senior unsecured obligations of the Company ranking PARI
PASSU in right of payment with all other existing and future unsubordinated
obligations of the Company. The Series C Notes were issued at a discount to
their aggregate principal amount at maturity and generated gross proceeds to the
Company of approximately $9.8 million. Net proceeds to the Company after
deducting the initial purchaser's discount and offering expenses were
approximately $9.5 million.
On January 22, 1999, the Company sold 256,800 Units to Merrill Lynch & Co and
Deutsche Bank Securities pursuant to a purchase agreement, each Unit consisting
of $1,000 principal amount at maturity of 14 1/2% Senior Discount Notes due 2009
and four warrants, each initially entitling the holder thereof to purchase
1.7656 shares of common stock, par value $0.01 per share at an exercise price of
$19.125 per share, subject to adjustment. Net proceeds to the Company after
deducting initial purchasers' discount and offering expenses were approximately
$96,000,000.
The Company filed a registration statement in connection with a proposed offer
to exchange its 14 1/2 % Senior Discount Notes due 2009 (each an "Exchange
Note") for each of its outstanding Notes. The form and terms of the Exchange
Notes will be substantially the same as the form and terms of the Old Notes
except that the Exchange Notes were registered under the Securities Act. The
Exchange Notes were registered under the Securities Act on a registration
statement on Form S-4, which registration statement was declared effective on
May 13, 1999. The exchange offer relating to the Exchange Notes has commenced
and is scheduled to expire on June 17, 1999, unless extended.
On January 22, 1999, the Company also sold 45,000 Series A 12% Cumulative
Preference Shares, $0.01 par value, 5,000 Series B 12% Cumulative Preference
Shares, $0.01 par value, and warrants, each warrant entitling the holder
thereof to
22
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purchase 110 shares of common stock, par value $0.01, at an exercise price of
$10 per share to Morgan Grenfell Private Equity Ltd. and certain members of the
Chase Family, with gross proceeds of approximately $50.0 million. Net proceeds
to the Company after deducting the initial purchaser's discount was
approximately $48.2 million.
These securities (other than the Exchange Notes) were sold to the initial
purchasers pursuant to Section 4(2) of the Securities Act and subsequent sales
of the securities were made pursuant to Rule 144A of the Securities Act.
The Company intends to use:
- - the net proceeds of its sale of the 14 1/2% Senior Discount Notes due
2009, which was approximately $96.0 million (after deducting offering
expenses and the initial purchasers' discount),
- - the net proceeds of the sale of the Series A 12% Cumulative Preference
Shares, the Series B 12% cumulative Preference Shares and Warrants,
which was approximately $48.2 million (after deducting offering
expenses and commissions), and
- - the net proceeds of the sale of the Series C Senior Discount Notes,
which was approximately $9.5 million (after deducting offering expenses
and the initial purchaser's discount)
for the following purposes:
- - to fund capital expenditures, operating losses and working capital
primarily related to the development and operation of its D-DTH
business, and
- - for general corporate purposes and certain other investments, including
the possible acquisition of cable television networks and certain
minority interests in subsidiaries which are held by unaffiliated third
parties.
In the event that the Company and TKP are able to reach an agreement regarding a
joint venture, investment or some other form of cooperation, the Company's use
of net proceeds from these three recent offerings may be reallocated and some
portion thereof may be used to fund participation in a joint venture.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION:
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.2 Amended and Restated By-Laws of @Entertainment, Inc., (Incorporated by
reference to Exhibit 3.2 of @Entertainment's Form S-4, Registration No.
333-72361).
4.1 Form of Indenture dated as of January 20, 1999 between @Entertainment and
Bankers Trust Company relating to @Entertainment's Series C Senior Discount
Notes due 2008.
4.2 Form of Indenture dated as of January 27, 1999 between @Entertainment and
Bankers Trust Company relating to @Entertainment's 14 1/2% Senior Discount Notes
due 2009 and its 14 1/2% Series B Senior Discount Notes due 2009.
4.3 Warrant Agreement, dated as of January 27, 1999 by and between
@Entertainment and Bankers Trust Company, relating to 1,027,200 warrants to
purchase an aggregate of 1,813,665 shares of Common Stock. (Incorporated by
reference to Exhibit 4.6 to @Entertainment's Annual Report on Form 10-K).
4.4 Form of Preference Warrant Agreement, dated as of January 27, 1999 by and
between @Entertainment and Bankers Trust Company, relating to 5,500,000 warrants
to purchase an aggregate of 5,500,000 shares of Common Stock.
23
<PAGE>
4.5 Form of Registration Rights Agreement, dated January 27, 1999 among
@Entertainment and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, and Deutsche Bank Securities Inc.
4.6 Preference Registration Rights Agreement, dated as of January 27, 1999 among
@Entertainment and Morgan Grenfell Private Equity Limited on behalf of Morgan
Grenfell Development Capital Syndication Limited, Arnold Chase, Cheryl Chase,
Rhoda Chase and The Darland Trust. (Incorporated by referenced to Exhibit 4.11
to @Entertainment's Annual Report on Form 10-K).
4.7 Warrant Registration Rights Agreement dated as of January 27, 1999 between
@Entertainment and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Deutsche Bank Securities and Deutsche Bank Securities Inc.
(Incorporated by referenced to Exhibit 4.13 to @Entertainment's Annual Report on
Form 10-K).
4.8 Form of Preference Warrant Registration Rights Agreement, dated as of
January 27, 1999 among @Entertainment and Morgan Grenfell Private Equity Limited
on behalf of Morgan Grenfell Development Capital Syndication Limited, Arnold
Chase, Cheryl Chase, Rhoda Chase and The Darland Trust.
4.9 Certificate of Designations, Preferences and Rights of Series A 12%
Cumulative Preference Shares and Series B 12% Cumulative Preference Shares.
(Incorporated by referenced to Exhibit 4.15 to @Entertainment's Annual Report on
Form 10-K).
10.1 Purchase Agreement dated January 19, 1999 between @Entertainment and
Merrill Lynch International relating to @Entertainment's Series C Senior
Discount Notes due 2008.(Incorporated by referenced to Exhibit 10.4 to
@Entertainment's Annual Report on Form 10-K).
10.2 Purchase Agreement dated January 22, 1998 between @Entertainment and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and
Deutsche Bank Securities Inc. relating to 256,800 units consisting of 14 1/2%
Senior Discount Notes due 2009 and 1,027,000 warrants to purchase an aggregate
of 1,813,665 shares of Common Stock.(Incorporated by referenced to Exhibit 1.1
to @Entertainment's Registration Statement on Form S-4, Registration No.
333-72361).
10.3 Form of Purchase Agreement dated January 22, 1999, between
@Entertainment and Arnold Chase, Cheryl Chase, and Rhoda Chase relating to
5,000 shares of Series B 12% Cumulative Preference Stock and 5,000 warrants
to purchase an aggregate of 550,000 shares of Common Stock.
10.4 Form of Purchase Agreement dated January 22, 1999, between @Entertainment
and Morgan Grenfell Private Equity Limited on behalf of Morgan Grenfell
Development Capital Syndication Limited relating to 45,000 shares of Series A
12% Cumulative Preference Stock and 45,000 Warrants to Purchase an Aggregate of
4,950,000 Shares of Common Stock.
10.5 Employment Agreement dated as of December 14, 1998, by and between
Warren L. Mobley, Jr. and PCI. (Incorporated by reference to Exhibit 10.41 to
@Entertainment's Registration Statement on Form S-4, Registration No.
333-72361.)
10.6 Stock Option Agreement dated as of December 14, 1998 between Warren L.
Mobley, Jr. and @Entertainment. (Incorporated by reference to Exhibit 10.42
to @Entertainment's Registration Statement on Form S-4, Registration
No. 333-72361)
11 Statement re computation of per share earnings (contained in Note 3 to
Unaudited Financial Statements in this Quarterly Report on Form 10-Q)
27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company filed the following Reports on Form 8-K during the quarter ended
March 31, 1999:
Report on Form 8-K , filed on January 14, 1999, regarding a press release dated
January 13, 1999 relating to the Company's proposed sale of preferred stock to
Morgan Grenfell Private Equity Ltd.
Report on Form 8-K, filed on January 25, 1999, regarding a press release dated
January 25, 1999 relating to the announcement of entering into agreements for
the Company's debt offering with gross proceeds of approximately $100 million
and an offering of preferred stock of $50 million.
Report on Form 8-K, filed on February 1, 1999, regarding a press release dated
January 29, 1999, relating to the announcement of the Company's completion of a
debt offering with gross proceeds of approximately $100 million and an offering
of preferred stock of $50 million.
Report on Form 8-K, filed on February 23, 1999, a press release dated February
23, 1999, relating to the Company's financial
24
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results for the quarter and year ended December 31, 1998.
25
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
@ ENTERTAINMENT, Inc.
By: /s/ Robert E. Fowler, III
------------------------------
Robert E. Fowler, III
Chief Executive Officer
By: /s/ Donald Miller-Jones
------------------------------
Donald Miller-Jones
Chief Financial Officer,
Vice President and Treasurer
DATE: May 17, 1999
26
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Exhibit 4.1
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
@ENTERTAINMENT, INC.
TO
BANKERS TRUST COMPANY
Trustee
--------------------
INDENTURE
Dated as of January 20, 1999
---------------------
$36,001,321 aggregate principal amount at maturity
Series C Senior Discount Notes due 2008
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
@ENTERTAINMENT, INC.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT
OF 1939 AND INDENTURE, DATED AS OF JANUARY 20, 1999
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
----------- -----------------
<S> <C>
310(a)(1) ......................................................... 607
(a)(2) ......................................................... 607
(b) ......................................................... 608
312(c) ......................................................... 701
314(a) ......................................................... 703
(a)(4) ......................................................... 1008(a)
(c)(1) ......................................................... 102
(c)(2) ......................................................... 102
(e) ......................................................... 102
315(b) ......................................................... 601
316(a)(last
sentence) ......................................................... 101 ("Outstanding")
(a)(1)(A) ......................................................... 502, 512
(a)(1)(B) ......................................................... 513
(b) ......................................................... 508
(c) ......................................................... 104(d)
317(a)(1) ......................................................... 503
(a)(2) ......................................................... 504
(b) ......................................................... 1003
318(a) ......................................................... 111
</TABLE>
- --------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PARTIES .............................................................................1
RECITALS OF THE COMPANY .............................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS ...................................................1
Accreted Value ..............................................................2
Acquired Indebtedness .......................................................3
Act .........................................................................3
Advent ......................................................................3
Affiliate ...................................................................3
Annualized Pro Forma Consolidated Operating Cash Flow .......................3
Asset Acquisition ...........................................................4
Asset Sale ..................................................................4
Average Life ................................................................5
Bankruptcy Law ..............................................................5
Board of Directors ..........................................................5
Board Resolution ............................................................5
Business Day ................................................................5
Cable Television Newco ......................................................5
Cable/Telecommunications Business ...........................................5
Capital Stock ...............................................................6
Capitalized Lease Obligation ................................................6
Cash Equivalents ............................................................6
Change of Control ...........................................................6
Commission ..................................................................7
Common Stock ................................................................7
Company .....................................................................7
Company Request or Company Order.............................................8
Consolidated Income Tax Expense..............................................8
Consolidated Interest Expense................................................8
Consolidated Net Income......................................................8
Consolidated Operating Cash Flow.............................................9
Corporate Trust Office.......................................................9
</TABLE>
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
<TABLE>
<S> <C>
Corporation..................................................................9
Cumulative Available Cash Flow...............................................9
Currency Agreement..........................................................10
Default.....................................................................10
Defaulted Interest..........................................................10
Depositary..................................................................10
Disinterested Director......................................................10
DTH Business................................................................10
ECO.........................................................................10
Entertainment/Programming Business..........................................10
Event of Default............................................................10
Exchange Act................................................................10
Exchange Offer..............................................................10
Exchange Offer Registration Statement.......................................11
Exchange Securities.........................................................11
Fair Market Value...........................................................11
Federal Bankruptcy Code.....................................................11
Generally Accepted Accounting Principles....................................11
GAAP........................................................................11
Global Security.............................................................11
guarantee...................................................................11
Holder......................................................................11
Incur" or "incur............................................................11
Indebtedness................................................................12
Indenture...................................................................13
Initial Securities..........................................................13
Interest Payment Date.......................................................13
Interest Rate Agreements....................................................13
Investment..................................................................13
Issue Date..................................................................13
Lien........................................................................13
Majority Owned Restricted Subsidiary........................................13
Management Agreement........................................................14
Management Company..........................................................14
Maturity....................................................................14
Moody's.....................................................................14
Net Cash Proceeds...........................................................14
Officers Certificate........................................................15
Opinion of Counsel..........................................................15
Organizational Contract.....................................................15
Outstanding.................................................................15
Overhead Agreement..........................................................16
Pari Passu Indebtedness.....................................................16
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Paying Agent................................................................16
PCBV........................................................................16
PCI.........................................................................17
PCI Indenture...............................................................17
Permitted Holders...........................................................17
Permitted Indebtedness......................................................17
Permitted Investments.......................................................20
Permitted Liens.............................................................20
Person......................................................................23
Physical Note...............................................................23
Poltelkab...................................................................23
Predecessor Security........................................................23
Preferred Stock.............................................................23
Public Equity Offering......................................................23
Purchase Money Obligation...................................................23
Qualified Capital Stock.....................................................23
Qualified Institutional Buyer or QIB........................................23
Redeemable Capital Stock....................................................24
Redemption Date.............................................................24
Redemption Price............................................................24
Registration Rights Agreement...............................................24
Registration Statement......................................................24
Regular Record Date.........................................................24
Responsible Officer.........................................................24
Restricted Payment..........................................................24
Restricted Subsidiary.......................................................24
Rule 144A...................................................................24
S&P.........................................................................25
Securities..................................................................25
Security Register and Security Registrar....................................25
Senior Bank Indebtedness....................................................25
Service Agreement...........................................................25
Shareholder Registration Rights Agreement...................................25
Shelf Registration Statement................................................25
Significant Subsidiary......................................................25
Special Purpose Vehicle.....................................................25
Special Record Date.........................................................26
Stated Maturity.............................................................26
Subordinated Indebtedness...................................................26
Subsidiary..................................................................26
Total Consolidated Indebtedness.............................................26
Trust Indenture Act.........................................................26
Trustee.....................................................................26
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Unrestricted Subsidiary.....................................................26
U.S. Dollar.................................................................27
U.S. Dollar Equivalent......................................................27
U.S. Government Obligations.................................................27
Vice President..............................................................27
Voting Stock................................................................27
Wholly Owned................................................................27
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS..........................28
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE........................28
SECTION 104. ACTS OF HOLDERS...............................................29
SECTION 105. NOTICES, ETC., TO TRUSTEE, COMPANY............................30
SECTION 106. NOTICE TO HOLDERS; WAIVER.....................................31
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS......................31
SECTION 108. SUCCESSORS AND ASSIGNS........................................31
SECTION 109. SEPARABILITY CLAUSE...........................................31
SECTION 110. BENEFITS OF INDENTURE.........................................32
SECTION 111. GOVERNING LAW.................................................32
SECTION 112. LEGAL HOLIDAYS................................................32
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY...............................................32
SECTION 202. RESTRICTIVE LEGENDS...........................................33
ARTICLE THREE
THE SECURITIES
SECTION 301. TITLE AND TERMS...............................................35
SECTION 302. DENOMINATIONS.................................................36
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING................36
SECTION 304. TEMPORARY SECURITIES..........................................38
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE ..........38
SECTION 306. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES...................39
SECTION 307. SPECIAL TRANSFER PROVISIONS...................................41
SECTION 308. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES..............44
SECTION 309. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED................45
SECTION 310. PERSONS DEEMED OWNERS.........................................47
SECTION 311. CANCELLATION..................................................47
SECTION 312. COMPUTATION OF INTEREST.......................................47
SECTION 313. FORM OF RULE 144A CERTIFICATE.................................48
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.......................48
SECTION 402. APPLICATION OF TRUST MONEY....................................49
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.............................................49
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT ...........51
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE ......................................................52
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM..............................53
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES ..54
SECTION 506. APPLICATION OF MONEY COLLECTED................................54
SECTION 507. LIMITATION ON SUITS...........................................55
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST .........................................56
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES............................56
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE................................56
SECTION 511. DELAY OR OMISSION NOT WAIVER..................................56
SECTION 512. CONTROL BY HOLDERS............................................57
SECTION 513. WAIVER OF PAST DEFAULTS.......................................57
SECTION 514. WAIVER OF STAY OR EXTENSION LAWS..............................57
ARTICLE SIX
THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS............................................58
SECTION 602. CERTAIN RIGHTS OF TRUSTEE.....................................58
SECTION 603. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES ...................................................60
SECTION 604. MAY HOLD SECURITIES...........................................60
SECTION 605. MONEY HELD IN TRUST...........................................60
SECTION 606. COMPENSATION AND REIMBURSEMENT................................60
SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.......................61
SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR ............61
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR........................63
SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS ..63
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS..................64
SECTION 702. REPORTS BY TRUSTEE............................................64
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS .........64
SECTION 802. SUCCESSOR SUBSTITUTED.........................................66
SECTION 803. SECURITIES TO BE SECURED IN CERTAIN EVENTS....................66
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS ...........67
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS ..............67
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES..........................68
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.............................69
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT...........................69
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES ...........69
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES.............................69
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST .........70
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY..............................70
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST .............70
SECTION 1004. CORPORATE EXISTENCE..........................................72
SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS............................72
SECTION 1006. MAINTENANCE OF PROPERTIES....................................72
SECTION 1007. INSURANCE....................................................73
SECTION 1008. STATEMENT BY OFFICERS AS TO DEFAULT..........................73
SECTION 1009. PROVISION OF FINANCIAL STATEMENTS AND REPORTS................73
SECTION 1010. LIMITATION ON ADDITIONAL INDEBTEDNESS........................74
SECTION 1011. LIMITATION ON RESTRICTED PAYMENTS............................74
SECTION 1012. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES......................................77
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 1013. LIMITATION ON TRANSACTIONS WITH AFFILIATES...................78
SECTION 1014. LIMITATION ON LIENS..........................................79
SECTION 1015. LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS BY
SUBSIDIARIES ................................................80
SECTION 1016. PURCHASE OF SECURITIES UPON A CHANGE OF CONTROL 80
SECTION 1017. LIMITATION ON SALE OF ASSETS.................................81
SECTION 1018. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES............................83
SECTION 1019. LIMITATION ON INVESTMENTS IN UNRESTRICTED SUBSIDIARIES ......84
SECTION 1020. LIMITATION ON LINES OF BUSINESS..............................84
SECTION 1021. WAIVER OF CERTAIN COVENANTS..................................84
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. RIGHT OF REDEMPTION..........................................85
SECTION 1102. APPLICABILITY OF ARTICLE.....................................85
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE........................86
SECTION 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED ...........86
SECTION 1105. NOTICE OF REDEMPTION.........................................86
SECTION 1106. DEPOSIT OF REDEMPTION PRICE..................................87
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE........................87
SECTION 1108. SECURITIES REDEEMED IN PART..................................88
ARTICLE TWELVE[RESERVED]
ARTICLE THIRTEENDEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE ..................................................88
SECTION 1302. DEFEASANCE AND DISCHARGE.....................................89
SECTION 1303. COVENANT DEFEASANCE..........................................89
SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE .............90
SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS.....................92
SECTION 1306. REINSTATEMENT................................................92
</TABLE>
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<PAGE>
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<PAGE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TESTIMONIUM...................................................................93
SIGNATURES AND SEALS..........................................................93
</TABLE>
SCHEDULE A - Existing Management Contracts, Overhead Agreements and Service
Agreements
SCHEDULE B - Indebtedness Outstanding on the Issue Date
SCHEDULE C - Liens Existing on the Issue Date
SCHEDULE D - Agreements Not Restricted Under Section 1018
EXHIBIT A - Form of Security
EXHIBIT B - Form of Certificate to Be Delivered upon Termination of Restricted
Period
<PAGE>
INDENTURE dated as of January 20, 1999, between
@ENTERTAINMENT, INC., a corporation duly organized and existing under the laws
of the State of Delaware (herein called the "Company" or the "Issuer"), having
its principal office at One Commercial Plaza, 24th Floor, Hartford, Connecticut,
and BANKERS TRUST COMPANY, a New York state banking corporation, Trustee (herein
called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
Series C Senior Discount Notes due 2008 (herein called the "Securities"), of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary have been done to make the Securities,
when executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311,
<PAGE>
2
shall have the meanings assigned to them in the rules of the Commission
adopted under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted on the Issue Date;
and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Accreted Value" as of any date (the "Specified Date") means,
with respect to each $1.00 principal amount at maturity of the Securities:
(i) if the Specified Date is one of the following dates (each
a "Semi-Accrual Date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
Semi-Annual
Accrual Date Accreted Value
------------ --------------
<S> <C>
ISSUE DATE ..... $ 0.27262
July 15, 1999 $ 0.29712
January 15, 2000 $ 0.32460
July 15, 2000 $ 0.35463
January 15, 2001 $ 0.38743
July 15, 2001 $ 0.42327
January 15, 2002 $ 0.46242
July 15, 2002 $ 0.50519
January 15, 2003 $ 0.55192
July 15, 2003 $ 0.60297
January 15, 2004 $ 0.65875
July 15, 2004 $ 0.68468
January 15, 2005 $ 0.71302
July 15, 2005 $ 0.74397
January 15, 2006 $ 0.77779
July 15, 2006 $ 0.81473
January 15, 2007 $ 0.85510
July 15, 2007 $ 0.89919
January 15, 2008 $ 0.94737
July 15, 2008 $ 1.00
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual
Accrual Dates, the sum of (a) the Accreted Value for the Semi-Annual
Accrual Date immediately preceding
<PAGE>
3
the Specified Date and (b) an amount equal to the product of (x) the
Accreted Value for the immediately following Semi-Annual Accrual Date
less the Accreted Value for the immediately preceding Semi-Annual
Accrual Date and (y) a fraction the numerator of which is the number of
days actually elapsed from the immediately preceding Semi-Annual
Accrual Date to the Specified Date and the denominator of which is 180;
and
(iii) if the Specified Date is on or after July 15, 2008,
$1.00.
"Acquired Indebtedness" means Indebtedness of a Person (a)
existing at the time such Person becomes a Restricted Subsidiary or (b) assumed
in connection with the acquisition of assets from such Person, in each case,
other than Indebtedness incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary or such acquisition; PROVIDED that,
for purposes of Section 1010, such Indebtedness shall be deemed to be incurred
on the date of the related acquisition of assets from any Person or the date the
acquired Person becomes a Restricted Subsidiary.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Advent" means Advent International Corporation, a Delaware
corporation.
"Affiliate" means, with respect to any specified Person, (a)
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person or (b) any other
Person that owns, directly or indirectly, 5% or more of such specified Person's
Voting Stock or any executive officer or director of any such specified Person
or other Person or, with respect to any natural Person, any Person having a
relationship with such Person by blood, marriage or adoption not more remote
than first cousin. For the purposes of this definition, "control," when used
with respect to any specified Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent Members" has the meaning specified in Section 306.
"Annualized Pro Forma Consolidated Operating Cash Flow" means
Consolidated Operating Cash Flow for the latest fiscal quarter for which
consolidated financial statements of the Company are available multiplied by
four. For purposes of calculating "Consolidated Operating Cash Flow" for any
fiscal quarter for purposes of this definition, (a) all Restricted Subsidiaries
of the Company on the date of the transaction giving rise to the need to
calculate "Annualized Pro Forma Consolidated Operating Cash Flow" (the
"Transaction Date") shall be deemed to have been Restricted Subsidiaries at all
times during such fiscal quarter and (b) any Unrestricted Subsidiary of the
Company on the Transaction
<PAGE>
4
Date shall be deemed to have been an Unrestricted Subsidiary at all times during
such fiscal quarter. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated Operating Cash Flow" shall be
calculated after giving effect on a PRO FORMA basis for the applicable fiscal
quarter to, without duplication, any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of the Company or a Restricted Subsidiary
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness) occurring during the period commencing on the first day of such
fiscal quarter to and including the Transaction Date (the "Reference Period"),
as if such Asset Sale or Asset Acquisition occurred on the first day of the
Reference Period.
"Asset Acquisition" means (a) 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 in any other Person, or any acquisition or purchase of
Capital Stock 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 merged with or into the Company or any Restricted
Subsidiary or (b) 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.
"Asset Sale" means any direct or indirect sale, conveyance,
transfer or lease (that has the effect of a disposition and is not for security
purposes) or other disposition (that is not for security purposes) to any Person
other than the Company or a Restricted Subsidiary in one transaction or a series
of related transactions, of (a) any Capital Stock of any Restricted Subsidiary,
(b) any material governmental license or other governmental authorization of the
Company or any Restricted Subsidiary pertaining to a Cable/Telecommunications
Business, a DTH Business or an Entertainment/Programming Business, (c) any
assets of the Company or any Restricted Subsidiary which constitute
substantially all of an operating unit or line of business of the Company and
its Restricted Subsidiaries or (d) any other property or asset of the Company or
any Restricted Subsidiary outside of the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include (a) any
disposition of properties and assets of the Company that is governed under
Article VIII, (b) sales of property or equipment that have become worn out,
obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Company or the Restricted Subsidiary, as the case may be, (c)
for purposes of Section 1017, any sale, conveyance, transfer, lease or other
disposition of any property or asset, whether in one transaction or a series of
related transactions, either (i) involving assets with a Fair Market Value not
in excess of $500,000 (or, if non-U.S. Dollar denominated, the U.S. Dollar
Equivalent thereof) or (ii) as part of a Capitalized Lease Obligation, and (d)
any transfer by the Company or a Restricted Subsidiary of property or equipment
to a Person who is not an Affiliate of the Company in exchange for property or
<PAGE>
5
equipment that has a fair market value at least equal to the fair market value
of the property or equipment so transferred; PROVIDED that, in the event of a
transfer described in this clause (d), the Company shall deliver to the Trustee
an Officer's Certificate certifying that such exchange complies with this clause
(d).
"Average Life" means, as of the date of determination with
respect to any Indebtedness, the quotient obtained by dividing (a) the sum of
the products of (i) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such Indebtedness multiplied by
(ii) the amount of each such principal payment by (b) the sum of all such
principal payments.
"Bankruptcy Law" means Title 11 of the United States Code, as
amended, or any similar United States federal or state law, or any similar law
of any other jurisdiction, relating to bankruptcy, insolvency, receivership,
winding-up, liquidation, reorganization or relief of debtors or any amendment
to, succession to or change in any such law.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of New
York or the city in which the Corporate Trust Office is located are authorized
or obligated by law or executive order to close.
"Cable Television Newco" means any Person (i) of whom the
Company or a Restricted Subsidiary owns the greater of 49% of the outstanding
Capital Stock or the maximum amount of the outstanding Capital Stock the Company
or such Restricted Subsidiary may own under applicable law and (ii) that holds
Capital Stock in a Management Company.
"Cable/Telecommunications Business" means any business
operating a cable or telephone or telecommunications or broadcasting system
(other than an Entertainment/Programming Business or a DTH Business), including,
without limitation, any business (other than an Entertainment/Programming
Business or a DTH Business) conducted by the Company or any Restricted
Subsidiary on the Issue Date and any programming guide or telephone directory
business.
<PAGE>
6
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations, rights in or
other equivalents (however designated) of such Person's capital stock or other
equity participations, including partnership interests, whether general or
limited, in such Person, including any Preferred Stock, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock, whether now outstanding
or issued after the date of this Indenture.
"Capitalized Lease Obligation" of any Person means any
obligation of such Person and its subsidiaries on a consolidated basis under a
lease of (or other agreement conveying the right to use) any property (whether
real, personal or mixed) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purpose of this Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (a) any evidence of Indebtedness with
a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (b) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System, in each case having combined capital and surplus and
undivided profits of not less than $500,000,000; (c) commercial paper with a
maturity of 180 days or less issued by a corporation that is not an Affiliate of
the Company and is organized under the laws of any state of the United States or
the District of Columbia and rated at least A-1 by S&P or at least P-l by
Moody's; and (d) any Capital Stock of any mutual funds at least 95% of the
assets of which are invested in the foregoing.
"Change of Control" means the occurrence of any of the
following events: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is
or becomes the "beneficial owner" (as defined in Rules 13d-3 and l3d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total outstanding Voting Stock
of the Company; (b) the Company consolidates with, or merges with or into
another Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with
or merges with or into the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is not
converted or
<PAGE>
7
exchanged at all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of the Company) or is converted into or exchanged
for (A) Voting Stock (other than Redeemable Capital Stock) of the surviving or
transferee corporation or (B) Voting Stock (other than Redeemable Capital Stock)
of the surviving or transferee corporation and cash, securities and other
property (other than Capital Stock of the Surviving Entity) in an amount that
could be paid by the Company as a Restricted Payment as described under Section
1011 and (ii) immediately after such transaction, no "person" or "group" (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than
Permitted Holders, is the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the total outstanding
Voting Stock of the surviving or transferee corporation; (c) during any
consecutive two year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election to such Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by a vote of 66b% of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office; or (d) the Company is liquidated or
dissolved or a special resolution is passed by the shareholders of the Company
approving the plan of liquidation or dissolution other than in a transaction
which complies with Article VIII.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this Indenture such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests or other participations in, and other equivalents (however
designated and whether voting or nonvoting) of such Person's common stock or
ordinary shares, whether outstanding at the Issue Date, and includes, without
limitation, all series and classes of such common stock or ordinary shares.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
<PAGE>
8
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman, its President, any
Vice President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated Income Tax Expense" means, with respect to any
period, the provision for United States corporation, local, foreign and other
income taxes of the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period, including, without limitation, (i)
amortization of original issue discount, (ii) the net cost of Interest Rate
Agreements (including amortization of discounts), (iii) the interest portion of
any deferred payment obligation, (iv) accrued interest, (v) the consolidated
amount of any interest capitalized by the Company and the Restricted
Subsidiaries, PROVIDED that such amount will be limited for purposes of this
definition to the amount that would have been obtained if such interest had been
capitalized at the interest rate for the Securities and (vi) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, PLUS (b) the interest component of Capitalized
Lease Obligations of the Company and its Restricted Subsidiaries paid, accrued
or scheduled to be paid or accrued during such period, in each case as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the
consolidated net income (or loss) of the Company and all Restricted Subsidiaries
for such period as determined in accordance with GAAP, adjusted by excluding,
without duplication, (a) any net after-tax extraordinary gains or losses (in
each case less all fees and expenses relating thereto), (b) any net after-tax
gains or losses (in each case less all fees and expenses relating thereto)
attributable to asset dispositions other than in the ordinary course of
business, (c) the portion of net income (or loss) of any Person (other than the
Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in
which the Company or any Restricted Subsidiary has an ownership interest, except
to the extent of the amount of dividends or other distributions actually paid to
the Company or any Restricted Subsidiary in cash dividends or distributions
during such period, (d) net income (or loss) of any Person combined with the
Company or any Restricted Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of combination, (e) except with
respect to any encumbrance or restriction described in clause (ii) of Section
1018, the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Subsidiary is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary or its stockholders and
<PAGE>
9
(f) any non-cash items of the Company and any Restricted Subsidiary (including
monetary corrections) increasing or decreasing Consolidated Net Income for such
period (other than items that will result in the receipt or payment of cash).
"Consolidated Operating Cash Flow" means, with respect to any
period, the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period increased by (in each case to the extent included
in computing Consolidated Net Income) the sum of (a) the Consolidated Income Tax
Expense of the Company and its Restricted Subsidiaries accrued according to GAAP
for such period (other than taxes attributable to extraordinary, unusual or
non-recurring gains or losses); (b) Consolidated Interest Expense for such
period; (c) depreciation of the Company and its Restricted Subsidiaries for such
period and (d) amortization of the Company and its Restricted Subsidiaries for
such period, including, without limitation, amortization of capitalized debt
issuance costs for such period, all determined on a consolidated basis in
accordance with GAAP PROVIDED that, if any Restricted Subsidiary is not a Wholly
Owned Restricted Subsidiary, Consolidated Operating Cash Flow shall be reduced
(to the extent not otherwise reduced in accordance with GAAP) by an amount equal
to (i) the amount of Consolidated Net Income attributable to such Restricted
Subsidiary multiplied by (ii) the quotient of (1) the number of shares of
outstanding Common Stock of such Restricted Subsidiary not owned on the last day
of such period by the Company or any of its Restricted Subsidiaries divided by
(2) the total number of shares of outstanding Common Stock of such Restricted
Subsidiary on the last day of such period.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of this
Indenture is located at Four Albany Street, New York, New York 10006, except
that with respect to presentation of Securities for payment or for registration
of transfer or exchange, such term shall mean the office or agency of the
Trustee at which, at any particular time, its corporate agency business shall be
conducted.
"Corporation" includes corporations, associations, companies
and business trusts.
"Cumulative Available Cash Flow" means, as at any date of
determination, the positive cumulative Consolidated Operating Cash Flow realized
during the period commencing on the Issue Date and ending on the last day of the
most recent fiscal quarter immediately preceding the date of determination for
which consolidated financial information of the Company is available or, if such
cumulative Consolidated Operating Cash Flow for such period is negative, the
negative amount by which cumulative Consolidated Operating Cash Flow is less
than zero.
<PAGE>
10
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement entered into
by a Person that is designed to protect such Person against fluctuations in
currency values.
"Default" means any event that after notice or passage of time
or both would be an Event of Default.
"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means Euroclear System, its nominees and their
respective successors.
"Disinterested Director" means, with respect to any
transaction or series of transactions in respect of which the Board of Directors
is required to deliver a resolution of the Board of Directors under this
Indenture, a member of the Board of Directors who does not have any material
direct or indirect financial interest in or with respect to such transaction or
series of transactions.
"DTH Business" means the business of (i) developing, managing,
operating or providing services relating to direct to home satellite systems for
the distribution of subscription programming services directly to homes and
cable systems in areas covered by the "footprint" of the satellites utilized by
the Company and its Restricted Subsidiaries, and activities to accomplish the
foregoing (other than the Cable/Telecommunications Business or the
Entertainment/Programming Business) or (ii) evaluating, participating or
pursuing any other activity or opportunity that is primarily related to those
identified above.
"ECO" means ECO Holdings III Limited Partnership, a Delaware
limited partnership.
"Entertainment/Programming Business" means a business engaged
primarily in the management, ownership, operation, acquisition, development,
production, distribution or syndication of general entertainment, sports,
movies, children's or other programming or publishing.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing
<PAGE>
11
buyer, as determined by the Board of Directors of the Company and evidenced by a
resolution thereof.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11
of the United States Code, as amended from time to time.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in effect in the United States on the
Issue Date.
"Global Security" has the meaning provided in Section 201.
"guarantee" means, as applied to any obligation, (a) 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 (b) 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.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"Incur" or "incur" means, with respect to any Indebtedness, to
create, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of, or otherwise incur such Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an incurrence of Indebtedness and provided further that the
incurrence of any particular Indebtedness by the Company or any Restricted
Subsidiary shall occur only once and any obligation of any Restricted Subsidiary
arising under any guarantee supporting such Indebtedness shall be disregarded.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all liabilities of such Person for borrowed money (including
overdrafts) or for the deferred purchase price of property or services,
excluding any trade payables and other accrued current liabilities (including
outstanding disbursements) incurred in the ordinary course of business (whether
or not evidenced by a note), but including, without limitation, all obligations,
contingent or otherwise, of such Person in connection with any letters of credit
and acceptances issued under letter of credit facilities, acceptance facilities
or other similar facilities, (b) all obligations of such Person evidenced by
bonds, notes, debentures or other similar instruments, (c) all indebtedness of
such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
<PAGE>
12
event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of business, (d)
all Capitalized Lease Obligations of such Person, (e) all Indebtedness referred
to in (but not excluded from) the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon or with respect to property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness
(the amount of such obligation being deemed to be the lesser of the value of
such property or asset or the amount of the obligation so secured), (f) all
guarantees by such Person of Indebtedness referred to in this definition of any
other Person, (g) all Redeemable Capital Stock of such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends and (h) any liability of such Person under or in
respect of Interest Rate Agreements or Currency Agreements. For purposes hereof,
the "maximum fixed repurchase price" of any Redeemable Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to this Indenture, and if such price is based upon, or measured by, the
fair market value of such Redeemable Capital Stock, such fair market value shall
be determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock. For purposes of Sections 1010 and 1011 and the
definition of "Events of Default", in determining the principal amount of any
Indebtedness to be incurred by the Company or a Restricted Subsidiary or which
is outstanding at any date, (x) the principal amount of any Indebtedness which
provides that an amount less than the principal amount at maturity thereof shall
be due upon any declaration of acceleration thereof shall be the accreted value
thereof at the date of determination and (y) effect shall be given to the impact
of any Currency Agreement with respect to such Indebtedness.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an
installment of cash interest on the Securities.
"Interest Rate Agreements" means any interest rate protection
agreements and other types of interest rate hedging agreements or arrangements
(including, without limitation, interest rate swaps, caps, floors, collars and
similar agreements) designed to protect against or manage exposure to
fluctuations in interest rates in respect of Indebtedness.
"Investment" means, with respect to any Person, any direct or
indirect advance, loan or other extension of credit or capital contribution to
such Person (by means of
<PAGE>
13
any transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase, acquisition or
ownership by such Person of any Capital Stock (including ownership of Capital
Stock through share leasing arrangements), bonds, notes, debentures or other
securities or evidences of Indebtedness issued or owned by any other Person and
all other items that would be classified as investments on a balance sheet
prepared in accordance with GAAP. In addition, the Fair Market Value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary shall be deemed to be an "Investment"
made by the Company in such Unrestricted Subsidiary at such time. "Investments"
shall exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Issue Date" means January 20, 1999.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired. A Person shall be deemed to own subject to a Lien
any property which such Person has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Majority Owned Restricted Subsidiary" means a Restricted
Subsidiary (a) at least 66.66% of the outstanding Capital Stock of which is
beneficially owned directly or indirectly by the Company or PCBV and one or more
Wholly Owned Restricted Subsidiaries and (b) no outstanding Capital Stock of
which is owned, directly or indirectly (except through the Company), by any
shareholder or Affiliate of a shareholder of the Company.
"Management Agreement" means (a) any agreement between the
Company or a Restricted Subsidiary and a Management Company pursuant to which
the Management Company shall lease or otherwise employ assets of the Company or
a Restricted Subsidiary to operate a Cable/Telecommunications Business, a DTH
Business or an Entertainment/Programming Business and (b) any agreement or
instrument (i) governing Indebtedness of a Management Company to the Company or
a Restricted Subsidiary or (ii) governing corporate procedures or control of a
Management Company.
"Management Company" means any Person, a portion of whose
Capital Stock is held by the Company or a Restricted Subsidiary, that (i) holds
or has applied for a license or permit to operate a Cable/Telecommunications
Business, a DTH Business or an Entertainment/Programming Business in the
Republic of Poland or elsewhere in Continental Europe and (ii) manages the
operations of a Restricted Subsidiary pursuant to a Management Agreement.
<PAGE>
14
"Maturity" means, with respect to any Security, the date on
which any principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity with respect to such principal
or by declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale,
the proceeds thereof in the form of cash or Cash Equivalents including payments
in respect of deferred payment obligations or escrowed funds, but only when
received in the form of, or stock or other assets when disposed for, cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants, consultants and investment banks) related to such
Asset Sale, (ii) provisions for all taxes payable as a result of such Asset
Sale, (iii) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of such Asset
Sale, (iv) amounts required to be paid to any Person (other than the Company or
any Restricted Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with GAAP against any liabilities associated with such Asset Sale and retained
by the Company or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as reflected in an Officers' Certificate delivered to the Trustee and
(b) with respect to any capital contribution or issuance or sale of Capital
Stock as referred to under Section 1011 and the definition of "Permitted
Indebtedness", the proceeds of such capital contribution, issuance or sale in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of, or stock or other assets when
disposed for, cash or Cash Equivalents (except to the extent that such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company), net of attorney's fees, accountant's fees and
brokerage, consultation, underwriting and other fees and expenses actually
incurred in connection with such capital contribution, issuance or sale and net
of taxes paid or payable as a result thereof.
"Non-U.S. Person" means a person who is not a "U.S. Person"
(as defined in Regulation S).
<PAGE>
15
"Officers Certificate" means a certificate signed by the
Chairman, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered
to the Trustee.
"Old Indenture" means the Indenture dated as of July 14, 1998
between the Issuer and Banker Trust Company, as trustee, as in effect on the
Issue Date.
"Old Notes means the Issuer's 14 1/2% Senior Discount Notes
due 2008 issued under the Old Indenture.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, including an employee of the Company, and who
shall be acceptable to the Trustee.
"Organizational Contract" means any agreement to which the
Company or any Restricted Subsidiary is a party pursuant to which, among other
things, fees are paid to the Company or a Restricted Subsidiary in exchange for
organizational, consulting or similar services, including, without limitation,
the agreements listed on Schedule A to this Indenture under the subheading
"Organizational Contracts."
"Outstanding", when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Securities;
PROVIDED that, if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(iii) Securities, except to the extent provided in Sections
1302 and 1303, with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article Thirteen;
and
(iv) Securities which have been paid pursuant to Section 306
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant
<PAGE>
16
to this Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof satisfactory to it
that such Securities are held by a bona fide purchaser in whose hands
the Securities are valid obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount at maturity of Outstanding Securities have given any
request, demand, authorization, direction, consent, notice or waiver
hereunder, and for the purpose of making the calculations required by TIA
Section 313, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in making such calculation or in
relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned
shall be so disregarded. Securities so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgees right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon
the Securities or any Affiliate of the Company or such other obligor.
"Overhead Agreement" means any agreement to which the Company
or any Restricted Subsidiary is a party pursuant to which, among other things,
costs are allocated among the parties thereto, including, without limitation,
the agreements listed on Schedule A to this Indenture under the subheading
"Overhead Agreements".
"Pari Passu Indebtedness" means Indebtedness of the Company
that is PARI PASSU in right of payment to the Securities.
"Paying Agent" means any Person (including the Company acting
as Paying Agent) authorized by the Company to pay the principal of (and premium,
if any) or interest on any Securities on behalf of the Company. The initial
paying agent shall be the Trustee.
"PCBV" means Poland Cablevision (Netherlands) B.V., a
Netherlands corporation.
"PCI" means Poland Communications, Inc., a New York
corporation and a Wholly Owned Subsidiary of the Company.
"PCI Indenture" means the Indenture dated as of October 31,
1996 between PCI and State Street Bank and Trust Company, as trustee, as in
effect on the Issue Date.
<PAGE>
17
"Permitted Holders" means, as of the date of determination,
(a) David T. Chase, Arnold L. Chase and Cheryl A. Chase (b) the family members,
estates and heirs of David T. Chase, Arnold L. Chase and Cheryl A. Chase and any
trust, partnership, corporation, limited liability company or other investment
vehicle principally for the benefit of any such persons or their respective
family members or heirs (including, without limitation, Polish Investments
Holding LP for so long as beneficial ownership thereof is held by Persons
meeting the requirements of clause (a) and (b) of this definition), (c) ECO and
any successor thereto that is owned by the Persons who beneficially own,
directly and indirectly, ECO on the Issue Date; (d) Advent International Corp.
and (e) any Person that is controlled by the Persons, individually or as a
group, described in clauses (a) through (d) above.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness under the Securities (or any guarantee
thereof) and this Indenture;
(b) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date and listed on Schedule B to this
Indenture;
(c) Indebtedness of the Company or any Restricted Subsidiary
(including PCI and any subsidiary of PCI that is a Restricted
Subsidiary) to the extent such Indebtedness constitutes "Permitted
Indebtedness" as defined in the PCI Indenture or the Old Indenture;
(d) (i) Indebtedness of any Restricted Subsidiary owed to and
held by the Company or a Restricted Subsidiary and (ii) Indebtedness of
the Company owed to and held by any Restricted Subsidiary that is
Subordinated Indebtedness; PROVIDED that an incurrence of Indebtedness
shall be deemed to have occurred upon (x) any sale or other disposition
(excluding assignments as security to financial institutions) of any
Indebtedness of the Company or Restricted Subsidiary referred to in
this clause (e) to a Person (other than the Company or a Restricted
Subsidiary) or (y) any sale or other disposition of Capital Stock of a
Restricted Subsidiary which holds Indebtedness of the Company or
another Restricted Subsidiary such that such Restricted Subsidiary, in
any such case, ceases to be a Restricted Subsidiary;
(e) Obligations under any Interest Rate Agreement of the
Company or any Restricted Subsidiary to the extent relating to (i)
Indebtedness of the Company or such Restricted Subsidiary, as the case
may be (which Indebtedness (x) bears interest at fluctuating interest
rates and (y) is otherwise permitted to be incurred under Section
1010), or (ii) Indebtedness for which a lender has provided a
commitment in an amount reasonably anticipated to be incurred by the
Company or a Restricted
<PAGE>
18
Subsidiary in the following 12 months after such Interest Rate
Agreement has been entered into, but only to the extent that the
notional principal amount of such Interest Rate Agreement does not
exceed the principal amount of the Indebtedness (or Indebtedness
subject to commitments) to which such Interest Rate Agreement relates;
(f) Indebtedness of the Company or any Restricted Subsidiary
under Currency Agreements to the extent relating to (i) Indebtedness of
the Company or a Restricted Subsidiary (which Indebtedness is otherwise
permitted to be incurred under Section 1010) or (ii) obligations to
purchase assets, properties or services incurred in the ordinary course
of business of the Company or any Restricted Subsidiary; PROVIDED that
such Currency Agreements do not increase the Indebtedness or other
obligations of the Company and its Restricted Subsidiaries outstanding
other than as a result of fluctuations in foreign currency exchange
rates or by reason of fees, indemnities and compensation payable
thereunder;
(g) Indebtedness of the Company or any Restricted Subsidiary
in respect of performance bonds of the Company or any Restricted
Subsidiary or surety bonds provided by the Company or any Restricted
Subsidiary incurred in the ordinary course of business in connection
with the construction or operation of a Cable/Telecommunications
Business, a DTH Business or an Entertainment/Programming Business;
(h) Indebtedness of the Company or any Restricted Subsidiary
to the extent it represents a replacement, renewal, refinancing or
extension of outstanding Indebtedness of the Company or of any
Restricted Subsidiary incurred or outstanding pursuant to clause (b) of
this definition or the proviso of Section 1010; PROVIDED that (i)
Indebtedness of the Company may not be replaced, renewed, refinanced or
extended to such extent under this clause (i) with Indebtedness of any
Restricted Subsidiary and (ii) any such replacement, renewal,
refinancing or extension (x) shall not result in a lower Average Life
of such Indebtedness as compared with the Indebtedness being replaced,
renewed, refinanced or extended, (y) shall not exceed the sum of the
principal amount (or, if such Indebtedness provides for a lesser amount
to be due and payable upon a declaration of acceleration thereof, an
amount no greater than such lesser amount) of the Indebtedness being
replaced, renewed, refinanced or extended plus the amount of accrued
interest thereon and the amount of any reasonably determined prepayment
premium necessary to accomplish such replacement, renewal, refinancing
or extension and such reasonable fees and expenses incurred in
connection therewith, and (z) in the case of any replacement, renewal,
refinancing or extension by the Company of Pari Passu Indebtedness or
Subordinated Indebtedness, such new Indebtedness is made PARI PASSU
with or subordinate to the Securities, at least to the same extent as
the Indebtedness being replaced, renewed, refinanced or extended;
<PAGE>
19
(i) Indebtedness of the Company having an aggregate principal
amount not to exceed, at any one time outstanding, two times (i) the
Net Cash Proceeds received by the Company after the Issue Date from the
issuance and sale of its Capital Stock (other than Redeemable Capital
Stock) to a Person that is not a Subsidiary, to the extent such Net
Cash Proceeds have not been used pursuant to clause (a)(3)(B), (b)(ii),
(b)(iii) or (b)(v) of Section 1011 to make a Restricted Payment and
(ii) 80% of the Fair Market Value of property (other than cash or Cash
Equivalents) received by the Company after the Issue Date from a sale
of its Capital Stock (other than Redeemable Capital Stock) to a Person
that is not a Subsidiary, the extent such sale of Capital Stock has not
been used pursuant to clause (b)(ii), (b)(iii) or (b)(v) of Section
1011 to make a Restricted Payment; PROVIDED, HOWEVER, that in
determining the Fair Market Value of property, if the estimated Fair
Market Value of such property exceeds $10.0 million, the Company will
deliver to the Trustee a written appraisal as to the fair market value
of such property prepared by an internationally recognized investment
banking or public accounting firm (or, if no such investment banking or
public accounting firm is qualified to prepare such an appraisal, by an
internationally recognized appraisal firm) and PROVIDED FURTHER that
such Indebtedness does not mature prior to the Stated Maturity of the
Securities and has an Average Life longer than the Securities;
(j) Subordinated Indebtedness of the Company not to exceed
$150 million (or, if non-U.S. Dollar denominated, the U.S. Dollar
Equivalent thereof) at any one time outstanding; and
(k) in addition to the items referred to in clauses (a)
through (j) above, Indebtedness of the Company having an aggregate
principal amount not to exceed $125 million (or, if non-U.S. Dollar
denominated, the U.S. Dollar Equivalent thereof) at any time
outstanding less the aggregate principal amount of any outstanding
Indebtedness incurred after the Issue Date under clause (c) of this
definition of Permitted Indebtedness.
"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 directors or employees made in the ordinary
course of business; (d) Interest Rate Agreements and Currency Agreements; (e)
bonds, notes, debentures or other securities received as a result of Asset Sales
permitted under Section 1017, PROVIDED that the Company or the Restricted
Subsidiaries, as the case may be, have received at least 75% of the aggregate
consideration therefrom in cash or Cash Equivalents; (f) Investments made in the
ordinary course of business as partial payment for constructing a network
relating principally to a Cable/Telecommunications Business or for supplying
equipment used or useful in the
<PAGE>
20
Cable/Telecommunications Business or the DTH Business; (g) Investments (other
than through share leasing arrangements) in any Person engaged in any business
in which the Company or any Restricted Subsidiary is engaged on the Issue Date
not to exceed $90 million (or, if non-U.S. Dollar denominated, the U.S. Dollar
Equivalent thereof) outstanding at any time; PROVIDED that immediately after
giving effect to any Investment made under this clause (g), the Company and its
Restricted Subsidiaries shall own at least 25% of the outstanding Capital Stock
of the Person in which the Investment was made; (h) Investments (other than
through share leasing arrangements) in any Person engaged in any business in
which the Company or any Restricted Subsidiary is engaged on the Issue Date not
to exceed $10 million (or, if non-U.S. Dollar denominated, the U.S. Dollar
Equivalent thereof) outstanding at any time; (i) Investments (other than through
share leasing programs) in the Capital Stock of any Person to the extent the
consideration therefor paid by the Company or any Restricted Subsidiary consists
of a lease or other right to use the capacity of a cable television network of
the Company or such Restricted Subsidiary and so long as the capacity leased or
used is used by such Person solely to provide telephony or Internet access
services; PROVIDED that the Board of Directors shall have determined (as
evidenced by a Board Resolution) that any such capacity is in excess of the
cable television network capacity required to operate the
Cable/Telecommunications Business of the Company or such Restricted Subsidiary
in the area in which such cable television network is located; (j) investments
by any Restricted Subsidiary in the Issuer; and (k) to the extent not covered in
clauses (a) through (j) above, any "Permitted Investment" as defined in the PCI
Indenture made by PCI or any subsidiary thereof in accordance with the terms of
the PCI Indenture.
"Permitted Liens" means the following types of Liens:
(a) Liens on any property or assets of a Restricted Subsidiary
granted in favor of the Company or any Restricted Subsidiary;
(b) Liens securing the Securities;
(c) Liens securing Acquired Indebtedness created prior to (and
not in connection with or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary; PROVIDED that
such Lien does not extend to any property or assets of the Company or
any Restricted Subsidiary other than the assets acquired in connection
with the incurrence of such Acquired Indebtedness;
(d) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens
arising in the ordinary course of business of the Company or any
Restricted Subsidiary and with respect to amounts not yet delinquent or
being contested in good faith by appropriate proceeding;
<PAGE>
21
(e) Liens for taxes, assessments, government charges or claims
that are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted;
(f) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect with
the business of the Company or any Restricted Subsidiary incurred in
the ordinary course of business;
(g) Liens arising by reason of any judgment, decree or order
of any court so long as such Lien is adequately bonded and any
appropriate legal proceedings that may have been initiated for the
review of such judgment, decree or order shall not have been finally
terminated or the period within which such proceedings may be initiated
shall not have expired;
(h) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security;
(i) any extension, renewal or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a) through (h);
PROVIDED that any such extension, renewal or replacement shall be no
more restrictive in any material respect than the Lien so extended,
renewed or replaced and shall not extend to any additional property or
assets;
(j) any interest or title of a lessor under any Capitalized
Lease Obligation or seller under any Purchase Money Obligation;
(k) Liens securing up to $45.0 million of Indebtedness of PCI
incurred after the Issue Date under clause (c) of the definition of
Permitted Indebtedness at any one time outstanding;
(l) Liens securing Indebtedness of the Company incurred
pursuant to clause (i) of the definition of Permitted Indebtedness in
an amount having an aggregate principal amount not to exceed, at any
one time outstanding, 100% of the Net Cash Proceeds received by the
Company after the Issue Date from the issuance and sale of its Capital
Stock;
(m) Liens in favor of Polish governmental fiscal authorities
created without the knowledge of and without fault on the part of the
Company;
<PAGE>
22
(n) Liens existing on the Issue Date and listed on Schedule C
to this Indenture;
(o) Liens in favor of the Screen Actors Guild, the Writers
Guild of America, the Directors Guild of America or any other unions,
guilds or collective bargaining units under collective bargaining
agreements, which Liens are incurred in the ordinary course of business
solely to secure the payment of residuals and other collective
bargaining obligations required to be paid by the Company or any of its
Restricted Subsidiaries under any such collective bargaining agreement;
(p) Liens arising in connection with completion guarantees
entered into in the ordinary course of business and consistent with
then current industry practices, securing obligations (other than
Indebtedness for borrowed money) of the Company or any of its
Restricted Subsidiaries not yet due and payable;
(q) Liens in favor of suppliers and/or producers of any
programming that are incurred in the ordinary course of business solely
to secure the purchase or license price of such programming and such
directly related rights or the rendering of services necessary for the
production of such programming; PROVIDED, HOWEVER, that no such Lien
shall extend to or cover any property or assets other than the
programming or license and the rights directly related thereto being so
acquired or produced; and PROVIDED FURTHER that any payment obligations
secured by such Liens shall by their terms be payable solely from the
revenues that are derived directly from the exhibition, syndication,
exploitation, distribution or disposition of such item of programming
and/or such directly related rights;
(r) Liens on assets of PCI or any subsidiary of PCI securing
the PCI Notes; and
(s) Liens on assets or Capital Stock of a Special Purpose
Vehicle.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, S.A., SP.
Z O.O., trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Physical Note" has the meaning specified in Section 201.
"Poltelkab" means Poltelkab Sp. z o.o., a Polish limited
liability company.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular
<PAGE>
23
Security; and, for the purposes of this definition, any Security authenticated
and delivered under Section 306 in exchange for a mutilated security or in lieu
of a lost, destroyed or stolen Security shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's preferred or preference stock whether now outstanding, or
issued after the Issue Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Public Equity Offering" means an issuance, offer and sale of
Common Stock (which is Qualified Capital Stock) of the Company for cash pursuant
to a registration statement that has been declared effective by the Commission
pursuant to the Securities Act (other than a registration statement on Form S-8
or otherwise relating to equity securities issuable under any employee benefit
plan of the Company).
"Purchase Money Obligation" means Indebtedness of the Company
or any Restricted Subsidiary (a) issued to finance or refinance the purchase or
construction of any assets of the Company or any Restricted Subsidiary or (b)
secured by a Lien on any assets of the Company or any Restricted Subsidiary
where the lender's sole recourse is to the assets so encumbered, in either case
to the extent the purchase or construction prices for such assets are or should
be included in "addition to property, plan or equipment" in accordance with
GAAP.
"Qualified Capital Stock" of any person means any and all
Capital Stock of such person other than Redeemable Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A.
"Redeemable Capital Stock" means any class or series of
Capital Stock that, either by its terms, by the terms of any security into which
it is convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Securities or is redeemable at the option of
the holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity; PROVIDED, HOWEVER, that Redeemable Capital Stock shall
not include any Common Stock the holder of which has a right to put to the
Company upon certain terminations of employment.
"Redemption Date", when used with respect to any Security to
be redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
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24
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the January 1 or July 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee,
means any officer in its corporate trust department or similar group, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Restricted Payment" has the meaning provided in Section 1011.
"Restricted Subsidiary" means a Subsidiary other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Ratings Group, a division of
The McGraw-Hill, Inc. and its successors.
"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Bank Indebtedness" means Indebtedness of the Company
or any Restricted Subsidiary under one or more term loans or revolving credit or
similar facilities (which may include any guarantee, bonding or letter of credit
facility) with a bank or other financial institution which is not subordinated
to any other Indebtedness of the Company or any Restricted Subsidiary.
"Series D Indenture" meas that certain indenture that shall be
dated within 30 days from the date hereof between the Company and Bankers Trust
Company, as trustee.
"Series D Notes" means those notes outstanding under the
Series D Indenture.
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25
"Service Agreement" means any agreement to which the Company
or any Restricted Subsidiary is a party pursuant to which, among other things,
the Company or a Restricted Subsidiary provides various services, which may
include administrative, technical, managerial, financial, operational and
marketing services, to the other party or parties thereto, including, without
limitation, the agreements listed on Schedule A to this Indenture under the
subheading "Service Agreements."
"Shareholder Registration Rights Agreement" means the
Registration Rights Agreement dated as of June 27, 1997 among PIHLP, ECO, Mr.
Freedman, Steele LLC, AESOP and CACMT (as such terms are defined in the
Company's C Notes Offering Memorandum dated January 20, 1999) in the form
existing on the Issue Date.
"Significant Subsidiary" means, at any particular time, any
Subsidiary that, together with the subsidiaries of such Subsidiary, (a)
accounted for more than 5% of the consolidated revenues of the Company and its
Subsidiaries for their most recently completed fiscal year or (b) is or are the
owner(s) of more than 5% of the consolidated assets of the Company and its
Subsidiaries as at the end of such fiscal year, all as calculated in accordance
with GAAP and as shown on the consolidated financial statements of the Company
and its Subsidiaries for such fiscal year.
"Special Purpose Vehicle" means a Person which is, or was,
established: (i) with separate legal identity and limited liability; and (ii)
for the sole purpose of a single transaction, or series of related transactions,
and which has no assets and liabilities other than those directly acquired or
incurred in connection with such transaction(s).
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means, when used with respect to any
Security or any installment of interest thereon, 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, and, when used with respect to any
other Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company
that is expressly subordinated in right of payment to the Securities.
"Subsidiary" means (a) any Person a majority of the equity
ownership or Voting Stock of which is at the time owned, directly or indirectly,
by the Company or by one or more other Subsidiaries or by the Company and one or
more other Subsidiaries and
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26
(b) Poltelkab, PTK Operator Sp. z o.o., Cable Television Newco and any other
Management Company.
"Total Consolidated Indebtedness" means, at any date of
determination, an amount equal to the aggregate amount of all Indebtedness of
the Company and its Restricted Subsidiaries outstanding as of the date of
determination.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (a) any Subsidiary that at the
time of determination shall be an Unrestricted Subsidiary (as designated by the
Board of Directors of the Company, as provided below) and (b) any subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company, subject to
the foregoing, may designate any newly acquired or newly formed Subsidiary
(other than a Management Company) to be an Unrestricted Subsidiary so long as
(i) neither the Company nor any Restricted Subsidiary is directly or indirectly
liable for any Indebtedness of such Subsidiary, (ii) no default with respect to
any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Restricted
Subsidiary to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity, (iii) any
Investment in such Subsidiary made as result of designating such Subsidiary an
Unrestricted Subsidiary will not violate the provisions of Section 1019, (iv)
neither the Company nor any Restricted Subsidiary has a contract, agreement,
arrangement, understanding or obligation of any kind, whether written or oral,
with such Subsidiary other than those that might be obtained at the time from
persons who are not Affiliates of the Company and (v) neither the Company nor
any Restricted Subsidiary has any obligation (1) to subscribe for additional
shares of Capital Stock or other equity interest in such Subsidiary or (2) to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results. Any such designation
by the Board of Directors of the Company shall be evidenced to the Trustee by
filing a board resolution with the Trustee giving effect to such designation.
The Board of Directors of the Company may designate any Unrestricted Subsidiary
as a Restricted Subsidiary if immediately after giving effect to such
designation, there would be no Default or Event of Default under this Indenture
and the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 1010.
"U.S. Dollar" means United States currency.
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27
"U.S. Dollar Equivalent" means with respect to any monetary
amount in a currency other than U.S. Dollars, at any time for the determination
thereof, the amount of U.S. Dollars obtained by converting such foreign currency
involved in such computation into U.S. Dollars at the spot rate for the purchase
of U.S. Dollars with the applicable foreign currency as quoted by the National
Bank of Poland at approximately noon (New York City time) on the date two
business days prior to such determination.
"U.S. Government Obligations" has the meaning provided in
Section 1304.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means, with respect to any Person, any class or
classes of Capital Stock pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a majority of the
board of directors, managers or trustees of such Person (irrespective of whether
or not, at the time, stock of any other class or classes shall have, or might
have, voting power by reason of the happening of any contingency).
"Wholly Owned" means, with respect to any Restricted
Subsidiary, such Restricted Subsidiary if all the outstanding Capital Stock of
such Restricted Subsidiary (other than any directors' qualifying shares) is
owned directly by the Company or PCBV and one or more Wholly Owned Restricted
Subsidiaries.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a condition precedent) relating to the
proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
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28
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(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 each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. ACTS OF HOLDERS.
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29
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount at maturity and serial numbers of
Securities held by any Person, and the date of holding the same, shall be proved
by the Security Register.
(d) If the Company shall solicit from the Holders of
Securities any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company may, at its option, by or pursuant to a Board
Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
Notwithstanding TIA Section 316(c), such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such solicitation
is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date;
PROVIDED that no such authorization, agreement or consent by the Holders on such
record date shall be deemed
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30
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
SECTION 105. NOTICES, ETC., TO TRUSTEE, COMPANY.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Manager, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this Indenture, or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice of any event to
Holders by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice mailed to a Holder in the manner herein prescribed
shall be conclusively deemed to have been received by such Holder, whether or
not such Holder actually receives such notice. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice.
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31
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 108. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 109. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities
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 110. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto, any Paying
Agent, any Security Registrar and their successors hereunder and the Holders any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. GOVERNING LAW.
This Indenture and the Securities shall be governed by and
construed in accordance with the law of the State of New York. This Indenture
shall be subject to the provisions of the Trust Indenture Act that are required
to be part of this Indenture and shall, to the extent applicable, be governed by
such provisions; and, if and to the extent that any provision of this Indenture
limits, qualifies or conflicts with any other provision included in this
Indenture which is required to be included in this Indenture by any of Sections
310 to 318, inclusive, of the Trust Indenture Act, such required provision shall
control.
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32
SECTION 112. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal (or premium, if any) or interest need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity or Maturity; PROVIDED that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Stated
Maturity or Maturity, as the case may be.
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY.
The definitive Securities shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
The Securities shall be known as the "Series C Senior Discount
Notes due 2008." The Securities and the Trustee's certificate of authentication
shall be substantially in the form annexed hereto as Exhibit A. The Securities
may have such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may have such
letters, notations, numbers or other marks of identification and such legends or
endorsements placed thereon as the Company may deem appropriate (and as are not
prohibited by the terms of this Indenture) or as may be required or appropriate
to comply with any law or with any rules made pursuant thereto or with any rules
of any securities exchange on which such Securities may be listed, or to conform
to general usage, or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of such
Securities. Any portion of the text of any Security may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the
Security. The Company shall approve the form of the Securities and any notation,
legend or endorsement on the Securities. Each Security shall be dated the date
of its authentication.
The terms and provisions contained in the form of the
Securities annexed hereto as Exhibit A shall constitute, and are hereby
expressly made, a part of this Indenture.
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33
Each of the Company and the Trustee, by its execution and delivery of this
Indenture, expressly agrees to the terms and provisions of the Securities
applicable to it and to be bound thereby.
Securities offered and sold in offshore transactions in
reliance on Regulation S shall be issued initially in the form of a single
permanent global Security in registered form, substantially in the form set
forth in Exhibit A (the "Global Security"), registered in the name of the
nominee of the Depositary, deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount at maturity of the Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Securities issued pursuant to Section 306 or Section 307 in
exchange for interests in the Global Security shall be in the form of permanent
certificated Securities in registered form in substantially the form set forth
in Exhibit A (the "PHYSICAL SECURITIES").
SECTION 202. RESTRICTIVE LEGENDS.
Unless and until a Security is sold under an effective
Registration Statement each Global Security and each Physical Security shall
bear the following legend set forth below (the "Private Placement Legend") on
the face thereof until at least the 41st day after the Closing Date and receipt
by the Company and the Trustee of a certificate substantially in the form of
Exhibit B hereto.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER OF THIS SECURITY (1) REPRESENTS THAT IT IS (A) A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
("RULE 144A")) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT WITHIN THE TIME
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34
PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN
EFFECT ON THE DATE OF TRANSFER OF THIS NOTE, RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF,
(B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE ACCRETED
VALUE OF NOTES AT THE TIME OF TRANSFER OF LESS THAN $100,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO AN 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 (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS
AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM , OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENT OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
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35
ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Security shall also bear the following legend on
the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
EUROCLEAR SYSTEMS ("EUROCLEAR"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF BANKERS TRUST COMPANY OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR
(AND ANY PAYMENT IS MADE TO BANKERS TRUST COMPANY OR SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, BANKERS
TRUST COMPANY, HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO EUROCLEAR OR NOMINEES OF EUROCLEAR OR TO A
SUCCESSOR OF EUROCLEAR OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF
THE INDENTURE.
ARTICLE THREE
THE SECURITIES
SECTION 301. TITLE AND TERMS.
The aggregate principal amount at maturity of Securities which
may be authenticated and delivered under this Indenture is limited to
$36,001,321 except for Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Securities pursuant to
Section 304, 305, 306, 801, 906, 1016, 1017 or 1108.
The Securities shall be known and designated as the "Series C
Senior Discount Notes due 2008" of the Company. The Stated Maturity of the
Series C Senior Discount Notes due 2008 shall be July 15, 2008. The Series C
Senior Discount Notes due 2008 are issued at a
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36
discount. Original issue discount will accrete from the Issue Date (January 20,
1999) until the stated maturity of the Securities on July 15, 2008. In addition,
except as otherwise set forth herein, the Series C Senior Discount Notes due
2008 will bear cash interest at the rate of 7% per annum on the principal amount
at maturity of $36,001,321 from January 15, 2004, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
payable on July 15, 2004 and semi-annually thereafter on July 15 and January 15
in each year and at said Stated Maturity, until the principal thereof is paid or
duly provided for. The principal of the Securities shall not accrue cash
interest until January 15, 2004, except in the case of a default in payment of
the amount due at Maturity, in which case the amount due on the Securities shall
bear interest at a rate of 18 1/2% per annum (to the extent that the payment of
such interest shall be legally enforceable), which shall accrue from the date of
such default to the date the payment of such amount has been made or duly
provided for. Interest on any overdue principal amount shall be payable on
demand.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose; PROVIDED, HOWEVER, that, at
the option of the Company, interest may be paid by check mailed to addresses of
the Persons entitled thereto as such addresses shall appear on the Security
Register.
The Securities shall be redeemable as provided in Article
Eleven.
SECTION 302. DENOMINATIONS.
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 principal amount at maturity
and any integral multiple thereof; provided that at the Issue Date the
Securities may be issued in denomination of $1.00 principal amount at maturity
and any integral amounts thereof. The Company may convert, at its option and to
the extent practical, the Securities to denominations of $1,000 aggregate
principal amount at maturity so long as such conversion is not adverse to the
Holders.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by
any of its Chairman, its President or a Vice President, the Chief Executive
Officer or the Chief Financial Officer under its corporate seal reproduced
thereon, the Chief Executive Officer or the Chief Financial Officer The
signature of any of these officers on the Securities may be manual or facsimile
signatures of the present or any future such authorized officer and may be
imprinted or otherwise reproduced on the Securities.
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37
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein duly executed by the Trustee by manual signature of an authorized
officer, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
SECTION 304. TEMPORARY SECURITIES.
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38
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 1002, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND
EXCHANGE.
The Company shall cause to be kept at the Corporate Trust
Office a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as security registrar (the "Security Registrar") for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at
the office or agency of the Company designated pursuant to Section 1002, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination and of a like aggregate
principal amount at maturity, upon surrender of the Securities to be exchanged
at such office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall
<PAGE>
39
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer, in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 801, 906, 1016, 1017
or 1108 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the selection of Securities to be redeemed under Section
1104 and ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
SECTION 306. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Security initially shall (i) be registered in
the name of the Depositary for such Global Securities or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 202.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under any Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent
<PAGE>
40
Members, the operation of customary practices governing the exercise of the
rights of a beneficial owner of any Security.
(b) Transfers of a Global Security shall be limited to
transfers of such Global Security in whole, but not in part, to the Depositary,
its successors or their respective nominees and, in part, in the circumstances
described in paragraph (d) hereof. Interests of beneficial owners in a Global
Security may be transferred in accordance with the applicable rules and
procedures of the Depositary and the provisions of Section 307. Beneficial
owners may obtain Physical Securities (which shall bear the Private Placement
Legend if required by Section 202) in exchange for their beneficial interests in
a Global Security upon request in accordance with the Depositary's and the
Security Registrar's procedures at any time. In addition, Physical Securities
shall be transferred to all beneficial owners in exchange for their beneficial
interests in the Global Security if (i) the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary for the Global Security or
the Depositary ceases to be a "Clearing Agency" registered under the Exchange
Act and a successor depositary is not appointed by the Company within 90 days or
(ii) an Event of Default has occurred and Holders of more than 25% in aggregate
principal amount of the Securities at the time outstanding represented by the
Global Securities advise the Trustee through the Depositary in writing that the
continuation of a book-entry system through the Depositary with respect to the
Global Securities is no longer required.
(c) In connection with any transfer pursuant to paragraph (b)
of this Section of a portion of the beneficial interest in the Global Security
to beneficial owners, upon receipt of written instructions from the Depositary,
the Security Registrar shall reflect on its books and records the date and a
decrease in the principal amount at maturity of the Global Security in an amount
equal to the principal amount at maturity of the beneficial interest in the
Global Security to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Physical Securities of like
tenor and amount.
(d) In connection with the transfer of the entire Global
Security to beneficial owners pursuant to paragraph (b) of this Section, the
Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the Global Security an equal aggregate principal
amount at maturity of Physical Securities of authorized denominations.
(e) Any Physical Security delivered in exchange for an
interest in the Global Security pursuant to paragraph (b) or (c) of this Section
shall, except as otherwise provided by paragraph (a)(i)(x) or paragraph (e) of
Section 307, bear the legend regarding transfer restrictions applicable to the
Physical Security set forth in Section 202.
<PAGE>
41
(f) The registered holder of a Global Security may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Securities.
(g) In connection with the execution, authentication and
delivery of Physical Securities in exchange for beneficial interests in a Global
Security pursuant to Section 306(b), the Security Registrar shall reflect on its
books and records a decrease in the principal amount at maturity of the relevant
Global Security equal to the principal amount at maturity of such Physical
Securities and the Company shall execute and the Trustee shall authenticate and
deliver one or more Physical Securities having an equal aggregate principal
amount at maturity.
SECTION 307. SPECIAL TRANSFER PROVISIONS.
(a) GENERAL. The provisions of this Section 307 shall apply to all
transfers involving any Physical Security and any beneficial interest
in any Global Security.
(b) CERTAIN DEFINITIONS. As used in this Section 307 only,
"delivery" of a certificate by a transferee or transferor means the
delivery to the Security Registrar by such transferee or transferor of
the applicable certificate duly completed; "holding" includes both
possession of a Physical Security and ownership of a beneficial
interest in a Global Security, as the context requires; "transferring"
a Global Security means transferring that portion of the principal
amount of the transferor's beneficial interest therein that the
transferor has notified the Security Registrar that it has agreed to
transfer; and "transferring" a Physical Security means transferring
that portion of the principal amount thereof that the transferor has
notified the Security Registrar that it has agreed to transfer.
As used in this Indenture,"Form of Regulation S Certificate"
means a certificate substantially in the form set forth in Section 313,
and Non-Registration Opinion and Supporting Evidence" means a written
opinion of counsel reasonably acceptable to the Company to the effect
that, and such other certification or information as the Company may
reasonably require to confirm that, the proposed transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
(c) TRANSFERS PURSUANT TO REGULATION S.
Prior to the 41st say following the Closing Date, the
Registrar shall register any transfer of any Note to a Non-U.S. Person
upon the receipt of a certificate substantially in the form of Exhibit
A hereto from the proposed transferor.
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42
(d) DEEMED DELIVERY OF A RULE 144A CERTIFICATE IN CERTAIN
CIRCUMSTANCES. A Rule 144A Certificate, if not actually delivered, will
be deemed delivered if (A) (i) the transferor advises the Company and
the Trustee in writing that the relevant offer and sale were made in
accordance with the provisions of Rule 144A (or, in the case of a
transfer of a Physical Security, the transferor checks the box provided
on the Physical Security to that effect) and (ii) the transferee
advises the Company and the Trustee in writing that (x) it and, if
applicable, each account for which it is acting in connection with the
relevant transfer, is a qualified institutional buyer within the
meaning of Rule 144A, (y) it is aware that the transfer of Securities
to it is being made in reliance on the exemption from the provisions of
Section 5 of the Securities Act provided by Rule 144A, and (z) prior to
the proposed date of transfer it has been given the opportunity to
obtain from the Company the information referred to in Rule 144A(d)(4),
and has either declined such opportunity or has received such
information (or, in the case of a transfer of a Physical Security, the
transferee signs the certification provided on the Physical Security to
that effect); or (B) the transferor holds the Global Security and is
transferring to a transferee that will take delivery in the form of the
Global Security.
(e) PROCEDURES AND REQUIREMENTS. If the proposed transferor
holds:
(A) a Physical Security which is surrendered to the
Security Registrar, and the proposed transferee or transferor,
as applicable:
(i) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A Certificate
and the proposed transferee requests delivery in the
form of a Physical Security, then the Security
Registrar shall (x) register such transfer in the
name of such transferee and record the date thereof
in its books and records, (y) cancel such surrendered
Physical Security and (z) deliver a new Physical
Security to such transferee duly registered in the
name of such transferee in principal amount equal to
the principal amount being transferred of such
surrendered Physical Security; or
(ii) delivers (or is deemed to have
delivered pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the Global Security, then the Security Registrar
shall (x) cancel such surrendered
<PAGE>
43
Physical Security, (y) record an increase in the
principal amount of the Global Security equal to the
principal amount being transferred of such
surrendered Physical Security and (z) notify the
Depositary in accordance with the procedures of the
Depositary that it approves of such transfer.
In any of the cases described in this Section
307(e)(A), the Security Registrar shall deliver to the
transferor a new Physical Security in principal amount equal
to the principal amount not being transferred of such
surrendered Physical Security, as applicable.
(B) the Global Security, and the proposed transferee
or transferor, as applicable:
(i) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A Certificate
and the proposed transferee requests delivery in the
form of a Physical Security, then the Security
Registrar shall (w) register such transfer in the
name of such transferee and record the date thereof
in its books and records, (x) record a decrease in
the principal amount of the Global Security in an
amount equal to the beneficial interest therein being
transferred, (y) deliver a new Physical Security to
such transferee duly registered in the name of such
transferee in principal amount equal to the amount of
such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that
it approves of such transfer; or
(ii) delivers (or is deemed to have
delivered pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the Global Security, then the transfer shall be
effected in accordance with the procedures of the
Depositary therefor.
(f) EXECUTION, AUTHENTICATION AND DELIVERY OF PHYSICAL
SECURITIES. In any case in which the Security Registrar is required to
deliver a Physical Security to a transferee or transferor, the Company
shall execute, and the Trustee shall authenticate and make available
for delivery, such Physical Security.
(g) CERTAIN ADDITIONAL TERMS APPLICABLE TO PHYSICAL
SECURITIES. Any transferee entitled to receive a Physical Security may
request that the principal amount thereof be evidenced by one or more
Physical Securities in any authorized denomination or denominations and
the Security Registrar shall comply with such request if all other
transfer restrictions are satisfied.
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44
(h) TRANSFERS NOT COVERED BY SECTION 307(e). The Security
Registrar shall effect and record, upon receipt of a written request
from the Company so to do, a transfer not otherwise permitted by
Section 307(e), such recording to be done in accordance with the
otherwise applicable provisions of Section 307(e), upon the furnishing
by the proposed transferor or transferee of a Non-Registration Opinion
and Supporting Evidence.
(i) GENERAL. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such 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 Security
Registrar shall not register a transfer of any Security unless such
transfer complies with the restrictions with respect thereto set forth
in this Indenture. The Security Registrar shall not be required to
determine (but may rely upon a determination made by the Company) the
sufficiency of any such certifications, legal opinions or other
information.
(j) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Security 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 Security Registrar
shall deliver only Securities that bear the Private Placement Legend
unless (i) the requested transfer is at least two years after the
original issue date of the Initial Security (with respect to any
Physical Security), (ii) there is delivered to the Security Registrar
an Opinion of Counsel in form 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 (iii) such Securities are
exchanged for Exchange Securities pursuant to an Exchange Offer.
SECTION 308. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If (i) any mutilated Security is surrendered to the Trustee,
or (ii) the Company and the Trustee receive evidence to their satisfaction of
the destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon Company Order the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount at maturity, bearing a number not contemporaneously outstanding.
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45
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 309. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name such Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
at the office or agency of the Company maintained for such purpose pursuant to
Section 1002; PROVIDED, HOWEVER, that each installment of interest may at the
Company's option be paid by (i) mailing a check for such interest, payable to or
upon the written order of the Person entitled thereto pursuant to Section 310,
to the address of such Person as it appears in the Security Register at the
close of business on the Regular Record Date for such interest payment or (ii)
transfer to an account located in the United States maintained by the payee.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the Regular Record Date by virtue
of having been such Holder, and such defaulted interest and (to the extent
lawful) interest on such defaulted interest at the rate borne by the Securities
(such defaulted interest and interest thereon herein collectively called
"Defaulted Interest") may be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:
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46
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date, and in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
given in the manner provided for in Section 106, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having
been so given, such Defaulted Interest shall be paid to the Persons in
whose names the Securities (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 310. PERSONS DEEMED OWNERS.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in
<PAGE>
47
whose name such Security is registered as the owner of such Security for the
purpose of receiving payment of principal of (and premium, if any) and (subject
to Sections 305 and 309) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and none of the Company,
the Trustee or any agent of the Company or the Trustee shall be affected by
notice to the contrary.
SECTION 311. CANCELLATION.
All Securities surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, 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. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company unless
by Company Order the Company shall direct that cancelled Securities be returned
to it.
SECTION 312. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 313. FORM OF REGULATION S CERTIFICATE.
Upon any transfer of the Securities pursuant to Regulation S,
the transferor of such Securities shall deliver to the Trustee a certificate in
the form of Exhibit A hereto.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
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48
This Indenture shall upon Company Request cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of Securities expressly provided for herein or pursuant hereto and the
rights, powers, trusts, duties and immunities of the Trustee) and the Trustee,
at the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when
(1) either
(a) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 308) and (ii) Securities for whose
payment money has theretofore been deposited in trust with the
Trustee or any Paying Agent or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(b) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose an amount
sufficient to pay and discharge the entire Indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest
on such Securities to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
<PAGE>
49
(3) the Company has delivered to the Trustee an Officers
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 606 and,
if money shall have been deposited with the Trustee pursuant to subclause (b) of
clause (1) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be held
in trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest on any Security
when it becomes due and payable and continuance of such default for a
period of 30 days;
(2) default in the payment of the principal of or premium, if
any, on any Security at its Maturity;
(3) default in the performance, or breach, of the provisions
described in Article Eight of this Indenture, the failure to make or
consummate a Change of Control Offer in accordance with the provisions
of Section 1016 or the failure to make
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or consummate an Excess Proceeds Offer in accordance with the
provisions of Section 1017;
(4) default in the performance, or breach, of any covenant or
agreement of the Company contained in this Indenture (other than a
default in the performance, or breach, of a covenant or warranty which
is specifically dealt with elsewhere in this Indenture) and continuance
of such default or breach for a period of 30 days after written notice
shall have been given to the Company by the Trustee or to the Company
and the Trustee by the holders of at least 25% in aggregate principal
amount at maturity of the then Outstanding Securities, as the case may
be;
(5) (i) one or more defaults in the payment of principal of or
premium, if any, on Indebtedness of the Company or any Significant
Subsidiary aggregating $15 million or more, when the same becomes due
and payable at the stated maturity thereof, and such default or
defaults shall have continued after any applicable grace period and
shall not have been cured or waived or (ii) Indebtedness of the Company
or any Significant Subsidiary aggregating $15 million or more shall
have been accelerated or otherwise declared due and payable, or
required to be prepaid or repurchased (other than by regularly
scheduled required prepayment) prior to the stated maturity thereof;
(6) any holder or holders (or any Person acting on any such
holder's behalf) of any Indebtedness in excess of $15 million in the
aggregate of the Company or any Significant Subsidiary shall,
subsequent to the occurrence of a default with respect to such
Indebtedness, notify the Trustee of the intended sale or disposition of
any assets of the Company or any Restricted Subsidiary that have been
pledged to or for the benefit of such Person to secure such
Indebtedness or shall commence proceedings, or take action to retain in
satisfaction of any such Indebtedness, or to collect on, seize, dispose
of or apply, any such assets of the Company or any Restricted
Subsidiary pursuant to the terms of any agreement or instrument
evidencing any such Indebtedness of the Company or any Restricted
Subsidiary or in accordance with applicable law;
(7) one or more final judgments, orders or decrees of any
court or regulatory agency shall be rendered against the Company or any
Significant Subsidiary or their respective properties for the payment
of money, either individually or in an aggregate amount, in excess of
$15 million and either (i) an enforcement proceeding shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall have been a period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, was not in effect;
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(8) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company or any Significant
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company or any Significant Subsidiary under the
Federal Bankruptcy Code or any other applicable federal or state law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or any Significant
Subsidiary or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the continuance of any
such decree or order unstayed and in effect for a period of 60
consecutive days; and
(9) the institution by the Company or any Significant
Subsidiary of proceedings to be adjudicated a bankrupt or insolvent, or
the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under the Federal Bankruptcy
Code or any other applicable federal or state law, or the consent by it
to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of the Company or any Significant Subsidiary or of any substantial part
of its property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND
ANNULMENT.
If an Event of Default (other than an Event of Default
specified in Section 501(8) or 501(9)) shall occur and be continuing, the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
Securities then Outstanding, by written notice to the Company (and to the
Trustee if such notice is given by the Holders), may, and the Trustee upon the
written request of such Holders, shall declare the principal of, premium, if
any, and accrued interest on all of the Outstanding Securities immediately due
and payable, and upon any such declaration all such amounts payable in respect
of the Securities shall become immediately due and payable. If an Event of
Default specified in Section 501(8) or 501(9) occurs and is continuing, then the
principal of, premium, if any, and accrued interest on all of the Outstanding
Securities shall IPSO FACTO become and be immediately due and payable without
any declaration or other act on the part of either the Trustee or any Holder.
At any time after a declaration of acceleration hereunder, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Securities, by written notice to the Company and the Trustee, may
rescind such declaration and its consequences if
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(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
(A) all overdue interest on all Outstanding
Securities,
(B) all unpaid principal of and premium, if any, on
any Outstanding Securities that have become due otherwise than
by such declaration of acceleration, and interest thereon at
the rate borne by such Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest and overdue principal
at the rate borne by such Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) all Events of Default, other than the non-payment of
amounts of principal of, premium, if any, or interest on Securities
that have become due solely by such declaration of acceleration, have
been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(a) default is made in the payment of any installment of
interest on any Security when such interest becomes due and payable and
such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate borne by the Securities, and, in addition
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thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents
and take such other actions, including participating as a member of any
official creditors committee appointed in the matter as it may deem
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
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and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively; and
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THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Securities shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment, as provided herein and in such Security of
the principal of (and premium, if any) and (subject to Section 309) interest on
such Security on the respective Stated Maturities expressed in such Security
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the
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enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 308, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of not less than a majority in principal amount at
maturity of the Outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, PROVIDED
that
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(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve
it in personal liability or be unjustly prejudicial to the Holders not
consenting.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal
amount at maturity of the Outstanding Securities may, on behalf of the Holders
of all the Securities, waive any past defaults hereunder, except a default
(1) in the payment of the principal of, premium, if any, or
interest on any such Security, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 514. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
ARTICLE SIX
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THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS.
Within 90 days after the occurrence of any Default or Event of
Default hereunder, the Trustee shall transmit in the manner and to the extent
provided in TIA Section 313(c), notice of such Default hereunder known to the
Trustee, unless such Default shall have been cured or waived; PROVIDED, HOWEVER,
that, except in the case of a Default in the payment of the principal of,
premium, if any, or interest on any Security, the Trustee shall be protected in
withholding such notice if a committee of its trust officers in good faith
determines that the withholding of such notice is in the interest of the
Holders; and PROVIDED FURTHER that in the case of any Default of the character
specified in Section 501(4) no such notice to Holders shall be given until at
least 30 days after the occurrence thereof.
SECTION 602. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of TIA Sections 315(a) through
315(d):
(1) the Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
(unless other evidence in respect thereof is herein specifically
prescribed) and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) shall
be entitled to receive and may require and, in the absence of bad faith
on its part, conclusively rely upon an Officers Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders
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pursuant to this Indenture, unless such Holders shall have offered to
the Trustee security or indemnity reasonably satisfactory to it against
the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(6) 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;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture; and
(9) the Trustee shall not be deemed to have knowledge of any
default, breach or Event of Default or other matter upon the occurrence
of which it may be required to take action hereunder unless one of its
Responsible Officers has actual knowledge thereof.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
indemnity satisfactory to it against such risk or liability is not reasonably
assured to it.
SECTION 603. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE
OF SECURITIES.
The recitals contained herein and in the Securities, except
for the Trustee's certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Securities and perform its obligations hereunder and that the
statements made by it in any
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Statement of Eligibility on Form T-1 supplied to the Company will be true and
accurate, subject to the qualifications set forth therein. The Trustee shall not
be accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 604. MAY HOLD SECURITIES.
The Trustee, any Paying Agent, any Security Registrar or any
other agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to TIA
Sections 310(b) and 311, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Security Registrar or
such other agent.
SECTION 605. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
SECTION 606. COMPENSATION AND REIMBURSEMENT.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of investigating or defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify
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and hold harmless the Trustee shall constitute additional indebtedness hereunder
and shall survive the satisfaction and discharge of this Indenture. As security
for the performance of such obligations of the Company, the Trustee shall have a
claim prior to the Securities upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the payment of principal of
(and premium, if any) or interest on particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(8) or (9), the
expenses (including the reasonable charges and expenses of its counsel) of and
the compensation for such services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar foreign or domestic law; PROVIDED, HOWEVER, that to the extent
unpaid as such expenses, they shall be paid as provided in Section 506.
The provisions of this Section shall survive the termination
of this Indenture.
SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of Federal, State, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 609 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
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(c) The Trustee may be removed at any time by Act of the
Holders of not less than a majority in principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least
six months, or
(2) the Trustee shall cease to be eligible under Section 607
and shall fail to resign after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Security for at
least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the
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manner provided for in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities. In case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee.
In all such cases such certificates shall have the full force and effect which
this Indenture provides for the certificate of authentication of the Trustee
shall have; PROVIDED, HOWEVER, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Securities in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
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ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.
Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any information as to the names and addresses of the Holders in
accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312(b).
SECTION 702. REPORTS BY TRUSTEE.
Within 60 days after May 15 of each year commencing with the
first May 15 after the first issuance of Securities, the Trustee shall transmit
to the Holders, in the manner and to the extent provided in TIA Section 313(c),
a brief report dated as of such May 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS.
The Company shall not, in a single transaction or through a
series of related transactions, consolidate with or merge with or into any other
Person or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets substantially as an entirety to
any other Person or Persons, and the Company shall not permit any Restricted
Subsidiary to enter into any such transaction or series of transactions if such
transaction or series of transactions, in the aggregate, would result in the
sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company and its Restricted
Subsidiaries on a consolidated basis to any Person or Persons, unless:
(1) either (i) the Company shall be the surviving
corporation or (ii) the Person (if other than the Company) formed by
such consolidation or into which the
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Company or the Company and its Restricted Subsidiaries is merged or the
Person which acquires by sale, conveyance, transfer, lease or other
disposition, all or substantially all of the properties and assets of
the Company or the Company and its Restricted Subsidiaries, as the case
may be, (the "Surviving Entity") (x) shall be a corporation organized
and validly existing under the laws of the United States of America,
any state thereof or the District of Columbia and (y) shall expressly
assume, by an indenture supplemental to this Indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
Company's obligations for the due and punctual payment of the principal
of (or premium, if any, on) and interest on all the Securities and the
performance and observance of every covenant of this Indenture on the
part of the Company to be performed or observed;
(2) immediately before and after giving effect to such
transaction or series of transactions on a PRO FORMA basis (and
treating any 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), no Default or Event of
Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction or
series of transactions on a PRO FORMA basis (on the assumption that the
transaction or series of transactions occurred on the first day of the
latest fiscal quarter for which consolidated financial statements of
the Company are available prior to the consummation of such transaction
or series of transactions with the appropriate adjustments with respect
to the transaction or series of transactions being included in such PRO
FORMA calculation), the ratio of Total Consolidated Indebtedness to
Annualized Pro Forma Consolidated Operating Cash Flow of the Company
(or the Surviving Entity if the Company is not the continuing obligor
under this Indenture) would be less than or equal to such ratio of the
Company immediately before such transaction;
(4) if any of the property or assets of the Company or any of
its Restricted Subsidiaries would thereupon become subject to any Lien,
the provisions of Section 1014 are complied with; and
(5) the Company or the Surviving Entity shall have delivered
to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition and such supplemental indenture
comply with the terms of this Indenture.
SECTION 802. SUCCESSOR SUBSTITUTED.
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Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company in accordance with Section 801 in which the
Company is not the continuing obligor under this Indenture, the Surviving Entity
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
had been named as the Company herein. When a successor assumes all the
obligations of its predecessor under this Indenture and the Securities, the
predecessor shall be released from those obligations; PROVIDED that in the case
of a transfer by lease, the predecessor shall not be released from the payment
of principal and interest on the Securities.
SECTION 803. SECURITIES TO BE SECURED IN CERTAIN EVENTS.
If, upon any such consolidation of the Company with or
merger of the Company into any other corporation, or upon any conveyance,
lease or transfer of the property of the Company substantially as an entirety
to any other Person, any property or assets of the Company would thereupon
become subject to any Lien, then unless such Lien could be created pursuant
to Section 1014 without equally and ratably securing the Securities, the
Company, prior to or simultaneously with such consolidation, merger,
conveyance, lease or transfer, will as to such property or assets, secure the
Securities Outstanding (together with, if the Company shall so determine any
other Indebtedness of the Company now existing or hereinafter created which
is not subordinate in right of payment to the Securities) equally and ratably
with (or prior to) the Indebtedness which upon such consolidation, merger,
conveyance, lease or transfer is to become secured as to such property or
assets by such Lien, or will cause such Securities to be so secured; PROVIDED
that, for the purpose of providing such equal and ratable security, the
principal amount of the Securities shall mean that amount which would at the
time of making such effective provision be due and payable pursuant to
Section 502 upon a declaration of acceleration of the Maturity thereof, and
the extent of such equal and ratable security shall be adjusted, to the
extent permitted by law, as and when said amount changes over time as
provided in Section 502.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
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(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company contained herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company; or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of
Section 609; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; PROVIDED that such action shall
not adversely affect the interests of the Holders in any material
respect; or
(6) to secure the Securities pursuant to the requirements of
Section 1014 or otherwise; or
(7) to qualify, or maintain the qualification of, this
Indenture under the TIA.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
aggregate principal amount at maturity of the Outstanding Securities, by Act of
said Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders under this Indenture;
PROVIDED, HOWEVER, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the Accreted Value
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which any
Security or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment
after the
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Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or
(2) reduce the percentage in principal amount at maturity of
the Outstanding Securities, the consent of whose Holders is required
for any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture, or
(3) modify any of the provisions of this Section, Section 1021
or Article Five, except to increase the percentage of Outstanding
Securities required for such actions or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security, or
(4) amend, change or modify the redemption provisions of this
Indenture or the Securities or the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate an Excess Proceeds Offer with respect to
any Asset Sale or modify any of the provisions or definitions with
respect thereto.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which adversely affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
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SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL
INDENTURES.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities. Failure to make the appropriate notation or to issue a
new Security shall not affect the validity of such amendment.
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of Section 902, the
Company shall give notice thereof to the Holders of each Outstanding Security
affected, in the manner provided for in Section 106, setting forth in general
terms the substance of such supplemental indenture. Failure to provide such
notice shall not affect the validity of such amendment.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND
INTEREST.
The Company covenants and agrees for the benefit of the
Holders that it will duly and punctually pay the principal of (and premium, if
any) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in The City of New York, an office
or agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The office
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of Bankers Trust Company at Four Albany Street, New York, New York 10006 shall
be such office or agency of the Company, unless the Company shall designate and
maintain some other office or agency for one or more of such purposes. The
Company will give prompt written notice to the Trustee of any change in the
location of any such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all such purposes and may
from time to time rescind any such designation; PROVIDED, HOWEVER, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of (or premium, if any) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal of (or
premium, if any) or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Securities, it will, on or before 10:00 a.m. (New York City time) two
business days prior to the due date of the principal of (or premium, if any) or
interest on any Securities, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal, premium
or interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of such action or any failure so to act.
Each amount payable according to the preceding paragraph shall
be paid unconditionally by credit transfer in the payment currency and in same
day, freely transferable cleared funds no later than 10:00 a.m. (New York City
time) on the relevant day to such account at such bank as the Paying Agent may
from time to time specify for such purpose by written notice to the Company at
least two business days prior to the date on
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which the Company must effectuate such wire transfer. The Company shall before
10:00 a.m. on the second business day prior to the day on which the Paying Agent
receives payment, procure that the bank effecting payment for it confirm by
telex or SWIFT MT100 message to the Paying Agent the payment instructions
relating to such payment.
The Company will cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (or
premium, if any) or interest on any Security and remaining unclaimed for two
years after such principal, premium or interest has become due and payable shall
be paid to the Company on Company Request, or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation
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in the Borough of Manhattan, The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
SECTION 1004. CORPORATE EXISTENCE.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Subsidiary; PROVIDED, HOWEVER, that the Company shall not be
required to preserve any such right or franchise if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, might by
law become a Lien upon the property of the Company or any Subsidiary; PROVIDED,
HOWEVER, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will cause all properties owned by the Company or
any Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; PROVIDED, HOWEVER, that nothing in this Section shall
prevent the Company from discontinuing the maintenance of any of such properties
if such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1007. INSURANCE.
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The Company will at all times keep all of its and its
Subsidiaries properties which are of an insurable nature insured with insurers,
believed by the Company to be responsible, against loss or damage to the extent
that property of similar character is usually so insured by corporations
similarly situated and owning like properties.
SECTION 1008. STATEMENT BY OFFICERS AS TO DEFAULT.
(a) The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year and within 45 days after the end of each
fiscal quarter (other than the last fiscal quarter of a year), a brief
certificate from the principal executive officer, principal financial officer or
principal accounting officer as to his or her knowledge of the Company's
compliance with all conditions and covenants under this Indenture. For purposes
of this Section 1008(a), such compliance shall be determined without regard to
any period of grace or requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $5,000,000), the Company shall
deliver to the Trustee by registered or certified mail or by telegram, telex or
facsimile transmission an officers certificate specifying such event, notice or
other action within five Business Days of its occurrence.
SECTION 1009. PROVISION OF FINANCIAL STATEMENTS AND REPORTS.
(a) 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 Commission (if permitted by Commission practice and applicable law
and regulations) the annual reports, quarterly reports and other documents which
are required to be filed with the Commission pursuant to such Section 13(a) or
15(d) or any successor provision thereto, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing Dates")
required by such Section 13(a) or 15(d) of the Exchange Act regardless of
whether the Company is required to file such documents. 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 Commission (i) transmit (or cause to
be transmitted) by mail to all holders of Securities, as their names and
addresses appear in the applicable Security Register, without cost to such
holders, and (ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company is required to file with the
Commission 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 Commission
is not permitted by Commission practice or applicable
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law or regulations, promptly upon written request supply copies of such
documents to any holder of Securities.
(b) The Company will disclose the current and accumulated
earnings and profits, if any, for any fiscal year in its annual report on form
10K so long as it is required to file such reports. Thereafter, the Company will
provide such information separately to the Holders who so request by written
notice to the Company.
SECTION 1010. LIMITATION ON ADDITIONAL INDEBTEDNESS.
(a) The Company will not, and will not permit any Restricted
Subsidiary, directly or indirectly, to incur, contingently or otherwise, any
Indebtedness, except for Permitted Indebtedness; PROVIDED that the Company will
be permitted to incur Indebtedness if after giving pro forma effect to such
incurrence (including the application of the net proceeds therefrom), the ratio
of (x) Total Consolidated Indebtedness outstanding as of the date of such
incurrence to (y) Annualized Pro Forma Consolidated Operating Cash Flow would be
greater than zero and less than or equal to 6 to 1.
(b) The Company will not incur any Subordinated Indebtedness
unless such Indebtedness by its terms expressly prohibits the payment by the
Company of any assets or securities (including Common Stock) to the holders of
such Subordinated Indebtedness prior to the payment in full of the Securities in
the event of a bankruptcy or reorganization.
SECTION 1011. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not take, and will not permit any
Restricted Subsidiary to, directly or indirectly, take any of the following
actions:
(i) declare or pay any dividend or any other distribution on
Capital Stock of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the
Company (other than dividends or distributions payable solely in
Capital Stock (other than Redeemable Capital Stock) of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of the Company (other than any such Capital Stock
owned by the Company or a Restricted Subsidiary) or any Affiliate of
the Company (other than any Restricted Subsidiary);
(iii) make any principal payment on, or repurchase, redeem,
defease or otherwise acquire or retire for value, prior to any
scheduled principal payment,
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sinking fund payment or maturity, any Subordinated Indebtedness of the
Company (other than any Subordinated Indebtedness held by a Restricted
Subsidiary);
(iv) make any Investment (other than a Permitted Investment)
in any Person (other than an Investment by the Company or a Restricted
Subsidiary in either (1) a Restricted Subsidiary or the Company or (2)
a Person that becomes a Restricted Subsidiary as a result of such
Investment);
(v) create or assume any guarantee of Indebtedness of any
Affiliate of the Company (other than guarantees of any Indebtedness of
any Restricted Subsidiary by the Company or any Restricted Subsidiary);
or
(vi) declare or pay any dividend or any other distribution on
any Capital Stock of any Restricted Subsidiary to any Person (other
than (1) dividends or distributions paid to the Company or a Restricted
Subsidiary or (2) PRO RATA dividends or distributions on Common Stock
of Restricted Subsidiaries held by minority stockholders, provided that
such dividends or distributions do not in the aggregate exceed the
minority stockholders' PRO RATA share of such Restricted Subsidiaries'
net income from the first day of the fiscal quarter beginning
immediately following the Issue Date);
(such payments or other actions described in (but not excluded from) clauses (i)
through (vi) are collectively referred to as "Restricted Payments"), unless at
the time of, and immediately after giving effect to, the proposed Restricted
Payment (1) no Default or Event of Default shall have occurred and be
continuing, (2) the Company would be able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the proviso of Section
1010; and (3) the aggregate amount of all Restricted Payments declared or made
after the Issue Date would not exceed an amount equal to the sum of:
(A) the difference between (x) the Cumulative Available Cash
Flow determined at the time of such Restricted Payment and (y) the
product of (I) 1.5 and (II) the cumulative Consolidated Interest
Expense of the Company determined for the period commencing on the
Issue Date and ending on the last day of the latest fiscal quarter for
which consolidated financial statements of the Company are available
preceding the date of such Restricted Payment (or if such difference
shall be a negative number, minus 100% of such number), PLUS (B) the
aggregate Net Cash Proceeds received by the Company from the issue or
sale (other than to a Restricted Subsidiary) of Capital Stock of the
Company (other than Redeemable Capital Stock) on or after the Issue
Date, excluding any Net Cash Proceeds that are, promptly following
receipt, invested in accordance with clause (ii), (iii) or (v) of
clause (b) hereof and except to the extent such Net Cash Proceeds are
used to incur Indebtedness pursuant to clause (i) of the
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definition of Permitted Indebtedness, PLUS (C) the aggregate Net Cash
Proceeds received by the Company on or after the Issue Date from the
issuance or sale (other than to a Restricted Subsidiary) of debt
securities or Redeemable Capital Stock of the Company that have been
converted into or exchanged for Capital Stock (other than Redeemable
Capital Stock) of the Company to the extent such securities were
originally sold for cash, together with the aggregate net cash proceeds
received by the Company (other than from a Restricted Subsidiary) at
the time of such conversion or exchange, plus (D) in the case of the
disposition or repayment of any Investment (other than through share
leasing arrangements) constituting a Restricted Payment made after the
Issue Date (other than in the case contemplated by clause (E) hereof)
an amount equal to the lesser of the return of capital with respect to
such Investment and the cost of such Investment, in either case, less
the cost of the disposition of such Investment, plus (E) in the case of
Investments (other than through share leasing arrangements) made in any
Person other than a Restricted Subsidiary, an amount equal to the
lesser of the Fair Market Value of such Investment and the total amount
of such Investments constituting Restricted Payments if and when such
Person becomes a Restricted Subsidiary less any amounts previously
credited pursuant to clause (D).
For purposes of determining the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof and
property other than cash shall be valued at its Fair Market Value.
(b) The provisions of this covenant shall not prohibit, so
long as, with respect to clauses (ii) through (ix) below, no Default or Event of
Default shall have occurred and be continuing (i) the payment of any dividend or
other distribution within 60 days after the date of declaration thereof if at
such date of declaration such payment complied with the provisions of this
Indenture; (ii) the purchase, redemption, retirement or other acquisition of any
shares of Capital Stock 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, shares of Capital Stock of the Company (other than
Redeemable Capital Stock); (iii) the purchase, redemption, retirement,
defeasance or other acquisition of Subordinated Indebtedness made by exchange
for, or out of the net cash proceeds of, a substantially concurrent issue or
sale (other than to a Restricted Subsidiary) of (1) Capital Stock (other than
Redeemable Capital Stock) of the Company or (2) other Subordinated Indebtedness
so long as (A) the principal amount of such new Indebtedness does not exceed the
principal amount (or, if such Subordinated Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as of the
date of determination) of the Subordinated Indebtedness being so purchased,
redeemed, defeased, acquired or retired, PLUS the lesser of the amount of any
premium required to be paid in connection with such refinancing pursuant to the
terms of the Subordinated Indebtedness being refinanced or the amount of any
premium reasonably determined by the
<PAGE>
77
Company as necessary to accomplish such refinancing, plus, in either case, the
amount of expenses of the Company incurred in connection with such refinancing,
(B) such new Subordinated Indebtedness is subordinated to the Securities to the
same extent as such Subordinated Indebtedness so purchased, redeemed, defeased,
acquired or retired and (C) such new Subordinated Indebtedness has an Average
Life longer than the Average Life of the Securities and a final Stated Maturity
of principal later than the Stated Maturity of principal of the Securities; (iv)
the extension by the Company and the Restricted Subsidiaries of trade credit to
Unrestricted Subsidiaries, represented by accounts receivable, extended on usual
and customary terms in the ordinary course of business; (v) Investments (other
than through share leasing arrangements) in any Person promptly made with the
proceeds of a substantially concurrent issue or sale of Capital Stock (other
than Redeemable Capital Stock) of the Company; (vi) payments made pursuant to
the Shareholder Registration Rights Agreement; (vii) the payment of reasonable
and customary regular compensation and fees to directors of the Company or any
Restricted Subsidiary who are not employees of the Company or any Restricted
Subsidiary; (viii) any "Restricted Payment" as defined in and permitted by the
PCI Indenture made by PCI or any Subsidiary thereof in accordance with the terms
of the PCI Indenture and (ix) any other Restricted Payments in an aggregate
amount not to exceed $1.0 million (or, if non-U.S. Dollar denominated, the U.S.
Dollar Equivalent thereof) at any one time outstanding.
In determining the amount of Restricted Payments permissible
under this covenant, amounts expended pursuant to clauses (i), (vi), (vii),
(viii) and (ix) above shall be included as Restricted Payments.
SECTION 1012. LIMITATION ON ISSUANCES AND SALES OF CAPITAL
STOCK OF RESTRICTED SUBSIDIARIES.
(a) The Company will not and will not permit any Restricted
Subsidiary to issue or sell any shares of Capital Stock of a Restricted
Subsidiary (other than to the Company or a Restricted Subsidiary); PROVIDED,
HOWEVER, that this covenant shall not prohibit (i) the issuance and sale of all,
but not less than all, of the issued and outstanding Capital Stock of any
Restricted Subsidiary in compliance with the other provisions of this Indenture,
(ii) issuances or sales of Common Stock of a Restricted Subsidiary if (x) the
proceeds of such issuance or sale are applied in accordance with Section 1017
and (y) immediately after giving effect thereto, the Company and its other
Restricted Subsidiaries own no less than 51% of the outstanding Voting Stock of
such Restricted Subsidiary, (iii) issuances or sales of Capital Stock of
Restricted Subsidiaries that are subsidiaries of PCI that are permitted by the
terms of the PCI Indenture or (iv) the ownership by directors of directors'
qualifying shares or the ownership by foreign nationals of Capital Stock of any
Restricted Subsidiary, to the extent mandated by applicable law.
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78
(b) The Company will not permit the direct or indirect
ownership of the Company or any Restricted Subsidiary in the Capital Stock of
any Management Company to fall below the lesser of (i) the maximum ownership
percentage permitted by applicable law and (ii) 51% of the outstanding Capital
Stock of such Management Company, PROVIDED that any increase in such ownership
of the Capital Stock of any Management Company required by any change in
applicable law shall not be required to be completed prior to 365 days from the
effective date of such change in applicable law, PROVIDED FURTHER that the
Company and the Restricted Subsidiaries may sell all, but not less than all, of
their Capital Stock of any Management Company in accordance with the provisions
of Section 1017.
SECTION 1013. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with, or
for the benefit of, any Affiliate of the Company (other than the Company or a
Restricted Subsidiary and after the Old Notes are no longer outstanding, a
Majority Owned Restricted Subsidiary) unless (i) such transaction or series of
related transactions is on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could have been
obtained in an arm's-length transaction with unrelated third parties who are not
Affiliates, (ii) with respect to any transaction or series of related
transactions involving aggregate consideration equal to or greater than $10
million, the Company shall have delivered an officers' certificate to the
Trustee certifying that such transaction or series of related transactions
complies with clause (i) above and such transaction or series of related
transactions has been approved by a majority of the Directors of the Board of
Directors, or the Company has obtained a written opinion from a nationally
recognized investment banking firm to the effect that such transaction or series
of related transactions is fair to the Company or such Restricted Subsidiary, as
the case may be, from a financial point of view (or if an investment banking
firm is generally not qualified to give such an opinion, by a nationally
recognized appraisal firm or accounting firm) and (iii) with respect to any
transaction or series of related transactions including aggregate consideration
in excess of $20 million, the Company shall have delivered an officers'
certificate to the Trustee certifying that such transaction or series of related
transactions complies with clause (i) above and such transaction or series of
related transactions has been approved by a majority of the Disinterested
Directors of the Board of Directors (assuming that at least two such Directors
exist), or in the event that at least two members of the Board of Directors are
not Disinterested Directors with respect to any transaction or series of
transactions included in this clause (iii), the Company shall obtain an opinion
from a nationally recognized investment banking firm (or if an investment
banking firm is generally not qualified to give such an opinion, by a nationally
recognized appraisal
<PAGE>
79
firm or accounting firm) as described above; PROVIDED, HOWEVER, that this
provision will not restrict (1) any transaction by the Company or any Restricted
Subsidiary with an Affiliate directly related to the purchase, sale or
distribution of products in the ordinary course of business, including, without
limitation, transactions related to the purchase, sale or distribution of
programming, subscriber management services, transmission services and services
related to the publication of programming guides, (2) the Company from paying
reasonable and customary regular compensation and fees to directors of the
Company or any Restricted Subsidiary who are not employees of the Company or any
Restricted Subsidiary, including, without limitation, any such fees which the
Company has agreed to pay to any director pursuant to an agreement in effect on
the Issue Date and listed on Schedule A to this Indenture, (3) the payment of
compensation (including stock options and other incentive compensation) to
officers and other employees the terms of which are approved by the Board of
Directors, (4) any transactions pursuant to a Management Agreement, (5) the
Company or any Restricted Subsidiary from making any Restricted Payment in
compliance with Section 1011, (6) (x) transactions pursuant to any Management
Contract, Overhead Agreement or Service Agreement that is entered into prior to
the Issue Date and is listed in Schedule A to this Indenture; or (y)
transactions pursuant to any Organizational Contract, Overhead Agreement or
Service Agreement that is entered into after the Issue Date and has
substantially identical terms as, and is no less favorable to the Company or any
Restricted Subsidiary than, the Organizational Contracts, Overhead Agreements or
Service Agreements, as the case may be, listed in Schedule A to this Indenture,
or (7) amendments, modifications or alterations of Management Agreements,
Organizational Contracts, Overhead Agreements and Service Agreements under (b)
below.
(b) The Company will not, and will not permit any Restricted
Subsidiary to, amend, modify, or in any way alter the terms of any Management
Agreement, Organizational Contract, Overhead Agreement or Service Agreement in a
manner materially adverse to the Company other than (i) by adding new Restricted
Subsidiaries to a Management Agreement, (ii) substituting one Restricted
Subsidiary in place of another Restricted Subsidiary under a Organizational
Contract, (iii) amendments, modifications or alterations required by applicable
law, (iv) amendments, modifications or alterations made to increase the
Company's control over, or interest in, any Management Company or (v)
amendments, modifications or alterations that are approved by a majority of the
Disinterested Directors of the Board of Directors of the Company as not
materially adverse to the Company.
SECTION 1014. LIMITATION ON LIENS.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien of any kind, except for Permitted Liens, on or with respect to any of
its property or assets, whether owned at the date of this Indenture or
thereafter acquired, or any income, profits or proceeds therefrom, or
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80
assign or otherwise convey any right to receive income thereon, unless (x) in
the case of any Lien securing Subordinated Indebtedness, the Securities are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Lien and (y) in the case of any other Lien, the Securities are
equally and ratably secured.
SECTION 1015. LIMITATION ON ISSUANCES OF GUARANTEES OF
INDEBTEDNESS BY SUBSIDIARIES.
(a) The Company will not permit any Restricted Subsidiary,
directly or indirectly, to guarantee, assume or in any other manner become
liable with respect to any Indebtedness of the Company unless such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture
providing for the guarantee of payment of the Securities by such Restricted
Subsidiary on a basis senior to any guarantee of Subordinated Indebtedness or at
least PARI PASSU with any guarantee of Pari Passu Indebtedness; PROVIDED that
this paragraph (a) shall not be applicable to (i) any guarantee of any
Restricted Subsidiary that existed at the time such Person became a Restricted
Subsidiary or (ii) any guarantee of any Restricted Subsidiary of Senior Bank
Indebtedness.
(b) Notwithstanding the foregoing, any guarantee of the
Securities created pursuant to the provisions described in the foregoing
paragraph (a) shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person who is not an Affiliate of the Company, of all of the Company's
Capital Stock in, or all or substantially all the assets of, such Restricted
Subsidiary (which sale, exchange or transfer is not prohibited by this
Indenture) (ii) the occurrence of any default or breach of any covenant or
agreement under any Indebtedness of the Company arising as a result of the
creation of such guarantee or (iii) the release by the holders of the
Indebtedness of the Company described in the preceding paragraph of their
guarantee by such Restricted Subsidiary (including any deemed release upon
payment in full of all obligations under such Indebtedness, except by or as a
result of payment under such guarantee), at a time when (A) no other
Indebtedness of the Company has been guaranteed by such Restricted Subsidiary or
(B) the holders of all such other Indebtedness which is guaranteed by such
Restricted Subsidiary also release their guarantee by such Restricted Subsidiary
(including any deemed release upon payment in full of all obligations under such
Indebtedness). In the event that clause (ii) of this paragraph (b) shall apply
immediately after the creation of such guarantee under paragraph (a) above, then
such guarantee need not be created.
SECTION 1016. PURCHASE OF SECURITIES UPON A CHANGE OF CONTROL.
If a Change of Control shall occur at any time, then each
holder of Securities shall have the right to require that the Company purchase
such holder's Securities, in whole
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81
or in part in integral multiples of $1,000 principal amount at maturity, at a
purchase price (the "Change of Control Purchase Price") in cash in an amount
equal to 101% of the Accreted Value of the Securities plus accrued and unpaid
interest, if any, to the date of purchase (the "Change of Control Purchase
Date"), pursuant to the offer described below (the "Change of Control Offer")
and the other procedures set forth in this Indenture.
Within 30 days following any Change of Control, the Company
shall notify the Trustee thereof and give written notice of such Change of
Control to each holder of Securities by first-class mail, postage prepaid, at
the address of such holder appearing in the Security Register, stating, among
other things, (a) the purchase price and the purchase date, which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed, or such later date as is necessary to comply with requirements
under the Exchange Act; (b) that any Security not tendered will continue to
accrue interest or accrete original issue discount, as applicable; (c) that,
unless the Company defaults in the payment of the purchase price, any Securities
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date; and (d) certain other
procedures that a holder of Securities must follow to accept a Change of Control
Offer or to withdraw such acceptance.
The Company will comply with the applicable tender offer
rules, including Rule l4e-l under the Exchange Act, and any other applicable
securities laws and regulations in connection with a Change of Control Offer.
The Company will not enter into any agreement that would
prohibit the Company from making a Change of Control Offer to purchase the
Securities or, if such Change of Control Offer is made, to pay for the
Securities tendered for purchase.
SECTION 1017. LIMITATION ON SALE OF ASSETS.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, engage in any Asset Sale unless (i) the
consideration received by the Company or such Restricted Subsidiary for such
Asset Sale is not less than the Fair Market Value of the shares or assets sold
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive and evidenced by a Board Resolution) and (ii) the
consideration received by the Company or the relevant Restricted Subsidiary in
respect of such Asset Sale consists of at least 75% cash or Cash Equivalents.
Notwithstanding the preceding sentence, the Company and its Restricted
Subsidiaries may consummate an Asset Sale without complying with clause (ii) of
the immediately preceding sentence if at least 75% of the consideration for such
Asset Sale consists of any combination of cash, Cash Equivalents and those items
described in clause (b)(ii) or (b)(iii) below.
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82
(b) If the Company or any Restricted Subsidiary engages in an
Asset Sale, the Company may use the Net Cash Proceeds thereof, within 12 months
after the later of such Asset Sale or the receipt of such Net Cash Proceeds, (i)
to permanently repay or prepay any then outstanding Senior Bank Indebtedness of
the Company or a Restricted Subsidiary, any then outstanding Indebtedness of a
Restricted Subsidiary or any other then outstanding unsubordinated Indebtedness
of the Company, (ii) to invest in any one or more businesses (including, without
limitation, in the Capital Stock of any Person that becomes a Restricted
Subsidiary as a result of such investment or that is received in connection with
a Permitted Investment made under clause (g), (h) or (i) of the definition
thereof), make capital expenditures (including lease payments for one or more
capital assets) or invest in other tangible assets of the Company or any
Restricted Subsidiary, in each case, engaged, used or useful in the
Cable/Telecommunications Business, the DTH Business or the
Entertainment/Programming Business of the Company and its Restricted
Subsidiaries (or enter into a legally binding agreement to do so within six
months of the date on which such agreement is executed) or (iii) to invest in
properties or assets that replace the properties and assets that are the subject
to such Asset Sale (or enter into a legally binding agreement to do so within
six months of the date on which such agreement is executed). If any such legally
binding agreement to invest such Net Cash Proceeds is terminated, then the
Company may, within 90 days of such termination or within 12 months of such
Asset Sale, whichever is later, apply or invest such Net Cash Proceeds as
provided in clause (ii) or (iii) (without regard to the parenthetical contained
in clauses (ii) or (iii)) above. The amount of such Net Cash Proceeds not so
used as set forth above in this paragraph (b) constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $15 million the Company
shall, within 30 business days, make an offer to purchase (an "Excess Proceeds
Offer") from all holders of Securities, on a PRO RATA basis (together with and
including any Notes that may be outstanding pursuant to the Series B Indenture),
in accordance with the procedures set forth below, the maximum Accreted Value of
Securities that may be purchased with the Excess Proceeds less the amount of
Excess Proceeds, if any, required to be applied under the PCI Indenture for the
repurchase of PCI Notes and applied under the Old Indenture for the repurchase
of the Old Notes. The offer price shall be payable in cash in an amount equal to
100% of the Accreted Value of the Securities plus accrued and unpaid interest,
if any (the "Offered Price"), to the date such Excess Proceeds Offer is
consummated (the "Offer Date"). To the extent that the aggregate Accreted Value
of Securities tendered pursuant to an Excess Proceeds Offer is less than the
Excess Proceeds relating thereto, the Company may use such additional Excess
Proceeds for general corporate purposes. If the Accreted Value of Securities
validly tendered and not withdrawn by holders thereof exceeds the Excess
Proceeds, Securities to be purchased will be selected on a PRO RATA basis
(together with and including any Notes that may be outstanding pursuant to the
Series B Indenture). Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset to zero.
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83
(d) If the Company becomes obligated to make an Offer pursuant
to clause (c) above, the Securities shall be purchased by the Company, at the
option of the holder thereof, in whole or in part in integral multiples of
$1,000 on a date that is not earlier than 30 days and not later than 60 days
from the date the notice is given to holders, or such later date as may be
necessary for the Company to comply with the requirements under the Exchange
Act, subject to proration in the event the amount of Excess Proceeds is less
than the aggregate Offered Price of all Securities tendered.
(e) The Company will comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, in connection with an Excess
Proceeds Offer.
SECTION 1018. LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise,
or make any other distributions to the Company or any Restricted Subsidiary on
or in respect of its Capital Stock, (b) pay any Indebtedness owed to the Company
or any other Restricted Subsidiary, (c) make loans or advances to the Company or
any other Restricted Subsidiary, or (d) transfer any of its properties or assets
to the Company or any other Restricted Subsidiary, except in all such cases for
such encumbrances or restrictions existing under or by reason of (i) any
agreement or instrument in effect on the Issue Date and listed on Schedule D
attached to this Indenture, (ii) applicable law or regulation (including
corporate governance provisions required by applicable law and regulations of
the National Bank of Poland), (iii) customary non-assignment provisions of any
lease governing a leasehold interest of the Company or any Restricted
Subsidiary, (iv) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, (v) any mortgage or other Lien on real property acquired or improved
by the Company or any Restricted Subsidiary after the Issue Date that prohibits
transfers of the type described in (d) above with respect to such real property,
(vi) with respect to a Restricted Subsidiary, an agreement that has been entered
into for the sale or disposition of all or substantially all of the Company's
Capital Stock in, or substantially all the assets of, such Restricted
Subsidiary, (vii) the refinancing of Indebtedness incurred under the agreements
listed on Schedule B attached to this Indenture or described in clause (v)
above, so long as such encumbrances or restrictions are no less favorable in any
material respect to the Company or any Restricted Subsidiary than those
contained in the respective agreement as in
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84
effect on the date of this Indenture, (viii) any such customary encumbrance or
restriction contained in a security document creating a Lien permitted under
this Indenture to the extent relating to the property or asset subject to such
Lien, (ix) any agreement or instrument governing or relating to Senior Bank
Indebtedness (an "Indebtedness Instrument") if such encumbrance or restriction
applies only (X) to amounts which at any point in time (other than during such
periods as are described in the following clause (Y)) (1) exceed amounts due and
payable (or which are to become due and payable within 30 days) in respect of
the Securities or this Indenture for interest, premium and principal (after
giving effect to any realization by the Company under any applicable Currency
Agreement), or (2) if paid, would result in an event described in the following
clause (Y) of this sentence, or (Y) during the pendency of any event that
causes, permits or, after notice or lapse of time, would cause or permit the
holder(s) of the Senior Bank Indebtedness governed by the Indebtedness
Instrument to declare any such Indebtedness to be immediately due and payable or
require cash collateralization or cash cover for such Indebtedness for so long
as such cash collateralization or cash cover has not been provided, or (Z)
arising or agreed to in the ordinary course of business, not relating to any
Indebtedness and that do not individually, or together with all such
encumbrances or restrictions, detract from the value of property or assets of
the Company or any Restricted Subsidiary in any manner material to the Company
or any Restricted Subsidiary and (x) with respect to clause (d) above, any
license agreement entered in the ordinary course of business whereby the Company
or any other Restricted Subsidiary grants a license of programming or other
intellectual property to any other Person and such license agreement prohibits
or encumbers the transfer of the licensed property.
SECTION 1019. LIMITATION ON INVESTMENTS IN UNRESTRICTED
SUBSIDIARIES.
The Company will not make, and will not permit any of its
Restricted Subsidiaries to make, any Investments in Unrestricted Subsidiaries
(other than Permitted Investments) if, at the time thereof, the amount of such
Investment would exceed the amount of Restricted Payments then permitted to be
made pursuant to Section 1011. Any Investments in Unrestricted Subsidiaries
permitted to be made pursuant to this covenant (a) will be treated as the making
of a Restricted Payment in calculating the amount of Restricted Payments made by
the Company or a Restricted Subsidiary (without duplication under the provisions
of clause (a) of paragraph (iv) of Section 1011 and (b) may be made in cash or
property (if made in property, the Fair Market Value thereof as determined by
the Board of Directors of the Company (whose determination shall be conclusive
and evidenced by a Board Resolution) shall be deemed to be the amount of such
Investment for the purpose of clause (a)).
SECTION 1020. LIMITATION ON LINES OF BUSINESS.
The Company will not, and will not permit any Restricted
Subsidiary of the Company to, engage in any business other than the
Cable/Telecommunications Business, the
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85
Entertainment/Programming Business or the DTH Business or any business or
activity reasonably related thereto, including the operation of a subscriber
management or service business.
SECTION 1021. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Sections 1007 through 1020,
inclusive, if before or after the time for such compliance the Holders of at
least a majority in principal amount of the Outstanding Securities, by Act of
such Holders, waive such compliance in such instance with such term, provision
or condition, but no such waiver shall extend to or affect such term, provision
or condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such term, provision or condition shall remain in full
force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. RIGHT OF REDEMPTION.
(a) The Securities will be redeemable at the option of the
Company, in whole or in part, at any time on or after July 15, 2004 on not less
than 30 or more than 60 days' prior notice at the redemption prices (expressed
as percentages of Accreted Value) set forth below, together with accrued
interest, if any, to the redemption date, if redeemed during the twelve-month
period beginning on July 15 of the years indicated below (subject to the right
of holders of record on relevant record dates to receive interest due on a
relevant interest payment date):
<TABLE>
<CAPTION>
YEAR REDEMPTION
- ---- PRICE
----------
<S> <C>
2004............................................................109.000%
2005............................................................106.000
2006............................................................103.000
2007 and thereafter.............................................100.000
</TABLE>
(b) The Company will redeem or purchase Series C Notes in
denominations of $1,000 principal amount at maturity and integral multiples
thereof in accordance with the
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86
terms of this Indenture unless the Series C Notes are in denominations of less
than $1,000 principal amount at maturity. In such events, the Series C Notes
will be redeemed or purchased in multiples of the denomination in which the
Series C Notes are then denominated.
SECTION 1102. APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities pursuant
to Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee in writing of such
Redemption Date and of the principal amount of Securities to be redeemed and
shall deliver to the Trustee such documentation and records as shall enable the
Trustee to select the Securities to be redeemed pursuant to Section 1104.
SECTION 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE
REDEEMED.
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee by such method as the Trustee shall
deem fair and appropriate; PROVIDED, HOWEVER, that no partial redemption shall
reduce the portion of the principal amount of a Security not redeemed to less
than $100.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in part, to
the portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION 1105. NOTICE OF REDEMPTION.
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87
Notice of redemption shall be given in the manner provided for
in Section 106 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed at its registered address.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to
the Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the
notice which relates to such Security shall state that on and after the
Redemption Date, upon surrender of such Security, the holder will
receive, without charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and
accrued interest, if any, to the Redemption Date payable as provided in
Section 1107) will become due and payable upon each such Security, or
the portion thereof, to be redeemed, and that interest thereon will
cease to accrue on and after said date, and
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued interest,
if any.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an amount
of money sufficient to pay the Redemption Price of, and accrued interest on, all
the Securities which are to be redeemed on that date.
<PAGE>
88
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified (together with accrued
interest, if any, to the Redemption Date), and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest,
if any, to the Redemption Date; PROVIDED, HOWEVER, that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 309.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Securities.
SECTION 1108. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holders
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
<PAGE>
89
ARTICLE TWELVE
[RESERVED]
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR
COVENANT DEFEASANCE.
The Company may, at its option and at any time, with respect
to the Securities, elect to have either Section 1302 or Section 1303 be applied
to all Outstanding Securities upon compliance with the conditions set forth
below in this Article Thirteen.
SECTION 1302. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1302, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Securities on
the date the conditions set forth in Section 1304 are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company 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 1305 and the other Sections of this Indenture
referred to in (A) and (B) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Securities to receive, solely from the trust fund
described in Section 1304 and as more fully set forth in such Section, payments
in respect of the principal of (and premium, if any, on) and interest on such
Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 304, 305, 308, 1002 and 1003, (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (D)
this Article Thirteen. Subject to compliance with this Article Thirteen, the
Company may exercise its option under this Section 1302 notwithstanding the
prior exercise of its option under Section 1303 with respect to the Securities.
SECTION 1303. COVENANT DEFEASANCE.
<PAGE>
90
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company shall be released from its
obligations under any covenant contained in Section 801 (3) and in Sections 1007
through 1020 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 to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Outstanding Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 501(4), but, except as specified above, the remainder of this Indenture
and such Securities shall be unaffected thereby.
SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the Outstanding Securities:
(1) The Company shall irrevocably deposit or cause to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Thirteen 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, (A) money in United States Dollars, (B)
U.S. Government Obligations, or (C) a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, or a nationally
recognized investment banking firm, to pay and discharge (i) the
principal of, premium, if any, and interest on the relevant Outstanding
Securities on the Stated Maturity (or upon redemption, if applicable)
of such principal, premium, if any, or installment of interest and (ii)
any mandatory redemption or analogous payments applicable to the
Outstanding Securities on the day on which such payments are due and
payable in accordance with the terms of this Indenture and of such
Securities; PROVIDED that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities. For this
purpose, "U.S. Government Obligations" means securities that are (x)
direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or
<PAGE>
91
supervised by and acting as an agency or instrumentality of the United
States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States
of America, which, in either case, are not callable or redeemable at
the option of the issuer thereof, and shall also include a depository
receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, PROVIDED that (except as
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
(2) 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 paragraphs (8) and (9) of Section 501 hereof are
concerned, at any time during 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).
(3) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the
Company is a party or by which it is bound.
(4) In the case of an election under Section 1302, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States stating that (x) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling, or (y) since
the effective date of the Registration Statement there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion 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 defeasance
and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
defeasance had not occurred.
(5) In the case of an election under Section 1303, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States 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 amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred.
<PAGE>
92
(6) The Company shall have delivered to the Trustee an Opinion
of Counsel in the United States to the effect that after the 91st day
following the deposit or after the date such opinion is delivered, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(7) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of the Securities
over the other creditors of the Company with the intent of hindering,
delaying or defrauding creditors of the Company.
(8) The Company shall have delivered to the Trustee an
Officers Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 1302 or the covenant defeasance under Section 1303 (as
the case may be) have been complied with.
SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS
TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1305, the "Trustee") pursuant to Section 1304 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 acting as its own 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 (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1304 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 s.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it as
provided in Section 1304 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would
<PAGE>
93
then be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1306. REINSTATEMENT.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1305 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1302 or 1303, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1305; PROVIDED, HOWEVER, that if the Company makes any payment of
principal of (or premium, if any) or interest on any following the reinstatement
of its obligations, the Company shall be subrogated to the rights of the Holders
to receive such payment from the money held by the Trustee or Paying Agent.
<PAGE>
94
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, and their respective corporate seals to be hereunto affixed and, in
the case of the Company, attested, all as of the day and year first above
written.
@ENTERTAINMENT, INC.
[SEAL] By: /s/ROBERT E. FOWLER, III
------------------------
Title: CHIEF EXECUTIVE OFFICER
Attest: /s/DONALD MILLER JONES
----------------------
Title: CHIEF FINANCIAL OFFICER
BANKERS TRUST COMPANY
[SEAL] By: /s/IAN HANCOCK
--------------
Title:
<PAGE>
Note: In these Schedules to this Indenture, defined terms have the same meaning
as in the Offering Memorandum.
SCHEDULE A
EXISTING MANAGEMENT CONTRACTS,
OVERHEAD AGREEMENTS AND SERVICE AGREEMENTS
<TABLE>
<CAPTION>
DATE SERVICE AGREEMENTS
<S> <C>
04/01/96 Service Agreement among Poltelkab, WCCI and PCBV.
08/31/95 Service Agreement among ETV, PCBV and WCCI.
07/07/95 Service Agreement among PTK-Lublin, WCCI and PCBV.
07/01/95 Service Agreement among Elektrim TV Sp. Z 0.0., WCCI and PCBV.
05/26/95 Service Agreement among PTK-Inzynier (predecessor to
PTK-Szczecin), WCCI and PCBV.
01/01/94 Service Agreement among PTK, S.A., WCCI and PCBV.
01/01/94 Service Agreement among PTK-Katowice, WCCI and PCBV.
01/01/94 Service Agreement among PTK-Krakow, WCCI and PCBV.
01/01/94 Service Agreement among PTK-Warsaw, WCCI and PCBV.
01/11/95 Service Agreement among Telkat, WCCI and PCBV.
11/01/95 Service Agreement among WCCI and PCBV.
</TABLE>
<TABLE>
<CAPTION>
DATE MANAGEMENT AGREEMENTS
<S> <C>
04/01/96 Management Agreement between WCCI and Poltelkab.
10/01/95 Management Agreement between WCCI and PTK-Inzynier
07/07/95 Management Agreement between WCCI and PTK-Lublin.
07/01/95 Management Agreement between WCCI and Elektrim TV Sp. Z 0.0.
<PAGE>
96
01/11/95 Management Agreement between WCCI and Telkat.
01/01/95 Management Agreement between WCCI and PTK-Warsaw.
01/01/95 Management Agreement between WCCI and PTK, S.A.
01/01/95 Management Agreement between WCCI and PTK-Krakow.
01/01/94 Management Agreement between WCCI and PTK-Katowice.
</TABLE>
<TABLE>
<CAPTION>
DATE CORPORATE OVERHEAD ALLOCATION AGREEMENTS
<S> <C>
As of
01/01/96 Corporate Overhead Allocation Agreement dated as of
January 1, 1996, among PTK, S.A., PTK-Warsaw, PTK-Ryntronik,
PTK-Krakow, PTK-Inzynier, PTK-Lublin, ETV, Telkat, WCCI and
PCBV.
As of
04/01/96 Letter Agreement Between WCCI, PCBV and Poltelkab
adding Poltelkab as a party to the Corporate Overhead
Allocation Agreement.
</TABLE>
<PAGE>
SCHEDULE B
INDEBTEDNESS OUTSTANDING ON THE ISSUE DATE
<TABLE>
<CAPTION>
Amount Outstanding
BORROWER Lender Exclusive of Amount of Loan
Accrued Interest
<S> <C> <C> <C>
Poland Communications, AmerBank-Bank $6,500,000.00 $6,500,000.00
Inc. Amerykanski w
Polsce S.A.
Szczecinska Telewizja Bank Rozwoju DM 3,204,900.00 DM 3,948,615.17
Kablowa Sp. Z o.o. Eksportu S.A.
Telewizja Kablowa Polski Bank $333,334.00 $500,000.00
Gosat Sp. Z o.o. Eksportu S.A.
</TABLE>
The Indenture dated as of July 14, 1998 between Bankers Trust Company,
as Trustee, and @Entertainment, Inc., the Indenture dated as of October 31, 1996
between State Street Bank and Trust Company, as Trustee, and Poland
Communications, Inc. and the Indenture dated as of January 20, 1999 between
Bankers Trust Company, as Trustee, and @Entertainment, Inc.
<PAGE>
SCHEDULE C
LIENS EXISTING ON THE ISSUE DATE
PLEDGES OF CAPITAL STOCK
1. 2,514,291 shares of PTK-Krakow capital stock owned by PCBV,
subject to a Lien existing on this date, are pledged in favor
of AmerBank.
2. 2,400 shares of PTK-Lublin capital stock owned by Poltelkab
have been pledged to Amerbank.
3. 3,583,457 shares of PTK-Warsaw S.A. owned by PCBV subject to a
Lien existing on this date, are pledged in favor of Amerbank.
4. Pledge of 1,818 shares of Szczecinska Telewizja Kablowa Sp. Z
o.o. for the security of certain obligations undertaken by PTK
Szczecin Sp. Z o.o.
5. Lien on certain cable television fixed assets of Telewizja
Kablowa Gosat Sp. Z o.o. and pledge on insurance policies for
such assets in favor of Polski Bank Rozwoju S.A.
<PAGE>
SCHEDULE D
AGREEMENTS NOT RESTRICTED UNDER SECTION 1018
A) LIMITATIONS ON ABILITY TO PAY DIVIDENDS OR MAKE DISTRIBUTIONS ON
CAPITAL STOCK.
The Indenture dated as of July 14, 1998 between Bankers Trust Company,
as Trustee, and @Entertainment, Inc. and the Indenture dated as of
October 31, 1996 between State Street Bank and Trust Company, as
Trustee, and Poland Communications, Inc.
The Indenture dated as of January 20, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
PCI's ability to pay dividends or make distributions on its capital
stock is limited by its Restated Certificate of Incorporation.
PTK-Operator's ability to pay dividends or make distributions on its
capital stock is limited by the convertible debt of PTK-Operator.
The Statutes, Notarial Deeds or Articles of Association of each of the
Polish Subsidiaries require shareholder vote to pay dividends or make
distribution on capital stock.
2) Limitations on the payment of indebtedness owed to the Company or any
Subsidiary.
The Indenture dates as of July 14, 1998 between Bankers Trust Company,
as Trustee, and @Entertainment, Inc. and the Indenture dated as of
October 31, 1996 between State Street Bank and Trust Company, as
Trustee, and Poland Communications, Inc.
The Indenture dated as of January 20, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
The statutes of PTK-Operator limit the payment on indebtedness owed to
the Company or any Subsidiary.
PCI's ability to make payments on indebtedness is limited by its
Restated Certificate of Incorporation.
PCBV and PCI have subordinated their right to receive payments on their
loans to PTK Warsaw, PTK-Krakow, and PTK-Lublin in favor of AmerBank.
<PAGE>
100
C) LIMITATIONS ON THE ABILITY OF A COMPANY TO MAKE INVESTMENTS IN THE
COMPANY OR ANY SUBSIDIARY.
The Indenture dated as of July 14, 1998 between Bankers Trust Company,
as Trustee, and @Entertainment, Inc. and the Indenture dated as of
October 31, 1996 between State Street Bank and Trust Company, as
Trustee, and Poland Communications, Inc.
The Indenture dated as of January 20, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
PCI's ability to make investments in any Subsidiary is limited by its
Restated Certificate of Incorporation.
The Statutes, Notarial Deeds or articles of association of each of the
Polish Subsidiaries require shareholder vote to make certain
investments in the Company or any Subsidiary.
The PCBV Shareholders agreement limits the ability to make investments
in the Company or any Subsidiary.
4) LIMITATIONS ON TRANSFERRING PROPERTY OR ANY ASSETS TO THE COMPANY OR
ANY SUBSIDIARY.
The Indenture dated as of July 14, 1998 between Bankers Trust Company,
as Trustee, and @Entertainment, Inc. and the Indenture dated as of
October 31, 1996 between State Street Bank and Trust Company, as
Trustee, and Poland Communications, Inc.
The Indenture dated as of January 20, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
PCI's ability to transfer property or assets to any Subsidiaries is
limited by the Company's Restated Certificate of Incorporation.
Certain Polish statutes restrict the transfer of property or any assets
to the Company or any Subsidiary or the conversion of convertible debt.
The PCBV shareholders agreement limits the ability to transfer property
or any assets to the Company or any Subsidiary.
2,514,291 shares of PTK-Krakow capital stock owned by PCBV, subject to
a Lien existing on this date, are pledged in favor of AmerBank.
2,400 shares of PTK-Lublin capital stock owned by Poltelkab have been
pledged to AmerBank.
<PAGE>
101
3,583,457 shares of PTK-Warsaw S.A. owned by PCBV subject to a Lien
existing on this date, are pledged in favor of AmerBank.
Pledge of 1,818 shares of Szczecinska Telewizja Kablowa Sp. z o.o. for
the security of certain obligations undertaken by PTK Szczecin Sp.z
o.o.
Lien on certain cable television fixed assets of Telewizja Kablowa
Gosat Sp. z o.o. and assignment of insurance policies for such assets
in favor of Polski Bank Rozwoju S.A.
<PAGE>
102
<PAGE>
@ENTERTAINMENT, INC.
Series C Senior Discount Note due 2008
ISIN: XS 0094166096
Common Code: 9416609
No.1 $36,001,321
@ENTERTAINMENT, INC., a Delaware corporation (the "Company",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to BT Globenet Nominees Limited, or its
registered assigns, the principal sum of THIRTY SIX MILLION ONE THOUSAND THREE
HUNDRED AND TWENTY ONE DOLLARS ($36,001,321) on July 15, 2008.
<TABLE>
<S> <C>
Issue Date: January 20, 1999
Issue Price of Note: $.27262 per $1.00 principal amount at
Maturity
Yield to Maturity: 18 1/2%
Accretion Period: Original issue discount will accrete from
Issue Date up to July 15, 2008.
Cash Interest Payment Dates: January 15 and July 15 of each year
commencing July 15, 2004.
Regular Record Dates: January 1 and July 1 of each year.
</TABLE>
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
<PAGE>
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Date: January 20, 1999 @ENTERTAINMENT, INC.
By:
--------------------------------
Title:
By:
--------------------------------
Title:
<PAGE>
A-3
This is one of the Series C Senior Discount Notes due 2008 described in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
as Trustee
By:
--------------------------------
Authorized Signatory
<PAGE>
A-4
@ENTERTAINMENT, INC.
Series C Senior Discount Note due 2008
1. PRINCIPAL AND INTEREST
The Company will pay the principal of this Note on July 15,
2008.
Original issue discount will accrete from the Issue Date up to
July 15, 2008. In addition, the Company promises to pay cash interest on the
principal amount of this Note on each Interest Payment Date, as set forth below,
at the rate of 7% per annum on the principal amount at maturity of $36,001,321
commencing on July 15, 2004.
Cash interest will be payable semiannually (to the holders of
record of the Notes at the close of business on the January 1 or July 1
immediately preceding the Interest Payment Date) on each Interest Payment
Date, commencing July 15, 2004. Except in the case of a Registration Default
(as defined herein), the principal of this Note shall not accrue cash
interest until January 15, 2004, except in the case of a default in payment
of the amount due at Maturity, in which case the amount due on this Note
shall bear interest at a rate of 18 1/2% per annum (to the extent that the
payment of such interest shall be legally enforceable), which shall accrue
from the date of such default to the date the payment of such amount has been
made or duly provided for. Interest on any overdue principal amount shall be
payable on demand.
Cash Interest on this Note will accrue from the most recent
date to which interest has been paid on this Note or, if no interest has been
paid, from July 15, 2004; PROVIDED that, if there is no existing default in the
payment of interest and if this Note is authenticated between a Regular Record
Date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such Interest Payment Date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Interest of 7% will be calculated on the principal amount at maturity of
$36,001,321.
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the extent
lawful, at a rate per annum of 18 1/2%.
<PAGE>
A-5
2. METHOD OF PAYMENT
The Company will pay cash interest (except defaulted interest)
on the principal amount of the Notes on each January 15 and July 15, commencing
July 15, 2004, to the persons who are Holders (as reflected in the Note Register
at the close of business on the January 1 and July 1 immediately preceding the
Interest Payment Date), in each case; PROVIDED that, with respect to the payment
of principal, the Company will make payment to the Holder that surrenders this
Note to any Paying Agent on or after July 15, 2008.
The Company will pay principal, premium, if any, and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal,
premium, if any, and interest by its check payable in such money. The Company
may mail an interest check to a Holder's registered address (as reflected in the
Note Register). If a payment date is a date other than a Business Day at a place
of payment, payment may be made at that place on the next succeeding day that is
a Business Day and no interest shall accrue for the intervening period.
3. PAYING AGENT AND NOTE REGISTRAR.
Initially, the Trustee will act as Paying Agent and Note
Registrar. The Company may change any Paying Agent or Note Registrar upon
written notice thereto. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Note Registrar or co-registrar.
4. INDENTURE; LIMITATIONS.
The Company issued the Notes under an Indenture dated as of
January 20, 1999 (the "Indenture"), between the Company and Bankers Trust
Company, as trustee (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are senior unsecured obligations of the Company
ranking pari passu in right of payment with all other existing and future
unsubordinated obligations of the
<PAGE>
A-6
Company and senior in right of payment to any existing and future obligations of
the Company expressly subordinated in right of payment to the Notes. The
Indenture limits the aggregate principal amount at maturity of the Notes to
$36,001,321.
5. OPTIONAL REDEMPTION UPON A PUBLIC EQUITY OFFERING.
The Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 15, 2004 on not less than 30 or
more than 60 days' prior notice at the redemption prices (expressed as
percentages of Accreted Value) set forth below, together with accrued interest,
if any, to the redemption date, if redeemed during the twelve-month period
beginning on July 15 of the years indicated below (subject to the right of
holders of record on relevant record dates to receive interest due on a relevant
interest payment date):
<TABLE>
<CAPTION>
YEAR REDEMPTION
PRICE
<S> <C>
2004................................................... 109.000%
2005................................................... 106.000
2006................................................... 103.000
2007 and thereafter................................... 100.000
</TABLE>
Notice of a redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder to be redeemed at
such Holder's last address as it appears in the Note Register. Notes in original
denominations larger than $1.00 principal amount at maturity may be redeemed in
part in integral multiples of $1.00 principal amount at maturity. On and after
the Redemption Date, interest will cease to accrue on Notes or portions of Notes
called for redemption, unless the Company defaults in the payment of the
Redemption Price.
6. REPURCHASE UPON A CHANGE IN CONTROL AND ASSET SALES.
(a) Upon the occurrence of a Change of Control, each holder of
Notes shall have the right to require that the Company purchase such holder's
Notes, in whole or in part in integral multiples of $1.00 principal amount at
maturity, at a purchase price in cash of 101% of the Accreted Value thereof on
the redemption date, plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of holders of record on relevant record dates to
receive interest due on relevant interest payment dates), and (b) upon the
occurrence of an Asset Sale, the Company may be obligated to make an offer to
purchase all or a portion of the outstanding Notes with a portion of the Net
Cash Proceeds of such Asset Sale at a
<PAGE>
A-7
redemption price of 100% of the Accreted Value thereof on the redemption date
plus accrued and unpaid interest, if any, to the date of purchase.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons, in
denominations of $1.00 principal amount at maturity and any integral multiple
thereof. Under the Terms of the Indenture, the Company may convert, at its
option and to the extent practical, the Notes to denominations of $1,000
principal amount at maturity, so long as such conversion is not adverse to
Holders. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Note Registrar may require a Holder, among other things,
to furnish appropriate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture. The Note Registrar need
not register the transfer or exchange of any Notes selected for redemption
(except the unredeemed portion of any Note being redeemed in part). Also, it
need not register the transfer or exchange of any Notes for a period of 15 days
before a selection of Notes to be redeemed is made.
8. PERSONS DEEMED OWNERS.
A Holder may be treated as the owner of a Note for all
purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount at maturity of the Notes then
outstanding, and any existing default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount at maturity of the Notes then outstanding. Without notice to or the
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to,
<PAGE>
A-8
among other things, cure any ambiguity or inconsistency and make any change that
does not materially adversely affect the rights of any Holder.
12. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) issuances and sales of Subsidiary stock; (iv)
transactions with Affiliates; (v) Liens; (vi) guarantees of Indebtedness by
0Subsidiaries; (vii) purchase of Notes upon a Change of Control, (viii) Asset
Sales and disposition of the proceeds thereof; (ix) dividends and other payment
restrictions affecting Subsidiaries; (x) investments in Unrestricted
Subsidiaries; (xi) merger and certain transfers of assets; and (xii) lines of
business. At the end of each quarter and fiscal year, the Company must report to
the Trustee on compliance with such limitations.
13. SUCCESSOR PERSONS.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. REMEDIES FOR EVENTS OF DEFAULT.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of not less than 25% in principal
amount at maturity of the Notes then outstanding, by written notice to the
Company (and to the Trustee, if such notice is given by the Holders) may declare
all the Notes to be immediately due and payable and upon any such declaration
all such amounts payable in respect of the Notes shall become immediately due
and payable. If a bankruptcy or insolvency default with respect to the Company
or any of its Significant Subsidiaries occurs and is continuing, the Notes and
all such amounts payable in respect of the Notes shall automatically become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder of Notes. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of at least a majority in principal amount of the
Notes then outstanding may direct the Trustee in its exercise of any trust or
power.
<PAGE>
A-9
15. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Company
and its Affiliates as if it were not the Trustee.
16. AUTHENTICATION.
This Note shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Note.
17. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder 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) and U/G/M/A (= Uniform Gifts to Minors
Act).
18. DEFEASANCE.
The Indenture contains provisions for defeasance, at any time,
of the Indebtedness represented by this Note or the covenants governing the
Indebtedness represented by this Note, upon compliance by the Company with
certain conditions set forth in the Indenture.
<PAGE>
A-10
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
INSERT TAXPAYER IDENTIFICATION NO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES]
In connection with any transfer of this Note occurring prior
to the date which is the earlier of the date of an effective Registration
Statement or the end of the period referred to in Rule 144(k) under the
Securities Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[CHECK ONE]
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
OR
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the
Indenture.
<PAGE>
A-11
If none of the foregoing boxes is checked, the Trustee or other Note Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
Date:
----------------------------
NOTICE: The signature to this
assignment must correspond with
the name as written upon the
face of the within-mentioned
instrument in every particular,
without alteration or any
change whatsoever.
Signature Guarantee:
------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date:
---------------------------- --------------------------------
NOTICE: To be executed by an
executive officer
<PAGE>
A-12
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 1016 or Section 1017 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1016 or Section 1017 of the Indenture, state the
amount (in original principal amount) below:
$---------------------.
Date:
---------------------------------
Your Signature:
------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
--------------------------------------------
<PAGE>
A-13
EXHIBIT A
FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATIONS S
To: Bankers Trust Company
Four Albany Street
New York, NY 10006
Attention: Corporate Trust Trustee Administration
Re: @Entertainment, Inc. (the "COMPANY")
SERIES C SENIOR DISCOUNT NOTES DUE 2008 (THE "NOTES")
Ladies and Gentlemen:
In connection with our proposed sale of $36,001,321 aggregate
principal amount at maturity of Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933 and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) at the time the buy order 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;
(3) no direct selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
You and the Company 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. The terms used in this letter have
the meanings set forth in Regulation S.
Very truly yours,
<PAGE>
A-14
[NAME OF TRANSFEROR]
By:
---------------------------------
Name:
Title:
Address:
Date of this Certificate:
--------------------------
<PAGE>
Exhibit 4.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
@ENTERTAINMENT, INC.
TO
BANKERS TRUST COMPANY
Trustee
--------------------
INDENTURE
Dated as of January 27, 1999
---------------------
$256,800,000 aggregate principal amount at maturity
14 1/2% Senior Discount Notes due 2009
and
14 1/2% Exchange Senior Discount Notes due 2009
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
@ENTERTAINMENT, INC.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT
OF 1939 AND INDENTURE, DATED AS OF JANUARY 27, 1999
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C>
ss. 310(a)(1) ........................................ 607
(a)(2) ........................................ 607
(b) ........................................ 608
ss. 312(c) ........................................ 701
ss. 314(a) ........................................ 703
(a)(4) ........................................ 1008(a)
(c)(1) ........................................ 102
(c)(2) ........................................ 102
(e) ........................................ 102
ss. 315(b) ........................................ 601
ss. 316(a)(last
sentence) ........................................ 101 ("Outstanding")
(a)(1)(A) ........................................ 502, 512
(a)(1)(B) ........................................ 513
(b) ........................................ 508
(c) ........................................ 104(d)
ss. 317(a)(1) ........................................ 503
(a)(2) ........................................ 504
(b) ........................................ 1003
ss. 318(a) ........................................ 111
</TABLE>
- --------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PARTIES................................................................... 1
RECITALS OF THE COMPANY................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. DEFINITIONS............................................ 1
Accreted Value....................................................... 2
Acquired Indebtedness................................................ 3
Act ................................................................. 3
Advent .............................................................. 3
Affiliate............................................................ 3
Annualized Pro Forma Consolidated Operating Cash Flow................ 3
Asset Acquisition.................................................... 4
Asset Sale........................................................... 4
Average Life......................................................... 5
Bankruptcy Law....................................................... 5
Board of Directors................................................... 5
Board Resolution..................................................... 5
Business Day......................................................... 5
Cable Television Newco............................................... 5
Cable/Telecommunications Business.................................... 5
Capital Stock........................................................ 6
Capitalized Lease Obligation......................................... 6
Cash Equivalents..................................................... 6
Change of Control.................................................... 6
Commission........................................................... 7
Common Stock......................................................... 7
Company ............................................................. 7
Company Request or Company Order..................................... 8
Consolidated Income Tax Expense...................................... 8
</TABLE>
- --------
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
<PAGE>
ii
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Interest Expense........................................ 8
Consolidated Net Income.............................................. 8
Consolidated Operating Cash Flow..................................... 9
Corporate Trust Office............................................... 9
Corporation.......................................................... 9
Cumulative Available Cash Flow....................................... 9
Currency Agreement................................................... 10
Default ............................................................. 10
Defaulted Interest................................................... 10
Depositary........................................................... 10
Disinterested Director............................................... 10
DTH Business......................................................... 10
ECO ................................................................. 10
Entertainment/Programming Business................................... 10
Event of Default..................................................... 10
Exchange Act......................................................... 10
Exchange Offer....................................................... 10
Exchange Offer Registration Statement................................ 11
Exchange Securities.................................................. 11
Fair Market Value.................................................... 11
Federal Bankruptcy Code.............................................. 11
Generally Accepted Accounting Principles............................. 11
GAAP ................................................................ 11
Global Security...................................................... 11
guarantee............................................................ 11
Holder .............................................................. 11
Incur or incur....................................................... 11
Indebtedness......................................................... 12
Indenture............................................................ 13
Initial Securities................................................... 13
Interest Payment Date................................................ 13
Interest Rate Agreements............................................. 13
Investment........................................................... 13
Issue Date........................................................... 13
Lien ... ............................................................ 13
Majority Owned Restricted Subsidiary................................. 13
Management Agreement................................................. 14
Management Company................................................... 14
Maturity ............................................................ 14
Moody's ............................................................. 14
Net Cash Proceeds.................................................... 14
</TABLE>
<PAGE>
iii
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Officers Certificate................................................. 15
Opinion of Counsel................................................... 15
Organizational Contract.............................................. 15
Outstanding.......................................................... 15
Overhead Agreement................................................... 16
Pari Passu Indebtedness.............................................. 16
Paying Agent......................................................... 16
PCBV................................................................. 16
PCI.................................................................. 17
PCI Indenture........................................................ 17
Permitted Holders.................................................... 17
Permitted Indebtedness............................................... 17
Permitted Investments................................................ 20
Permitted Liens...................................................... 20
Person............................................................... 23
Physical Note........................................................ 23
Poltelkab............................................................ 23
Predecessor Security................................................. 23
Preferred Stock...................................................... 23
Public Equity Offering............................................... 23
Purchase Money Obligation............................................ 23
Qualified Capital Stock.............................................. 23
Qualified Institutional Buyer or QIB................................. 23
Redeemable Capital Stock............................................. 24
Redemption Date...................................................... 24
Redemption Price..................................................... 24
Registration Rights Agreement........................................ 24
Registration Statement............................................... 24
Regular Record Date.................................................. 24
Responsible Officer.................................................. 24
Restricted Payment................................................... 24
Restricted Subsidiary................................................ 24
Rule 144A............................................................ 24
S&P.................................................................. 25
Securities........................................................... 25
Security Register and Security Registrar............................. 25
Senior Bank Indebtedness............................................. 25
Service Agreement.................................................... 25
Shareholder Registration Rights Agreement............................ 25
Shelf Registration Statement......................................... 25
Significant Subsidiary............................................... 25
</TABLE>
<PAGE>
iv
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Special Purpose Vehicle.............................................. 25
Special Record Date.................................................. 26
Stated Maturity...................................................... 26
Subordinated Indebtedness............................................ 26
Subsidiary........................................................... 26
Total Consolidated Indebtedness...................................... 26
Trust Indenture Act.................................................. 26
Trustee ............................................................ 26
Unrestricted Subsidiary.............................................. 26
U.S. Dollar.......................................................... 27
U.S. Dollar Equivalent............................................... 27
U.S. Government Obligations.......................................... 27
Vice President....................................................... 27
Voting Stock......................................................... 27
Wholly Owned......................................................... 27
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS................... 28
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE................. 28
SECTION 104. ACTS OF HOLDERS........................................ 29
SECTION 105. NOTICES, ETC., TO TRUSTEE, COMPANY..................... 30
SECTION 106. NOTICE TO HOLDERS; WAIVER.............................. 31
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS............... 31
SECTION 108. SUCCESSORS AND ASSIGNS................................. 31
SECTION 109. SEPARABILITY CLAUSE.................................... 31
SECTION 110. BENEFITS OF INDENTURE.................................. 32
SECTION 111. GOVERNING LAW.......................................... 32
SECTION 112. LEGAL HOLIDAYS......................................... 32
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY........................................ 32
SECTION 202. RESTRICTIVE LEGENDS.................................... 33
ARTICLE THREE
THE SECURITIES
SECTION 301. TITLE AND TERMS........................................ 35
SECTION 302. DENOMINATIONS.......................................... 36
</TABLE>
<PAGE>
v
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING......... 36
SECTION 304. TEMPORARY SECURITIES................................... 38
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.... 38
SECTION 306. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES............ 39
SECTION 307. SPECIAL TRANSFER PROVISIONS............................ 41
SECTION 308. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES....... 44
SECTION 309. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED......... 45
SECTION 310. PERSONS DEEMED OWNERS.................................. 47
SECTION 311. CANCELLATION........................................... 47
SECTION 312. COMPUTATION OF INTEREST................................ 47
SECTION 313. FORM OF RULE 144A CERTIFICATE.......................... 48
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE................ 48
SECTION 402. APPLICATION OF TRUST MONEY............................. 49
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT...................................... 49
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT..... 51
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE............................................ 52
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM....................... 53
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES............................................ 54
SECTION 506. APPLICATION OF MONEY COLLECTED......................... 54
SECTION 507. LIMITATION ON SUITS.................................... 55
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.................................. 56
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES..................... 56
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE......................... 56
SECTION 511. DELAY OR OMISSION NOT WAIVER........................... 56
SECTION 512. CONTROL BY HOLDERS..................................... 57
SECTION 513. WAIVER OF PAST DEFAULTS................................ 57
SECTION 514. WAIVER OF STAY OR EXTENSION LAWS....................... 57
</TABLE>
<PAGE>
vi
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE SIX
THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS..................................... 58
SECTION 602. CERTAIN RIGHTS OF TRUSTEE.............................. 58
SECTION 603. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE
OF SECURITIES......................................... 60
SECTION 604. MAY HOLD SECURITIES.................................... 60
SECTION 605. MONEY HELD IN TRUST.................................... 60
SECTION 606. COMPENSATION AND REIMBURSEMENT......................... 60
SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY................ 61
SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR...... 61
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR................. 63
SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS........................................... 63
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS........... 64
SECTION 702. REPORTS BY TRUSTEE..................................... 64
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS... 64
SECTION 802. SUCCESSOR SUBSTITUTED.................................. 66
SECTION 803. SECURITIES TO BE SECURED IN CERTAIN EVENTS............. 66
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS..... 67
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS........ 67
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES................... 68
</TABLE>
<PAGE>
vii
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES...................... 69
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.................... 69
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES..... 69
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES...................... 69
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST... 70
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY....................... 70
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST....... 70
SECTION 1004. CORPORATE EXISTENCE................................... 72
SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS..................... 72
SECTION 1006. MAINTENANCE OF PROPERTIES............................. 72
SECTION 1007. INSURANCE............................................. 73
SECTION 1008. STATEMENT BY OFFICERS AS TO DEFAULT................... 73
SECTION 1009. PROVISION OF FINANCIAL STATEMENTS AND REPORTS......... 73
SECTION 1010. LIMITATION ON ADDITIONAL INDEBTEDNESS................. 74
SECTION 1011. LIMITATION ON RESTRICTED PAYMENTS..................... 74
SECTION 1012. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK
OF RESTRICTED SUBSIDIARIES........................... 77
SECTION 1013. LIMITATION ON TRANSACTIONS WITH AFFILIATES............ 78
SECTION 1014. LIMITATION ON LIENS................................... 79
SECTION 1015. LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
BY SUBSIDIARIES...................................... 80
SECTION 1016. PURCHASE OF SECURITIES UPON A CHANGE OF CONTROL....... 80
SECTION 1017. LIMITATION ON SALE OF ASSETS.......................... 81
SECTION 1018. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.................... 83
SECTION 1019. LIMITATION ON INVESTMENTS IN UNRESTRICTED SUBSIDIARIES 84
SECTION 1020. LIMITATION ON LINES OF BUSINESS....................... 84
SECTION 1021. WAIVER OF CERTAIN COVENANTS........................... 84
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. RIGHT OF REDEMPTION................................... 85
SECTION 1102. APPLICABILITY OF ARTICLE.............................. 85
</TABLE>
<PAGE>
viii
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE................. 86
SECTION 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED..... 86
SECTION 1105. NOTICE OF REDEMPTION.................................. 86
SECTION 1106. DEPOSIT OF REDEMPTION PRICE........................... 87
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE................. 87
SECTION 1108. SECURITIES REDEEMED IN PART........................... 88
ARTICLE TWELVE
[RESERVED]
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE........................................... 88
SECTION 1302. DEFEASANCE AND DISCHARGE.............................. 89
SECTION 1303. COVENANT DEFEASANCE................................... 89
SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE....... 90
SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS........ 92
SECTION 1306. REINSTATEMENT......................................... 92
TESTIMONIUM............................................................... 93
SIGNATURES AND SEALS...................................................... 93
</TABLE>
SCHEDULE A - Existing Management Contracts, Overhead Agreements and Service
Agreements
SCHEDULE B - Indebtedness Outstanding on the Issue Date
SCHEDULE C - Liens Existing on the Issue Date
SCHEDULE D - Agreements Not Restricted Under Section 1018
<PAGE>
ix
EXHIBIT A - Form of Security
EXHIBIT B - Form of Certificate to Be Delivered upon Termination of Restricted
Period
<PAGE>
INDENTURE dated as of January 27, 1999, between @ENTERTAINMENT, INC., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company" or the "Issuer"), having its principal office at
One Commercial Plaza, 24th Floor, Hartford, Connecticut, and BANKERS TRUST
COMPANY, a New York state banking corporation, Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 14
1/2% Senior Discount Notes due 2009 (herein called the "Initial Securities"),
and 14 1/2% Exchange Senior Discount Notes due 2009 (the "Exchange Securities"
and, together with the Initial Securities, the "Securities"), of substantially
the tenor and amount hereinafter set forth, and to provide therefor the Company
has duly authorized the execution and delivery of this Indenture.
Upon the issuance of the Exchange Securities, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to the provisions of the Trust Indenture Act of 1939,
as amended, that are required to be part of this Indenture and shall, to the
extent applicable, be governed by such provisions.
All things necessary have been done to make the Securities,
when executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
<PAGE>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under the
Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as are
generally accepted on the Issue Date; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Accreted Value" as of any date (the "Specified Date") means, with
respect to each $1,000 principal amount at maturity of the Securities.
(i) if the Specified Date is one of the following dates (each a
"Semi-Accrual Date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
Semi-Annual
Accrual Date Accreted Value
<S> <C>
ISSUE DATE (JANUARY
27, 1999)................... $ 389.43
AUGUST 1, 1999.............. 428.75
FEBRUARY 1, 2000............ 471.05
AUGUST 1, 2000.............. 517.53
---------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
FEBRUARY 1, 2001............ 568.59
AUGUST 1, 2001.............. 624.69
FEBRUARY 1, 2002............ 686.33
AUGUST 1, 2002.............. 754.05
FEBRUARY 1, 2003............ 828.45
AUGUST 1, 2003.............. 910.19
FEBRUARY 1, 2004............ $1,000.00
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual
Accrual Dates, the sum of (a) the Accreted Value for the Semi-Annual
Accrual Date immediately preceding the Specified Date and (b) an amount
equal to the product of (x) the Accreted Value for the immediately
following Semi-Annual Accrual Date less the Accreted Value for the
immediately preceding Semi-Annual Accrual Date and (y) a fraction the
numerator of which is the number of days actually elapsed from the
immediately preceding SemiAnnual Accrual Date to the Specified Date and
the denominator of which is 180; and
(iii) if the Specified Date is on or after February 1, 2004,
$1,000.
"Acquired Indebtedness" means Indebtedness of a Person (a)
existing at the time such Person becomes a Restricted Subsidiary or (b) assumed
in connection with the acquisition of assets from such Person, in each case,
other than Indebtedness incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary or such acquisition; PROVIDED that,
for purposes of Section 1010, such Indebtedness shall be deemed to be incurred
on the date of the related acquisition of assets from any Person or the date the
acquired Person becomes a Restricted Subsidiary.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Advent" means Advent International Corporation, a Delaware
corporation.
"Affiliate" means, with respect to any specified Person, (a)
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person or (b) any other
Person that owns, directly or indirectly, 5% or more of such specified Person's
Voting Stock or any executive officer or director of any such specified Person
or other Person or, with respect to any natural Person, any Person having a
relationship with such Person by blood, marriage or adoption not more remote
than first cousin. For the purposes of this definition, "control," when used
with respect to any specified Person, means the power to direct the management
and policies of such Person, directly or
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<PAGE>
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent Members" has the meaning specified in Section 306.
"Annualized Pro Forma Consolidated Operating Cash Flow" means
Consolidated Operating Cash Flow for the latest fiscal quarter for which
consolidated financial statements of the Company are available multiplied by
four. For purposes of calculating "Consolidated Operating Cash Flow" for any
fiscal quarter for purposes of this definition, (a) all Restricted Subsidiaries
of the Company on the date of the transaction giving rise to the need to
calculate "Annualized Pro Forma Consolidated Operating Cash Flow" (the
"Transaction Date") shall be deemed to have been Restricted Subsidiaries at all
times during such fiscal quarter and (b) any Unrestricted Subsidiary of the
Company on the Transaction Date shall be deemed to have been an Unrestricted
Subsidiary at all times during such fiscal quarter. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
Operating Cash Flow" shall be calculated after giving effect on a PRO FORMA
basis for the applicable fiscal quarter to, without duplication, any Asset Sales
or Asset Acquisitions (including, without limitation, any Asset Acquisition
giving rise to the need to make such calculation as a result of the Company or a
Restricted Subsidiary (including any Person who becomes a Restricted Subsidiary
as a result of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness) occurring during the period commencing on the
first day of such fiscal quarter to and including the Transaction Date (the
"Reference Period"), as if such Asset Sale or Asset Acquisition occurred on the
first day of the Reference Period.
"Asset Acquisition" means (a) 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 in any other Person, or any acquisition or purchase of
Capital Stock 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 merged with or into the Company or any Restricted
Subsidiary or (b) 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.
"Asset Sale" means any direct or indirect sale, conveyance,
transfer or lease (that has the effect of a disposition and is not for security
purposes) or other disposition (that is not for security purposes) to any Person
other than the Company or a Restricted Subsidiary in one transaction or a series
of related transactions, of (a) any Capital Stock of any Restricted
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<PAGE>
Subsidiary, (b) any material governmental license or other governmental
authorization of the Company or any Restricted Subsidiary pertaining to a
Cable/Telecommunications Business, a DTH Business or an
Entertainment/Programming Business, (c) any assets of the Company or any
Restricted Subsidiary which constitute substantially all of an operating unit or
line of business of the Company and its Restricted Subsidiaries or (d) any other
property or asset of the Company or any Restricted Subsidiary outside of the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include (a) any disposition of properties and assets of
the Company that is governed under Article VIII, (b) sales of property or
equipment that have become worn out, obsolete or damaged or otherwise unsuitable
for use in connection with the business of the Company or the Restricted
Subsidiary, as the case may be, (c) for purposes of Section 1017, any sale,
conveyance, transfer, lease or other disposition of any property or asset,
whether in one transaction or a series of related transactions, either (i)
involving assets with a Fair Market Value not in excess of $500,000 (or, if
non-U.S. Dollar denominated, the U.S. Dollar Equivalent thereof) or (ii) as part
of a Capitalized Lease Obligation, and (d) any transfer by the Company or a
Restricted Subsidiary of property or equipment to a Person who is not an
Affiliate of the Company in exchange for property or equipment that has a fair
market value at least equal to the fair market value of the property or
equipment so transferred; PROVIDED that, in the event of a transfer described in
this clause (d), the Company shall deliver to the Trustee an Officer's
Certificate certifying that such exchange complies with this clause (d).
"Average Life" means, as of the date of determination with
respect to any Indebtedness, the quotient obtained by dividing (a) the sum of
the products of (i) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such Indebtedness multiplied by
(ii) the amount of each such principal payment by (b) the sum of all such
principal payments.
"Bankruptcy Law" means Title 11 of the United States Code, as
amended, or any similar United States federal or state law, or any similar law
of any other jurisdiction, relating to bankruptcy, insolvency, receivership,
winding-up, liquidation, reorganization or relief of debtors or any amendment
to, succession to or change in any such law.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors
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<PAGE>
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of New
York or the city in which the Corporate Trust Office is located are authorized
or obligated by law or executive order to close.
"Cable Television Newco" means any Person (i) of whom the
Company or a Restricted Subsidiary owns the greater of 49% of the outstanding
Capital Stock or the maximum amount of the outstanding Capital Stock the Company
or such Restricted Subsidiary may own under applicable law and (ii) that holds
Capital Stock in a Management Company.
"Cable/Telecommunications Business" means any business
operating a cable or telephone or telecommunications or broadcasting system
(other than an Entertainment/Programming Business or a DTH Business), including,
without limitation, any business (other than an Entertainment/Programming
Business or a DTH Business) conducted by the Company or any Restricted
Subsidiary on the Issue Date and any programming guide or telephone directory
business.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations, rights in or
other equivalents (however designated) of such Person's capital stock or other
equity participations, including partnership interests, whether general or
limited, in such Person, including any Preferred Stock, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock, whether now outstanding
or issued after the date of this Indenture.
"Capitalized Lease Obligation" of any Person means any
obligation of such Person and its subsidiaries on a consolidated basis under a
lease of (or other agreement conveying the right to use) any property (whether
real, personal or mixed) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purpose of this Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (a) any evidence of Indebtedness with
a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (b) certificates of deposit or
6
<PAGE>
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System, in each case having combined
capital and surplus and undivided profits of not less than $500,000,000; (c)
commercial paper with a maturity of 180 days or less issued by a corporation
that is not an Affiliate of the Company and is organized under the laws of any
state of the United States or the District of Columbia and rated at least A-1 by
S&P or at least P-l by Moody's; and (d) any Capital Stock of any mutual funds at
least 95% of the assets of which are invested in the foregoing.
"Change of Control" means the occurrence of any of the
following events: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is
or becomes the "beneficial owner" (as defined in Rules 13d-3 and l3d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total outstanding Voting Stock
of the Company; (b) the Company consolidates with, or merges with or into
another Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with
or merges with or into the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company) or is converted into
or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation or (B) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation and cash, securities
and other property (other than Capital Stock of the Surviving Entity) in an
amount that could be paid by the Company as a Restricted Payment as described
under Section 1011 and (ii) immediately after such transaction, no "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), other than Permitted Holders, is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the total
outstanding Voting Stock of the surviving or transferee corporation; (c) during
any consecutive two year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election to such Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by a vote of 662/3% of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any
7
<PAGE>
reason to constitute a majority of the Board of Directors of the Company then in
office; or (d) the Company is liquidated or dissolved or a special resolution is
passed by the shareholders of the Company approving the plan of liquidation or
dissolution other than in a transaction which complies with Article VIII.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this Indenture such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests or other participations in, and other equivalents (however
designated and whether voting or nonvoting) of such Person's common stock or
ordinary shares, whether outstanding at the Issue Date, and includes, without
limitation, all series and classes of such common stock or ordinary shares.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman, its President, any
Vice President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated Income Tax Expense" means, with respect to any
period, the provision for United States corporation, local, foreign and other
income taxes of the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period, including, without limitation, (i)
amortization of original issue discount, (ii) the net cost of Interest Rate
Agreements (including amortization of discounts), (iii) the interest portion of
any deferred payment obligation, (iv) accrued interest, (v) the consolidated
amount of any interest capitalized by the Company and the Restricted
Subsidiaries, PROVIDED that such amount will be limited for purposes of this
definition to the amount that would have been obtained if such interest had been
capitalized at the interest rate for the Securities and (vi) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
8
<PAGE>
bankers' acceptance financing, PLUS (b) the interest component of Capitalized
Lease Obligations of the Company and its Restricted Subsidiaries paid, accrued
or scheduled to be paid or accrued during such period, in each case as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the
consolidated net income (or loss) of the Company and all Restricted Subsidiaries
for such period as determined in accordance with GAAP, adjusted by excluding,
without duplication, (a) any net after-tax extraordinary gains or losses (in
each case less all fees and expenses relating thereto), (b) any net after-tax
gains or losses (in each case less all fees and expenses relating thereto)
attributable to asset dispositions other than in the ordinary course of
business, (c) the portion of net income (or loss) of any Person (other than the
Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in
which the Company or any Restricted Subsidiary has an ownership interest, except
to the extent of the amount of dividends or other distributions actually paid to
the Company or any Restricted Subsidiary in cash dividends or distributions
during such period, (d) net income (or loss) of any Person combined with the
Company or any Restricted Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of combination, (e) except with
respect to any encumbrance or restriction described in clause (ii) of Section
1018, the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Subsidiary is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary or its stockholders and (f) any
non-cash items of the Company and any Restricted Subsidiary (including monetary
corrections) increasing or decreasing Consolidated Net Income for such period
(other than items that will result in the receipt or payment of cash).
"Consolidated Operating Cash Flow" means, with respect to any
period, the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period increased by (in each case to the extent included
in computing Consolidated Net Income) the sum of (a) the Consolidated Income Tax
Expense of the Company and its Restricted Subsidiaries accrued according to GAAP
for such period (other than taxes attributable to extraordinary, unusual or
non-recurring gains or losses); (b) Consolidated Interest Expense for such
period; (c) depreciation of the Company and its Restricted Subsidiaries for such
period and (d) amortization of the Company and its Restricted Subsidiaries for
such period, including, without limitation, amortization of capitalized debt
issuance costs for such period, all determined on a consolidated basis in
accordance with GAAP PROVIDED that, if any Restricted Subsidiary is not a Wholly
Owned Restricted Subsidiary, Consolidated Operating Cash Flow shall be reduced
(to the extent not otherwise reduced in accordance with GAAP)
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<PAGE>
by an amount equal to (i) the amount of Consolidated Net Income attributable to
such Restricted Subsidiary multiplied by (ii) the quotient of (1) the number of
shares of outstanding Common Stock of such Restricted Subsidiary not owned on
the last day of such period by the Company or any of its Restricted Subsidiaries
divided by (2) the total number of shares of outstanding Common Stock of such
Restricted Subsidiary on the last day of such period.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of this
Indenture is located at Four Albany Street, New York, New York 10006, except
that with respect to presentation of Securities for payment or for registration
of transfer or exchange, such term shall mean the office or agency of the
Trustee at which, at any particular time, its corporate agency business shall be
conducted.
"Corporation" includes corporations, associations, companies
and business trusts.
"Cumulative Available Cash Flow" means, as at any date of
determination, the positive cumulative Consolidated Operating Cash Flow realized
during the period commencing on the Issue Date and ending on the last day of the
most recent fiscal quarter immediately preceding the date of determination for
which consolidated financial information of the Company is available or, if such
cumulative Consolidated Operating Cash Flow for such period is negative, the
negative amount by which cumulative Consolidated Operating Cash Flow is less
than zero.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement entered into
by a Person that is designed to protect such Person against fluctuations in
currency values.
"Default" means any event that after notice or passage of time
or both would be an Event of Default.
"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Disinterested Director" means, with respect to any
transaction or series of transactions in respect of which the Board of Directors
is required to deliver a resolution of the Board of Directors under this
Indenture, a member of the Board of Directors who does not
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have any material direct or indirect financial interest in or with respect to
such transaction or series of transactions.
"DTH Business" means the business of (i) developing, managing,
operating or providing services relating to direct to home satellite systems for
the distribution of subscription programming services directly to homes and
cable systems in areas covered by the "footprint" of the satellites utilized by
the Company and its Restricted Subsidiaries, and activities to accomplish the
foregoing (other than the Cable/Telecommunications Business or the
Entertainment/Programming Business) or (ii) evaluating, participating or
pursuing any other activity or opportunity that is primarily related to those
identified above.
"ECO" means ECO Holdings III Limited Partnership, a Delaware
limited partnership.
"Entertainment/Programming Business" means a business engaged
primarily in the management, ownership, operation, acquisition, development,
production, distribution or syndication of general entertainment, sports,
movies, children's or other programming or publishing.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the exchange offer that may be effected
pursuant to the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange
Offer Registration Statement as defined in the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in the first
recital of this Indenture and refers to any Exchange Securities containing terms
substantially identical to the Initial Securities (except that such Exchange
Securities shall not contain terms with respect to transfer restrictions) that
are issued and exchanged for the Initial Securities pursuant to the Registration
Rights Agreement and this Indenture.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer, as determined by the Board of Directors of the
Company and evidenced by a resolution thereof.
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"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11
of the United States Code, as amended from time to time.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in effect in the United States on the
Issue Date.
"Global Security" has the meaning provided in Section 201.
"guarantee" means, as applied to any obligation, (a) 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 (b) 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.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"Incur" or "incur" means, with respect to any Indebtedness, to
create, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of, or otherwise incur such Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an incurrence of Indebtedness and provided further that the
incurrence of any particular Indebtedness by the Company or any Restricted
Subsidiary shall occur only once and any obligation of any Restricted Subsidiary
arising under any guarantee supporting such Indebtedness shall be disregarded.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all liabilities of such Person for borrowed money (including
overdrafts) or for the deferred purchase price of property or services,
excluding any trade payables and other accrued current liabilities (including
outstanding disbursements) incurred in the ordinary course of business (whether
or not evidenced by a note), but including, without limitation, all obligations,
contingent or otherwise, of such Person in connection with any letters of credit
and acceptances issued under letter of credit facilities, acceptance facilities
or other similar facilities, (b) all obligations of such Person evidenced by
bonds, notes, debentures or other similar instruments, (c) all indebtedness of
such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
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event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of business, (d)
all Capitalized Lease Obligations of such Person, (e) all Indebtedness referred
to in (but not excluded from) the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon or with respect to property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness
(the amount of such obligation being deemed to be the lesser of the value of
such property or asset or the amount of the obligation so secured), (f) all
guarantees by such Person of Indebtedness referred to in this definition of any
other Person, (g) all Redeemable Capital Stock of such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends and (h) any liability of such Person under or in
respect of Interest Rate Agreements or Currency Agreements. For purposes hereof,
the "maximum fixed repurchase price" of any Redeemable Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to this Indenture, and if such price is based upon, or measured by, the
fair market value of such Redeemable Capital Stock, such fair market value shall
be determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock. For purposes of Sections 1010 and 1011 and the
definition of "Events of Default", in determining the principal amount of any
Indebtedness to be incurred by the Company or a Restricted Subsidiary or which
is outstanding at any date, (x) the principal amount of any Indebtedness which
provides that an amount less than the principal amount at maturity thereof shall
be due upon any declaration of acceleration thereof shall be the accreted value
thereof at the date of determination and (y) effect shall be given to the impact
of any Currency Agreement with respect to such Indebtedness.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Securities" has the meaning provided in the recitals
to this Indenture.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Interest Rate Agreements" means any interest rate protection
agreements and other types of interest rate hedging agreements or arrangements
(including, without limitation,
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interest rate swaps, caps, floors, collars and similar agreements) designed to
protect against or manage exposure to fluctuations in interest rates in respect
of Indebtedness.
"Investment" means, with respect to any Person, any direct or
indirect advance, loan or other extension of credit or capital contribution to
such Person (by means of any transfer of cash or other property to others or any
payment for property or services for the account or use of others), or any
purchase, acquisition or ownership by such Person of any Capital Stock
(including ownership of Capital Stock through share leasing arrangements),
bonds, notes, debentures or other securities or evidences of Indebtedness issued
or owned by any other Person and all other items that would be classified as
investments on a balance sheet prepared in accordance with GAAP. In addition,
the Fair Market Value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary shall
be deemed to be an "Investment" made by the Company in such Unrestricted
Subsidiary at such time. "Investments" shall exclude extensions of trade credit
on commercially reasonable terms in accordance with normal trade practices.
"Issue Date" means January 27, 1999.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired. A Person shall be deemed to own subject to a Lien
any property which such Person has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Majority Owned Restricted Subsidiary" means a Restricted
Subsidiary (a) at least 66.66% of the outstanding Capital Stock of which is
beneficially owned directly or indirectly by the Company or PCBV and one or more
Wholly Owned Restricted Subsidiaries and (b) no outstanding Capital Stock of
which is owned, directly or indirectly (except through the Company), by any
shareholder or Affiliate of a shareholder of the Company.
"Management Agreement" means (a) any agreement between the
Company or a Restricted Subsidiary and a Management Company pursuant to which
the Management Company shall lease or otherwise employ assets of the Company or
a Restricted Subsidiary to operate a Cable/Telecommunications Business, a DTH
Business or an Entertainment/Programming Business and (b) any agreement or
instrument (i) governing Indebtedness of a Management Company to the Company or
a Restricted Subsidiary or (ii) governing corporate procedures or control of a
Management Company.
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"Management Company" means any Person, a portion of whose
Capital Stock is held by the Company or a Restricted Subsidiary, that (i) holds
or has applied for a license or permit to operate a Cable/Telecommunications
Business, a DTH Business or an Entertainment/Programming Business in the
Republic of Poland or elsewhere in Continental Europe and (ii) manages the
operations of a Restricted Subsidiary pursuant to a Management Agreement.
"Maturity" means, with respect to any Security, the date on
which any principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity with respect to such principal
or by declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale,
the proceeds thereof in the form of cash or Cash Equivalents including payments
in respect of deferred payment obligations or escrowed funds, but only when
received in the form of, or stock or other assets when disposed for, cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants, consultants and investment banks) related to such
Asset Sale, (ii) provisions for all taxes payable as a result of such Asset
Sale, (iii) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of such Asset
Sale, (iv) amounts required to be paid to any Person (other than the Company or
any Restricted Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with GAAP against any liabilities associated with such Asset Sale and retained
by the Company or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as reflected in an Officers' Certificate delivered to the Trustee and
(b) with respect to any capital contribution or issuance or sale of Capital
Stock as referred to under Section 1011 and the definition of "Permitted
Indebtedness", the proceeds of such capital contribution, issuance or sale in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of, or stock or other assets when
disposed for, cash or Cash Equivalents (except to the extent that such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company), net of attorney's fees, accountant's fees and
brokerage, consultation, underwriting and other fees and expenses
15
<PAGE>
actually incurred in connection with such capital contribution, issuance or sale
and net of taxes paid or payable as a result thereof.
"Officers Certificate" means a certificate signed by the
Chairman, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered
to the Trustee.
"Old Indenture" means the Indenture dated as of July 14, 1998
between the Issuer and Bankers Trust Company, as trustee, as in effect on the
Issue Date.
"Old Notes" means the Issuer's 14 1/2% Senior Discount Notes
due 2008 issued under the Old Indenture.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, including an employee of the Company, and who
shall be acceptable to the Trustee.
"Organizational Contract" means any agreement to which the
Company or any Restricted Subsidiary is a party pursuant to which, among other
things, fees are paid to the Company or a Restricted Subsidiary in exchange for
organizational, consulting or similar services, including, without limitation,
the agreements listed on Schedule A to this Indenture under the subheading
"Organizational Contracts."
"Outstanding", when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Securities;
PROVIDED that, if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
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(iii) Securities, except to the extent provided in Sections
1302 and 1303, with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article Thirteen;
and
(iv) Securities which have been paid pursuant to Section 306
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands the Securities are valid obligations
of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount at maturity of Outstanding Securities have given any request,
demand, authorization, direction, consent, notice or waiver hereunder, and for
the purpose of making the calculations required by TIA Section 313, Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgees right so to act with
respect to such Securities and that the pledgee is not the Company or any other
obligor upon the Securities or any Affiliate of the Company or such other
obligor.
"Overhead Agreement" means any agreement to which the Company
or any Restricted Subsidiary is a party pursuant to which, among other things,
costs are allocated among the parties thereto, including, without limitation,
the agreements listed on Schedule A to this Indenture under the subheading
"Overhead Agreements".
"Pari Passu Indebtedness" means Indebtedness of the Company
that is PARI PASSU in right of payment to the Securities.
"Paying Agent" means any Person (including the Company acting
as Paying Agent) authorized by the Company to pay the principal of (and premium,
if any) or interest on any Securities on behalf of the Company. The initial
paying agent shall be the Trustee.
"PCBV" means Poland Cablevision (Netherlands) B.V., a
Netherlands corporation.
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"PCI" means Poland Communications, Inc., a New York
corporation and a Wholly Owned Subsidiary of the Company.
"PCI Indenture" means the Indenture dated as of October 31,
1996 between PCI and State Street Bank and Trust Company, as trustee, as in
effect on the Issue Date.
"Permitted Holders" means, as of the date of determination,
(a) David T. Chase, Arnold L. Chase and Cheryl A. Chase (b) the family members,
estates and heirs of David T. Chase, Arnold L. Chase and Cheryl A. Chase and any
trust, partnership, corporation, limited liability company or other investment
vehicle principally for the benefit of any such persons or their respective
family members or heirs (including, without limitation, Polish Investments
Holding LP for so long as beneficial ownership thereof is held by Persons
meeting the requirements of clause (a) and (b) of this definition), (c) ECO and
any successor thereto that is owned by the Persons who beneficially own,
directly and indirectly, ECO on the Issue Date; (d) Advent International Corp.
and (e) any Person that is controlled by the Persons, individually or as a
group, described in clauses (a) through (d) above.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness under the Securities (or any guarantee
thereof) and this Indenture;
(b) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date and listed on Schedule B to this
Indenture;
(c) Indebtedness of the Company or any Restricted Subsidiary
(including PCI and any subsidiary of PCI that is a Restricted
Subsidiary) to the extent such Indebtedness constitutes "Permitted
Indebtedness" as defined in the PCI Indenture or the Old Indenture;
(d) (i) Indebtedness of any Restricted Subsidiary owed to and
held by the Company or a Restricted Subsidiary and (ii) Indebtedness of
the Company owed to and held by any Restricted Subsidiary that is
Subordinated Indebtedness; PROVIDED that an incurrence of Indebtedness
shall be deemed to have occurred upon (x) any sale or other disposition
(excluding assignments as security to financial institutions) of any
Indebtedness of the Company or Restricted Subsidiary referred to in
this clause (e) to a Person (other than the Company or a Restricted
Subsidiary) or (y) any sale or other disposition of Capital Stock of a
Restricted Subsidiary which holds Indebtedness of the
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Company or another Restricted Subsidiary such that such Restricted
Subsidiary, in any such case, ceases to be a Restricted Subsidiary;
(e) Obligations under any Interest Rate Agreement of the
Company or any Restricted Subsidiary to the extent relating to (i)
Indebtedness of the Company or such Restricted Subsidiary, as the case
may be (which Indebtedness (x) bears interest at fluctuating interest
rates and (y) is otherwise permitted to be incurred under Section
1010), or (ii) Indebtedness for which a lender has provided a
commitment in an amount reasonably anticipated to be incurred by the
Company or a Restricted Subsidiary in the following 12 months after
such Interest Rate Agreement has been entered into, but only to the
extent that the notional principal amount of such Interest Rate
Agreement does not exceed the principal amount of the Indebtedness (or
Indebtedness subject to commitments) to which such Interest Rate
Agreement relates;
(f) Indebtedness of the Company or any Restricted Subsidiary
under Currency Agreements to the extent relating to (i) Indebtedness of
the Company or a Restricted Subsidiary (which Indebtedness is otherwise
permitted to be incurred under Section 1010) or (ii) obligations to
purchase assets, properties or services incurred in the ordinary course
of business of the Company or any Restricted Subsidiary; PROVIDED that
such Currency Agreements do not increase the Indebtedness or other
obligations of the Company and its Restricted Subsidiaries outstanding
other than as a result of fluctuations in foreign currency exchange
rates or by reason of fees, indemnities and compensation payable
thereunder;
(g) Indebtedness of the Company or any Restricted Subsidiary
in respect of performance bonds of the Company or any Restricted
Subsidiary or surety bonds provided by the Company or any Restricted
Subsidiary incurred in the ordinary course of business in connection
with the construction or operation of a Cable/ Telecommunications
Business, a DTH Business or an Entertainment/Programming Business;
(h) Indebtedness of the Company or any Restricted Subsidiary
to the extent it represents a replacement, renewal, refinancing or
extension of outstanding Indebtedness of the Company or of any
Restricted Subsidiary incurred or outstanding pursuant to clause (b) of
this definition or the proviso of Section 1010; PROVIDED that (i)
Indebtedness of the Company may not be replaced, renewed, refinanced or
extended to such extent under this clause (i) with Indebtedness of any
Restricted Subsidiary and (ii) any such replacement, renewal,
refinancing or extension (x) shall not result in a lower Average Life
of such Indebtedness as compared with the
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Indebtedness being replaced, renewed, refinanced or extended, (y) shall
not exceed the sum of the principal amount (or, if such Indebtedness
provides for a lesser amount to be due and payable upon a declaration
of acceleration thereof, an amount no greater than such lesser amount)
of the Indebtedness being replaced, renewed, refinanced or extended
plus the amount of accrued interest thereon and the amount of any
reasonably determined prepayment premium necessary to accomplish such
replacement, renewal, refinancing or extension and such reasonable fees
and expenses incurred in connection therewith, and (z) in the case of
any replacement, renewal, refinancing or extension by the Company of
Pari Passu Indebtedness or Subordinated Indebtedness, such new
Indebtedness is made PARI PASSU with or subordinate to the Securities,
at least to the same extent as the Indebtedness being replaced,
renewed, refinanced or extended;
(i) Indebtedness of the Company having an aggregate principal
amount not to exceed, at any one time outstanding, two times (i) the
Net Cash Proceeds received by the Company on or after the Issue Date
from the issuance and sale of its Capital Stock (other than Redeemable
Capital Stock) to a Person that is not a Subsidiary, to the extent such
Net Cash Proceeds have not been used pursuant to clause (a)(3)(B),
(b)(ii), (b)(iii) or (b)(v) of Section 1011 to make a Restricted
Payment and (ii) 80% of the Fair Market Value of property (other than
cash or Cash Equivalents) received by the Company on or after the Issue
Date from a sale of its Capital Stock (other than Redeemable Capital
Stock) to a Person that is not a Subsidiary, the extent such sale of
Capital Stock has not been used pursuant to clause (b)(ii), (b)(iii) or
(b)(v) of Section 1011 to make a Restricted Payment; PROVIDED, HOWEVER,
that in determining the Fair Market Value of property, if the estimated
Fair Market Value of such property exceeds $10.0 million, the Company
will deliver to the Trustee a written appraisal as to the fair market
value of such property prepared by an internationally recognized
investment banking or public accounting firm (or, if no such investment
banking or public accounting firm is qualified to prepare such an
appraisal, by an internationally recognized appraisal firm) and
PROVIDED FURTHER that such Indebtedness does not mature prior to the
Stated Maturity of the Securities and has an Average Life longer than
the Securities;
(j) Subordinated Indebtedness of the Company not to exceed
$150 million (or, if non-U.S. Dollar denominated, the U.S. Dollar
Equivalent thereof) at any one time outstanding; and
(k) in addition to the items referred to in clauses (a)
through (j) above, Indebtedness of the Company having an aggregate
principal amount not to exceed $125 million (or, if non-U.S. Dollar
denominated, the U.S. Dollar Equivalent thereof) at
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<PAGE>
any time outstanding less the aggregate principal amount of any
outstanding Indebtedness incurred after the Issue Date under clause (c)
of this definition of Permitted Indebtedness.
"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 directors or employees made in the ordinary
course of business; (d) Interest Rate Agreements and Currency Agreements; (e)
bonds, notes, debentures or other securities received as a result of Asset Sales
permitted under Section 1017, PROVIDED that the Company or the Restricted
Subsidiaries, as the case may be, have received at least 75% of the aggregate
consideration therefrom in cash or Cash Equivalents; (f) Investments made in the
ordinary course of business as partial payment for constructing a network
relating principally to a Cable/Telecommunications Business or for supplying
equipment used or useful in the Cable/Telecommunications Business or the DTH
Business; (g) Investments (other than through share leasing arrangements) in any
Person engaged in any business in which the Company or any Restricted Subsidiary
is engaged on the Issue Date not to exceed $90 million (or, if non-U.S. Dollar
denominated, the U.S. Dollar Equivalent thereof) outstanding at any time;
PROVIDED that immediately after giving effect to any Investment made under this
clause (g), the Company and its Restricted Subsidiaries shall own at least 25%
of the outstanding Capital Stock of the Person in which the Investment was made;
(h) Investments (other than through share leasing arrangements) in any Person
engaged in any business in which the Company or any Restricted Subsidiary is
engaged on the Issue Date not to exceed $10 million (or, if non-U.S. Dollar
denominated, the U.S. Dollar Equivalent thereof) outstanding at any time; (i)
Investments (other than through share leasing programs) in the Capital Stock of
any Person to the extent the consideration therefor paid by the Company or any
Restricted Subsidiary consists of a lease or other right to use the capacity of
a cable television network of the Company or such Restricted Subsidiary and so
long as the capacity leased or used is used by such Person solely to provide
telephony or Internet access services; PROVIDED that the Board of Directors
shall have determined (as evidenced by a Board Resolution) that any such
capacity is in excess of the cable television network capacity required to
operate the Cable/Telecommunications Business of the Company or such Restricted
Subsidiary in the area in which such cable television network is located; (j)
investments by any Restricted Subsidiary in the Issuer; and (k) to the extent
not covered in clauses (a) through (j) above, any "Permitted Investment" as
defined in the PCI Indenture made by PCI or any subsidiary thereof in accordance
with the terms of the PCI Indenture.
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"Permitted Liens" means the following types of Liens:
(a) Liens on any property or assets of a Restricted
Subsidiary granted in favor of the Company or any Restricted
Subsidiary;
(b) Liens securing the Securities;
(c) Liens securing Acquired Indebtedness created prior to (and
not in connection with or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary; PROVIDED that
such Lien does not extend to any property or assets of the Company or
any Restricted Subsidiary other than the assets acquired in connection
with the incurrence of such Acquired Indebtedness;
(d) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens
arising in the ordinary course of business of the Company or any
Restricted Subsidiary and with respect to amounts not yet delinquent or
being contested in good faith by appropriate proceeding;
(e) Liens for taxes, assessments, government charges or claims
that are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted;
(f) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect with
the business of the Company or any Restricted Subsidiary incurred in
the ordinary course of business;
(g) Liens arising by reason of any judgment, decree or order
of any court so long as such Lien is adequately bonded and any
appropriate legal proceedings that may have been initiated for the
review of such judgment, decree or order shall not have been finally
terminated or the period within which such proceedings may be initiated
shall not have expired;
(h) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security;
(i) any extension, renewal or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a) through (h);
PROVIDED that any such extension, renewal or replacement shall be no
more restrictive in any material respect than the
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Lien so extended, renewed or replaced and shall not extend to any
additional property or assets;
(j) any interest or title of a lessor under any Capitalized
Lease Obligation or seller under any Purchase Money Obligation;
(k) Liens securing up to $45.0 million of Indebtedness of PCI
incurred after the Issue Date under clause (c) of the definition of
Permitted Indebtedness at any one time outstanding;
(l) Liens securing Indebtedness of the Company incurred
pursuant to clause (i) of the definition of Permitted Indebtedness in
an amount having an aggregate principal amount not to exceed, at any
one time outstanding, 100% of the Net Cash Proceeds received by the
Company after the Issue Date from the issuance and sale of its Capital
Stock;
(m) Liens in favor of Polish governmental fiscal authorities
created without the knowledge of and without fault on the part of the
Company;
(n) Liens existing on the Issue Date and listed on Schedule C
to this Indenture;
(o) Liens in favor of the Screen Actors Guild, the Writers
Guild of America, the Directors Guild of America or any other unions,
guilds or collective bargaining units under collective bargaining
agreements, which Liens are incurred in the ordinary course of business
solely to secure the payment of residuals and other collective
bargaining obligations required to be paid by the Company or any of its
Restricted Subsidiaries under any such collective bargaining agreement;
(p) Liens arising in connection with completion guarantees
entered into in the ordinary course of business and consistent with
then current industry practices, securing obligations (other than
Indebtedness for borrowed money) of the Company or any of its
Restricted Subsidiaries not yet due and payable;
(q) Liens in favor of suppliers and/or producers of any
programming that are incurred in the ordinary course of business solely
to secure the purchase or license price of such programming and such
directly related rights or the rendering of services necessary for the
production of such programming; PROVIDED, HOWEVER, that no such Lien
shall extend to or cover any property or assets other than the
programming or
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<PAGE>
license and the rights directly related thereto being so acquired or
produced; and PROVIDED FURTHER that any payment obligations secured by
such Liens shall by their terms be payable solely from the revenues
that are derived directly from the exhibition, syndication,
exploitation, distribution or disposition of such item of programming
and/or such directly related rights;
(r) Liens on assets of PCI or any subsidiary of PCI securing
the PCI Notes; and
(s) Liens on assets or Capital Stock of a Special Purpose
Vehicle.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, S.A., SP.
Z O.O., trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Physical Note" has the meaning specified in Section 201.
"Poltelkab" means Poltelkab Sp. z o.o., a Polish limited
liability company.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's preferred or preference stock whether now outstanding, or
issued after the Issue Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Public Equity Offering" means an issuance, offer and sale of
Common Stock (which is Qualified Capital Stock) of the Company for cash pursuant
to a registration statement that has been declared effective by the Commission
pursuant to the Securities Act (other than a registration statement on Form S-8
or otherwise relating to equity securities issuable under any employee benefit
plan of the Company).
"Purchase Money Obligation" means Indebtedness of the Company
or any Restricted Subsidiary (a) issued to finance or refinance the purchase or
construction of any
24
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assets of the Company or any Restricted Subsidiary or (b) secured by a Lien on
any assets of the Company or any Restricted Subsidiary where the lender's sole
recourse is to the assets so encumbered, in either case to the extent the
purchase or construction prices for such assets are or should be included in
"addition to property, plan or equipment" in accordance with GAAP.
"Qualified Capital Stock" of any person means any and all
Capital Stock of such person other than Redeemable Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A.
"Redeemable Capital Stock" means any class or series of
Capital Stock that, either by its terms, by the terms of any security into which
it is convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Securities or is redeemable at the option of
the holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity; PROVIDED, HOWEVER, that Redeemable Capital Stock shall
not include any Common Stock the holder of which has a right to put to the
Company upon certain terminations of employment.
"Redemption Date", when used with respect to any Security to
be redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company and the Initial Purchasers named therein, dated as
of January 27, 1999, relating to the Securities and the Company's 14 1/2% Senior
Discount Notes due 2009, a copy of which has been filed with the Trustee.
"Registration Statement" means the Registration Statement as
defined in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the January 15 or July 15 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
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"Responsible Officer", when used with respect to the Trustee,
means any officer in its corporate trust department or similar group, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Restricted Payment" has the meaning provided in Section 1011.
"Restricted Subsidiary" means a Subsidiary other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Ratings Group, a division of
The McGraw-Hill, Inc. and its successors.
"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Bank Indebtedness" means Indebtedness of the Company
or any Restricted Subsidiary under one or more term loans or revolving credit or
similar facilities (which may include any guarantee, bonding or letter of credit
facility) with a bank or other financial institution which is not subordinated
to any other Indebtedness of the Company or any Restricted Subsidiary.
"Series C Indenture" meant the Indenture dated as of January
20, 1999 between the Issuer and Bankers Trust Company, as trustee, as in effect
on the Issue Date.
"Series C Notes" means the Issuer's Series C Discount Notes
due 2008 issued under the Series C Indenture.
"Service Agreement" means any agreement to which the Company
or any Restricted Subsidiary is a party pursuant to which, among other things,
the Company or a Restricted Subsidiary provides various services, which may
include administrative, technical, managerial, financial, operational and
marketing services, to the other party or parties thereto, including, without
limitation, the agreements listed on Schedule A to this Indenture under the
subheading "Service Agreements."
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"Shareholder Registration Rights Agreement" means the
Registration Rights Agreement dated as of June 27, 1997 among PIHLP, ECO, Mr.
Freedman, Steele LLC, AESOP and CACMT (as such terms are defined in the
Company's Offering Memorandum dated January 22, 1999) in the form existing on
the Issue Date.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means, at any particular time, any
Subsidiary that, together with the subsidiaries of such Subsidiary, (a)
accounted for more than 5% of the consolidated revenues of the Company and its
Subsidiaries for their most recently completed fiscal year or (b) is or are the
owner(s) of more than 5% of the consolidated assets of the Company and its
Subsidiaries as at the end of such fiscal year, all as calculated in accordance
with GAAP and as shown on the consolidated financial statements of the Company
and its Subsidiaries for such fiscal year.
"Special Purpose Vehicle" means a Person which is, or was,
established: (i) with separate legal identity and limited liability; and (ii)
for the sole purpose of a single transaction, or series of related transactions,
and which has no assets and liabilities other than those directly acquired or
incurred in connection with such transaction(s).
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means, when used with respect to any
Security or any installment of interest thereon, 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, and, when used with respect to any
other Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company
that is expressly subordinated in right of payment to the Securities.
"Subsidiary" means (a) any Person a majority of the equity
ownership or Voting Stock of which is at the time owned, directly or indirectly,
by the Company or by one or more other Subsidiaries or by the Company and one or
more other Subsidiaries and (b) Poltelkab, PTK Operator Sp. z o.o., Cable
Television Newco and any other Management Company.
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"Total Consolidated Indebtedness" means, at any date of
determination, an amount equal to the aggregate amount of all Indebtedness of
the Company and its Restricted Subsidiaries outstanding as of the date of
determination.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (a) any Subsidiary that at the
time of determination shall be an Unrestricted Subsidiary (as designated by the
Board of Directors of the Company, as provided below) and (b) any subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company, subject to
the foregoing, may designate any newly acquired or newly formed Subsidiary
(other than a Management Company) to be an Unrestricted Subsidiary so long as
(i) neither the Company nor any Restricted Subsidiary is directly or indirectly
liable for any Indebtedness of such Subsidiary, (ii) no default with respect to
any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Restricted
Subsidiary to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity, (iii) any
Investment in such Subsidiary made as result of designating such Subsidiary an
Unrestricted Subsidiary will not violate the provisions of Section 1019, (iv)
neither the Company nor any Restricted Subsidiary has a contract, agreement,
arrangement, understanding or obligation of any kind, whether written or oral,
with such Subsidiary other than those that might be obtained at the time from
persons who are not Affiliates of the Company and (v) neither the Company nor
any Restricted Subsidiary has any obligation (1) to subscribe for additional
shares of Capital Stock or other equity interest in such Subsidiary or (2) to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results. Any such designation
by the Board of Directors of the Company shall be evidenced to the Trustee by
filing a board resolution with the Trustee giving effect to such designation.
The Board of Directors of the Company may designate any Unrestricted Subsidiary
as a Restricted Subsidiary if immediately after giving effect to such
designation, there would be no Default or Event of Default under this Indenture
and the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 1010.
"U.S. Dollar" means United States currency.
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"U.S. Dollar Equivalent" means with respect to any monetary
amount in a currency other than U.S. Dollars, at any time for the determination
thereof, the amount of U.S. Dollars obtained by converting such foreign currency
involved in such computation into U.S. Dollars at the spot rate for the purchase
of U.S. Dollars with the applicable foreign currency as quoted by the National
Bank of Poland at approximately noon (New York City time) on the date two
business days prior to such determination.
"U.S. Government Obligations" has the meaning provided in
Section 1304.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means, with respect to any Person, any class or
classes of Capital Stock pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a majority of the
board of directors, managers or trustees of such Person (irrespective of whether
or not, at the time, stock of any other class or classes shall have, or might
have, voting power by reason of the happening of any contingency).
"Wholly Owned" means, with respect to any Restricted
Subsidiary, such Restricted Subsidiary if all the outstanding Capital Stock of
such Restricted Subsidiary (other than any directors' qualifying shares) is
owned directly by the Company or PCBV and one or more Wholly Owned Restricted
Subsidiaries.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a condition precedent) relating to the
proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
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(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(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 each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
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SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount at maturity and serial numbers of
Securities held by any Person, and the date of holding the same, shall be proved
by the Security Register.
(d) If the Company shall solicit from the Holders of
Securities any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company may, at its option, by or pursuant to a Board
Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
Notwithstanding TIA Section 316(c), such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such solicitation
is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the
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requisite proportion of Outstanding Securities have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other Act, and for that purpose the Outstanding Securities shall be
computed as of such record date; PROVIDED that no such authorization, agreement
or consent by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of this Indenture not later
than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
SECTION 105. NOTICES, ETC., TO TRUSTEE, COMPANY.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Manager, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this Indenture, or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice of any event to
Holders by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such
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notice with respect to other Holders. Any notice mailed to a Holder in the
manner herein prescribed shall be conclusively deemed to have been received by
such Holder, whether or not such Holder actually receives such notice. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 108. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 109. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities
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 110. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto, any Paying
Agent, any Security Registrar and their successors hereunder and the Holders any
benefit or any legal or equitable right, remedy or claim under this Indenture.
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SECTION 111. GOVERNING LAW.
This Indenture and the Securities shall be governed by and
construed in accordance with the law of the State of New York. Upon issuance of
the Exchange Securities or the effectiveness of a Shelf Registration Statement,
this Indenture shall be subject to the provisions of the Trust Indenture Act
that are required to be part of this Indenture and shall, to the extent
applicable, be governed by such provisions; and, if and to the extent that any
provision of this Indenture limits, qualifies or conflicts with any other
provision included in this Indenture which is required to be included in this
Indenture by any of Sections 310 to 318, inclusive, of the Trust Indenture Act,
such required provision shall control.
SECTION 112. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal (or premium, if any) or interest need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity or Maturity; PROVIDED that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Stated
Maturity or Maturity, as the case may be.
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY.
The definitive Securities shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
The Initial Securities shall be known as the "14 1/2% Senior
Discount Notes due 2009" and the Exchange Securities shall be known as the "14
1/2% Exchange Senior Discount Notes due 2009". The Securities and the Trustee's
certificate of authentication shall be substantially in the form annexed hereto
as Exhibit A. The Securities may have such
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appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, notations,
numbers or other marks of identification and such legends or endorsements placed
thereon as the Company may deem appropriate (and as are not prohibited by the
terms of this Indenture) or as may be required or appropriate to comply with any
law or with any rules made pursuant thereto or with any rules of any securities
exchange on which such Securities may be listed, or to conform to general usage,
or as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of such Securities. Any portion of
the text of any Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security. The Company shall
approve the form of the Securities and any notation, legend or endorsement on
the Securities. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the form of the
Securities annexed hereto as Exhibit A shall constitute, and are hereby
expressly made, a part of this Indenture. Each of the Company and the Trustee,
by its execution and delivery of this Indenture, expressly agrees to the terms
and provisions of the Securities applicable to it and to be bound thereby.
Initial Securities offered and sold in reliance on Rule 144A
shall be issued initially in the form of a single permanent global Security in
registered form, substantially in the form set forth in Exhibit A (the "Global
Security"), deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount at maturity of the Global Security may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Securities issued pursuant to Section 306 or Section 307 in
exchange for interests in the Global Security shall be in the form of permanent
certificated Securities in registered form in substantially the form set forth
in Exhibit A (the "PHYSICAL SECURITIES").
SECTION 202. RESTRICTIVE LEGENDS.
Unless and until (i) an Initial Security is sold under an
effective Registration Statement or (ii) an Initial Security is exchanged for an
Exchange Security in connection with an effective Registration Statement, in
each case pursuant to the Registration Rights Agreement, each Global Security
and each Physical Security shall bear the following legend set forth below (the
"Private Placement Legend") on the face thereof.
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THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE
144A")), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER
THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS
SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY
APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE") OFFER, SELL
OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 (IF AVAILABLE), OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT
IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. OFFERS, SALES OR
OTHER TRANSFERS OF THIS
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SECURITY UNDER (C), (D) AND (E) ABOVE ARE SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFERS, SALES OR OTHER TRANSFERS
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
Each Global Security, whether or not an Initial Security,
shall also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR 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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO DTC OR NOMINEES OF DTC OR TO A SUCCESSOR OF
DTC OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
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ARTICLE THREE
THE SECURITIES
SECTION 301. TITLE AND TERMS.
The aggregate principal amount at maturity of Securities which
may be authenticated and delivered under this Indenture is limited to up to
$256,800,000, except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 304, 305, 306, 801, 906, 1016, 1017 or 1108.
The Initial Securities shall be known and designated as the
"14 1/2% Senior Discount Notes due 2009" of the Company. The Exchange Securities
shall be known and designated as the "14 1/2% Exchange Senior Discount Notes due
2009" of the Company. The Stated Maturity of the Initial Securities and the
Exchange Securities shall be February 1, 2009 and, except as otherwise set forth
herein, they shall bear cash interest at the rate of 14 1/2% per annum from
February 1, 2004, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, payable on August 1, 2004 and
semi-annually thereafter on February 1 and August 1 in each year and at said
Stated Maturity, until the principal thereof is paid or duly provided for.
Except in the case of a Registration Default (as defined in the form of
Securities), the principal of the Securities shall not accrue cash interest
until February 1, 2004, except in the case of a default in payment of the amount
due at Maturity, in which case the amount due on the Securities shall bear cash
interest at a rate of 17 1/2% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
default to the date the payment of such amount has been made or duly provided
for. Interest on any overdue principal amount shall be payable on demand. The
Securities are issued at a discount to their aggregate principal amount at
maturity and will generate gross proceeds to the Company of $100,003,056.
Original issue discount will accrete from the Issue Date (January 27, 1999)
until February 1, 2004. Based on the issue price thereof, the yield on the
Securities is 17 1/2% (computed on a semiannual bond equivalent basis)
calculated from January 27, 1999.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose; PROVIDED, HOWEVER, that, at
the option of the Company, interest may be paid by check mailed to addresses of
the Persons entitled thereto as such addresses shall appear on the Security
Register.
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The Securities shall be redeemable as provided in Article
Eleven.
SECTION 302. DENOMINATIONS.
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 principal amount at maturity
and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by
any of its Chairman, its President or a Vice President, the Chief Executive
Officer or the Chief Financial Officer, under its corporate seal reproduced
thereon. The signature of any of these officers on the Securities may be manual
or facsimile signatures of the present or any future such authorized officer and
may be imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein duly executed by the Trustee by manual signature of an authorized
officer, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person
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resulting from such consolidation, or surviving such merger, or into which the
Company shall have been merged, or the Person which shall have received a
conveyance, transfer, lease or other disposition as aforesaid, shall have
executed an indenture supplemental hereto with the Trustee pursuant to Article
Eight, any of the Securities authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Securities executed in the name of the successor Person with such changes
in phraseology and form as may be appropriate, but otherwise in substance of
like tenor as the Securities surrendered for such exchange and of like principal
amount; and the Trustee, upon Company Request of the successor Person, shall
authenticate and deliver Securities as specified in such request for the purpose
of such exchange. If Securities shall at any time be authenticated and delivered
in any new name of a successor Person pursuant to this Section in exchange or
substitution for or upon registration of transfer of any Securities, such
successor Person, at the option of the Holders but without expense to them,
shall provide for the exchange of all Securities at the time Outstanding for
Securities authenticated and delivered in such new name.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 1002, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
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SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND
EXCHANGE.
The Company shall cause to be kept at the Corporate Trust
Office a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as security registrar (the "Security Registrar") for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at
the office or agency of the Company designated pursuant to Section 1002, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination and of a like aggregate
principal amount at maturity, upon surrender of the Securities to be exchanged
at such office or agency. Whenever any Securities are so surrendered for
exchange (including an exchange of Initial Securities for Exchange Securities),
the Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive PROVIDED
that no exchange of Initial Securities for Exchange Securities shall occur until
an Exchange Offer Registration Statement shall have been declared effective by
the Commission and that the Initial Securities to be exchanged for the Exchange
Securities shall be cancelled by the Trustee.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer, in form satisfactory to the Company and
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the Security Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 801, 906, 1016, 1017
or 1108 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the selection of Securities to be redeemed under Section
1104 and ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
SECTION 306. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Security initially shall (i) be registered in
the name of the Depositary for such Global Securities or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 202.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under any Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a beneficial owner
of any Security.
(b) Transfers of a Global Security shall be limited to
transfers of such Global Security in whole, but not in part, to the Depositary,
its successors or their respective nominees and, in part, in the circumstances
described in paragraph (d) hereof. Interests of beneficial owners in a Global
Security may be transferred in accordance with the applicable rules and
procedures of the Depositary and the provisions of Section 307. Beneficial
owners may obtain Physical Securities (which shall bear the Private Placement
Legend if required by
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Section 202) in exchange for their beneficial interests in a Global Security
upon request in accordance with the Depositary's and the Security Registrar's
procedures at any time. In addition, Physical Securities shall be transferred to
all beneficial owners in exchange for their beneficial interests in the Global
Security if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for the Global Security or the Depositary
ceases to be a "Clearing Agency" registered under the Exchange Act and a
successor depositary is not appointed by the Company within 90 days or (ii) an
Event of Default has occurred and Holders of more than 25% in aggregate
principal amount of the Securities at the time outstanding represented by the
Global Securities advise the Trustee through the Depositary in writing that the
continuation of a book-entry system through the Depositary with respect to the
Global Securities is no longer required.
(c) In connection with any transfer pursuant to paragraph (b)
of this Section of a portion of the beneficial interest in the Global Security
to beneficial owners, upon receipt of written instructions from the Depositary,
the Security Registrar shall reflect on its books and records the date and a
decrease in the principal amount at maturity of the Global Security in an amount
equal to the principal amount at maturity of the beneficial interest in the
Global Security to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Physical Securities of like
tenor and amount.
(d) In connection with the transfer of the entire Global
Security to beneficial owners pursuant to paragraph (b) of this Section, the
Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the Global Security an equal aggregate principal
amount at maturity of Physical Securities of authorized denominations.
(e) Any Physical Security delivered in exchange for an
interest in the Global Security pursuant to paragraph (b) or (c) of this Section
shall, except as otherwise provided by paragraph (a)(i)(x) or paragraph (e) of
Section 307, bear the legend regarding transfer restrictions applicable to the
Physical Security set forth in Section 202.
(f) The registered holder of a Global Security may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Securities.
(g) In connection with the execution, authentication and
delivery of Physical Securities in exchange for beneficial interests in a Global
Security pursuant to
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Section 306(b), the Security Registrar shall reflect on its books and records a
decrease in the principal amount at maturity of the relevant Global Security
equal to the principal amount at maturity of such Physical Securities and the
Company shall execute and the Trustee shall authenticate and deliver one or more
Physical Securities having an equal aggregate principal amount at maturity.
SECTION 307. SPECIAL TRANSFER PROVISIONS.
Unless and until (i) an Initial Security is sold pursuant to
an effective Registration Statement, or (ii) an Initial Security is exchanged
for an Exchange Security in the Exchange Offer pursuant to an effective
Registration Statement, in each case, pursuant to the Registration Rights
Agreement, the following provisions shall apply:
(a) GENERAL. The provisions of this Section 307 shall apply to
all transfers involving any Physical Security and any beneficial
interest in any Global Security.
(b) CERTAIN DEFINITIONS. As used in this Section 307 only,
"delivery" of a certificate by a transferee or transferor means the
delivery to the Security Registrar by such transferee or transferor of
the applicable certificate duly completed; "holding" includes both
possession of a Physical Security and ownership of a beneficial
interest in a Global Security, as the context requires; "transferring"
a Global Security means transferring that portion of the principal
amount of the transferor's beneficial interest therein that the
transferor has notified the Security Registrar that it has agreed to
transfer; and "transferring" a Physical Security means transferring
that portion of the principal amount thereof that the transferor has
notified the Security Registrar that it has agreed to transfer.
As used in this Indenture,"Rule 144A Certificate" means a
certificate substantially in the form set forth in Section 313 and
"Non-Registration Opinion and Supporting Evidence" means a written
opinion of counsel reasonably acceptable to the Company to the effect
that, and such other certification or information as the Company may
reasonably require to confirm that, the proposed transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
(c) [Intentionally Omitted]
(d) DEEMED DELIVERY OF A RULE 144A CERTIFICATE IN CERTAIN
CIRCUMSTANCES. A Rule 144A Certificate, if not actually delivered, will
be deemed delivered if (A) (i)
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the transferor advises the Company and the Trustee in writing that the
relevant offer and sale were made in accordance with the provisions of
Rule 144A (or, in the case of a transfer of a Physical Security, the
transferor checks the box provided on the Physical Security to that
effect) and (ii) the transferee advises the Company and the Trustee in
writing that (x) it and, if applicable, each account for which it is
acting in connection with the relevant transfer, is a qualified
institutional buyer within the meaning of Rule 144A, (y) it is aware
that the transfer of Securities to it is being made in reliance on the
exemption from the provisions of Section 5 of the Securities Act
provided by Rule 144A, and (z) prior to the proposed date of transfer
it has been given the opportunity to obtain from the Company the
information referred to in Rule 144A(d)(4), and has either declined
such opportunity or has received such information (or, in the case of a
transfer of a Physical Security, the transferee signs the certification
provided on the Physical Security to that effect); or (B) the
transferor holds the Global Security and is transferring to a
transferee that will take delivery in the form of the Global Security.
(e) PROCEDURES AND REQUIREMENTS. If the proposed transferor
holds:
(A) a Physical Security which is surrendered to the
Security Registrar, and the proposed transferee or transferor,
as applicable:
(i) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A Certificate
and the proposed transferee requests delivery in the
form of a Physical Security, then the Security
Registrar shall (x) register such transfer in the
name of such transferee and record the date thereof
in its books and records, (y) cancel such surrendered
Physical Security and (z) deliver a new Physical
Security to such transferee duly registered in the
name of such transferee in principal amount equal to
the principal amount being transferred of such
surrendered Physical Security; or
(ii) delivers (or is deemed to have
delivered pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the Global Security, then the Security Registrar
shall (x) cancel such surrendered Physical Security,
(y) record an increase in the principal amount of the
Global Security equal to the principal amount being
transferred of such surrendered
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Physical Security and (z) notify the Depositary in
accordance with the procedures of the Depositary that
it approves of such transfer.
In any of the cases described in this Section
307(e)(A), the Security Registrar shall deliver to the
transferor a new Physical Security in principal amount equal
to the principal amount not being transferred of such
surrendered Physical Security, as applicable.
(B) the Global Security, and the proposed transferee
or transferor, as applicable:
(i) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A Certificate
and the proposed transferee requests delivery in the
form of a Physical Security, then the Security
Registrar shall (w) register such transfer in the
name of such transferee and record the date thereof
in its books and records, (x) record a decrease in
the principal amount of the Global Security in an
amount equal to the beneficial interest therein being
transferred, (y) deliver a new Physical Security to
such transferee duly registered in the name of such
transferee in principal amount equal to the amount of
such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that
it approves of such transfer; or
(ii) delivers (or is deemed to have
delivered pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the Global Security, then the transfer shall be
effected in accordance with the procedures of the
Depositary therefor.
(f) EXECUTION, AUTHENTICATION AND DELIVERY OF PHYSICAL
SECURITIES. In any case in which the Security Registrar is required to
deliver a Physical Security to a transferee or transferor, the Company
shall execute, and the Trustee shall authenticate and make available
for delivery, such Physical Security.
(g) CERTAIN ADDITIONAL TERMS APPLICABLE TO PHYSICAL
SECURITIES. Any transferee entitled to receive a Physical Security may
request that the principal amount thereof be evidenced by one or more
Physical Securities in any authorized
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denomination or denominations and the Security Registrar shall comply
with such request if all other transfer restrictions are satisfied.
(h) TRANSFERS NOT COVERED BY SECTION 307(E). The Security
Registrar shall effect and record, upon receipt of a written request
from the Company so to do, a transfer not otherwise permitted by
Section 307(e), such recording to be done in accordance with the
otherwise applicable provisions of Section 307(e), upon the furnishing
by the proposed transferor or transferee of a Non-Registration Opinion
and Supporting Evidence.
(i) GENERAL. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such 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 Security
Registrar shall not register a transfer of any Security unless such
transfer complies with the restrictions with respect thereto set forth
in this Indenture. The Security Registrar shall not be required to
determine (but may rely upon a determination made by the Company) the
sufficiency of any such certifications, legal opinions or other
information.
(j) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Security 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 Security Registrar
shall deliver only Securities that bear the Private Placement Legend
unless (i) the requested transfer is at least two years after the
original issue date of the Initial Security (with respect to any
Physical Security), (ii) there is delivered to the Security Registrar
an Opinion of Counsel in form 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 (iii) such Securities are
exchanged for Exchange Securities pursuant to an Exchange Offer.
SECTION 308. MUTILATED, DESTROYED, LOST AND STOLEN
SECURITIES.
If (i) any mutilated Security is surrendered to the Trustee,
or (ii) the Company and the Trustee receive evidence to their satisfaction of
the destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the
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Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon Company Order the Trustee shall
authenticate and deliver, in exchange for any such mutilated Security or in lieu
of any such destroyed, lost or stolen Security, a new Security of like tenor and
principal amount at maturity, bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 309. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name such Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
at the office or agency of the Company maintained for such purpose pursuant to
Section 1002; PROVIDED, HOWEVER, that each installment of interest may at the
Company's option be paid by (i) mailing a check for such interest, payable to or
upon the written order of the Person entitled thereto pursuant to Section 310,
to the address of such Person as it appears in the Security Register at the
close of business on the Regular Record Date for such interest payment or (ii)
transfer to an account located in the United States maintained by the payee.
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Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the Regular Record Date by virtue
of having been such Holder, and such defaulted interest and (to the extent
lawful) interest on such defaulted interest at the rate borne by the Securities
(such defaulted interest and interest thereon herein collectively called
"Defaulted Interest") may be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date, and in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
given in the manner provided for in Section 106, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having
been so given, such Defaulted Interest shall be paid to the Persons in
whose names the Securities (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
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Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 310. PERSONS DEEMED OWNERS.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any) and (subject to Sections 305 and 309) interest on such Security and for
all other purposes whatsoever, whether or not such Security be overdue, and none
of the Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 311. CANCELLATION.
All Securities surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee (or
to any other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, 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. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company unless
by Company Order the Company shall direct that cancelled Securities be returned
to it.
SECTION 312. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
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SECTION 313. FORM OF RULE 144A CERTIFICATE.
Upon any transfer of the Securities pursuant to Rule 144A, the
purchaser of such Securities shall deliver to the Trustee a certificate in the
form of Exhibit B hereto.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of Securities expressly provided for herein or pursuant hereto and the
rights, powers, trusts, duties and immunities of the Trustee) and the Trustee,
at the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when
(1) either
(a) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 308) and (ii) Securities for whose
payment money has theretofore been deposited in trust with the
Trustee or any Paying Agent or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(b) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company,
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and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose an amount
sufficient to pay and discharge the entire Indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest
on such Securities to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 606 and,
if money shall have been deposited with the Trustee pursuant to subclause (b) of
clause (1) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be held
in trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or
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involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest on any Security
when it becomes due and payable and continuance of such default for a
period of 30 days;
(2) default in the payment of the principal of or premium, if
any, on any Security at its Maturity;
(3) default in the performance, or breach, of the provisions
described in Article Eight of this Indenture, the failure to make or
consummate a Change of Control Offer in accordance with the provisions
of Section 1016 or the failure to make or consummate an Excess Proceeds
Offer in accordance with the provisions of Section 1017;
(4) default in the performance, or breach, of any covenant or
agreement of the Company contained in this Indenture (other than a
default in the performance, or breach, of a covenant or warranty which
is specifically dealt with elsewhere in this Indenture) and continuance
of such default or breach for a period of 30 days after written notice
shall have been given to the Company by the Trustee or to the Company
and the Trustee by the holders of at least 25% in principal amount of
the then Outstanding Securities, as the case may be;
(5) (i) one or more defaults in the payment of principal of or
premium, if any, on Indebtedness of the Company or any Significant
Subsidiary aggregating $15 million or more, when the same becomes due
and payable at the stated maturity thereof, and such default or
defaults shall have continued after any applicable grace period and
shall not have been cured or waived or (ii) Indebtedness of the Company
or any Significant Subsidiary aggregating $15 million or more shall
have been accelerated or otherwise declared due and payable, or
required to be prepaid or repurchased (other than by regularly
scheduled required prepayment) prior to the stated maturity thereof;
(6) any holder or holders (or any Person acting on any such
holder's behalf) of any Indebtedness in excess of $15 million in the
aggregate of the Company or any Significant Subsidiary shall,
subsequent to the occurrence of a default with respect to such
Indebtedness, notify the Trustee of the intended sale or disposition of
any assets of the Company or any Restricted Subsidiary that have been
pledged to or for the benefit of such Person to secure such
Indebtedness or shall commence proceedings, or take action to retain in
satisfaction of any such Indebtedness, or to collect on, seize,
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dispose of or apply, any such assets of the Company or any Restricted
Subsidiary pursuant to the terms of any agreement or instrument
evidencing any such Indebtedness of the Company or any Restricted
Subsidiary or in accordance with applicable law;
(7) one or more final judgments, orders or decrees of any
court or regulatory agency shall be rendered against the Company or any
Significant Subsidiary or their respective properties for the payment
of money, either individually or in an aggregate amount, in excess of
$15 million and either (i) an enforcement proceeding shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall have been a period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, was not in effect;
(8) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company or any Significant
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company or any Significant Subsidiary under the
Federal Bankruptcy Code or any other applicable federal or state law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or any Significant
Subsidiary or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the continuance of any
such decree or order unstayed and in effect for a period of 60
consecutive days; and
(9) the institution by the Company or any Significant
Subsidiary of proceedings to be adjudicated a bankrupt or insolvent, or
the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under the Federal Bankruptcy
Code or any other applicable federal or state law, or the consent by it
to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of the Company or any Significant Subsidiary or of any substantial part
of its property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION
AND ANNULMENT.
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If an Event of Default (other than an Event of Default
specified in Section 501(8) or 501(9)) shall occur and be continuing, the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
Securities then Outstanding, by written notice to the Company (and to the
Trustee if such notice is given by the Holders), may, and the Trustee upon the
written request of such Holders, shall declare the principal of, premium, if
any, and accrued interest on all of the Outstanding Securities immediately due
and payable, and upon any such declaration all such amounts payable in respect
of the Securities shall become immediately due and payable. If an Event of
Default specified in Section 501(8) or 501(9) occurs and is continuing, then the
principal of, premium, if any, and accrued interest on all of the Outstanding
Securities shall IPSO FACTO become and be immediately due and payable without
any declaration or other act on the part of either the Trustee or any Holder.
At any time after a declaration of acceleration hereunder, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Securities, by written notice to the Company and the Trustee, may
rescind such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
(A) all overdue interest on all Outstanding
Securities,
(B) all unpaid principal of and premium, if any, on
any Outstanding Securities that have become due otherwise than
by such declaration of acceleration, and interest thereon at
the rate borne by such Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest and overdue principal
at the rate borne by such Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) all Events of Default, other than the non-payment of
amounts of principal of, premium, if any, or interest on Securities
that have become due solely by such declaration of acceleration, have
been cured or waived as provided in Section 513.
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No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(a) default is made in the payment of any installment of
interest on any Security when such interest becomes due and payable and
such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate borne by the Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
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SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents
and take such other actions, including participating as a member of any
official creditors committee appointed in the matter as it may deem
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
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SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons
entitled thereto.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Securities shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
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(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment, as provided herein and in such Security of
the principal of (and premium, if any) and (subject to Section 309) interest on
such Security on the respective Stated Maturities expressed in such Security
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions
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hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 308, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of not less than a majority in principal amount at
maturity of the Outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, PROVIDED
that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve
it in personal liability or be unjustly prejudicial to the Holders not
consenting.
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SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal
amount at maturity of the Outstanding Securities may, on behalf of the Holders
of all the Securities, waive any past defaults hereunder, except a default
(1) in the payment of the principal of, premium, if any, or
interest on any such Security, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 514. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS.
Within 90 days after the occurrence of any Default or Event of
Default hereunder, the Trustee shall transmit in the manner and to the extent
provided in TIA Section 313(c), notice of such Default hereunder known to the
Trustee, unless such Default
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shall have been cured or waived; PROVIDED, HOWEVER, that, except in the case of
a Default in the payment of the principal of, premium, if any, or interest on
any Security, the Trustee shall be protected in withholding such notice if a
committee of its trust officers in good faith determines that the withholding of
such notice is in the interest of the Holders; and PROVIDED FURTHER that in the
case of any Default of the character specified in Section 501(4) no such notice
to Holders shall be given until at least 30 days after the occurrence thereof.
SECTION 602. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of TIA Sections 315(a) through
315(d):
(1) the Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
(unless other evidence in respect thereof is herein specifically
prescribed) and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) shall
be entitled to receive and may require and, in the absence of bad faith
on its part, conclusively rely upon an Officers Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
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(6) 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;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture; and
(9) the Trustee shall not be deemed to have knowledge of any
default, breach or Event of Default or other matter upon the occurrence
of which it may be required to take action hereunder unless one of its
Responsible Officers has actual knowledge thereof.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
indemnity satisfactory to it against such risk or liability is not reasonably
assured to it.
SECTION 603. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE
OF SECURITIES.
The recitals contained herein and in the Securities, except
for the Trustee's certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Securities and perform its obligations hereunder and that the
statements made by it in any Statement of Eligibility on Form T-1 supplied to
the Company will be true and accurate,
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subject to the qualifications set forth therein. The Trustee shall not be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 604. MAY HOLD SECURITIES.
The Trustee, any Paying Agent, any Security Registrar or any
other agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to TIA
Sections 310(b) and 311, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Security Registrar or
such other agent.
SECTION 605. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
SECTION 606. COMPENSATION AND REIMBURSEMENT.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of investigating or defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
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The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of (and premium, if any)
or interest on particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(8) or (9), the
expenses (including the reasonable charges and expenses of its counsel) of and
the compensation for such services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar foreign or domestic law; PROVIDED, HOWEVER, that to the extent
unpaid as such expenses, they shall be paid as provided in Section 506.
The provisions of this Section shall survive the termination
of this Indenture.
SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of Federal, State, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 609 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of
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resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of not less than a majority in principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least
six months, or
(2) the Trustee shall cease to be eligible under Section 607
and shall fail to resign after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Security for at
least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly
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situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 106. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities. In case at that time any of the Securities shall not have been
authenticated, any
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successor Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor Trustee. In all such cases
such certificates shall have the full force and effect which this Indenture
provides for the certificate of authentication of the Trustee shall have;
PROVIDED, HOWEVER, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.
Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any information as to the names and addresses of the Holders in
accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312(b).
SECTION 702. REPORTS BY TRUSTEE.
Within 60 days after May 15 of each year commencing with the
first May 15 after the first issuance of Securities, the Trustee shall transmit
to the Holders, in the manner and to the extent provided in TIA Section 313(c),
a brief report dated as of such May 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS.
The Company shall not, in a single transaction or through a
series of related transactions, consolidate with or merge with or into any other
Person or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets
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substantially as an entirety to any other Person or Persons, and the Company
will not permit any Restricted Subsidiary to enter into any such transaction or
series of transactions if such transaction or series of transactions, in the
aggregate, would result in the sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
the Company and its Restricted Subsidiaries on a consolidated basis to any
Person or Persons, unless:
(1) either (i) the Company shall be the surviving corporation
or (ii) the Person (if other than the Company) formed by such
consolidation or into which the Company or the Company and its
Restricted Subsidiaries is merged or the Person which acquires by sale,
conveyance, transfer, lease or other disposition, all or substantially
all of the properties and assets of the Company or the Company and its
Restricted Subsidiaries, as the case may be, (the "Surviving Entity")
(x) shall be a corporation organized and validly existing under the
laws of the United States of America, any state thereof or the District
of Columbia and (y) shall expressly assume, by an indenture
supplemental to this Indenture executed and delivered to the Trustee,
in form satisfactory to the Trustee, the Company's obligations for the
due and punctual payment of the principal of (or premium, if any, on)
and interest on all the Securities and the performance and observance
of every covenant of this Indenture on the part of the Company to be
performed or observed;
(2) immediately before and after giving effect to such
transaction or series of transactions on a PRO FORMA basis (and
treating any 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), no Default or Event of
Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction or
series of transactions on a PRO FORMA basis (on the assumption that the
transaction or series of transactions occurred on the first day of the
latest fiscal quarter for which consolidated financial statements of
the Company are available prior to the consummation of such transaction
or series of transactions with the appropriate adjustments with respect
to the transaction or series of transactions being included in such PRO
FORMA calculation), the ratio of Total Consolidated Indebtedness to
Annualized Pro Forma Consolidated Operating Cash Flow of the Company
(or the Surviving Entity if the Company is not the continuing obligor
under this Indenture) would be less than or equal to such ratio of the
Company immediately before such transaction;
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(4) if any of the property or assets of the Company or any of
its Restricted Subsidiaries would thereupon become subject to any Lien,
the provisions of Section 1014 are complied with; and
(5) the Company or the Surviving Entity shall have delivered
to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition and such supplemental indenture
comply with the terms of this Indenture.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company in accordance with Section 801 in which the
Company is not the continuing obligor under this Indenture, the Surviving Entity
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
had been named as the Company herein. When a successor assumes all the
obligations of its predecessor under this Indenture and the Securities, the
predecessor shall be released from those obligations; PROVIDED that in the case
of a transfer by lease, the predecessor shall not be released from the payment
of principal and interest on the Securities.
SECTION 803. SECURITIES TO BE SECURED IN CERTAIN EVENTS.
If, upon any such consolidation of the Company with or merger
of the Company into any other corporation, or upon any conveyance, lease or
transfer of the property of the Company substantially as an entirety to any
other Person, any property or assets of the Company would thereupon become
subject to any Lien, then unless such Lien could be created pursuant to Section
1014 without equally and ratably securing the Securities, the Company, prior to
or simultaneously with such consolidation, merger, conveyance, lease or
transfer, will as to such property or assets, secure the Securities Outstanding
(together with, if the Company shall so determine any other Indebtedness of the
Company now existing or hereinafter created which is not subordinate in right of
payment to the Securities) equally and ratably with (or prior to) the
Indebtedness which upon such consolidation, merger, conveyance, lease or
transfer is to become secured as to such property or assets by such Lien, or
will cause such Securities to be so secured; PROVIDED that, for the purpose of
providing such equal and ratable security, the principal amount of the
Securities shall mean that amount which would at the time of making such
effective provision be due and payable pursuant to Section 502 upon a
declaration of acceleration of the Maturity thereof, and the extent of such
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equal and ratable security shall be adjusted, to the extent permitted by law, as
and when said amount changes over time as provided in Section 502.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company contained herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company; or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of
Section 609; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; PROVIDED that such action shall
not adversely affect the interests of the Holders in any material
respect; or
(6) to secure the Securities pursuant to the requirements of
Section 1014 or otherwise; or
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(7) to qualify, or maintain the qualification of, this
Indenture under the TIA.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
aggregate principal amount at maturity of the Outstanding Securities, by Act of
said Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders under this Indenture;
PROVIDED, HOWEVER, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the Accreted Value
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which any
Security or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or
(2) reduce the percentage in principal amount at maturity of
the Outstanding Securities, the consent of whose Holders is required
for any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture, or
(3) modify any of the provisions of this Section, Section 1021
or Article Five, except to increase the percentage of Outstanding
Securities required for such actions or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security, or
(4) amend, change or modify the redemption provisions of this
Indenture or the Securities or the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate an Excess Proceeds Offer with respect to
any Asset Sale or modify any of the provisions or definitions with
respect thereto.
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It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which adversely affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL
INDENTURES.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities. Failure to make the appropriate notation or to issue a
new Security shall not affect the validity of such amendment.
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SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of Section 902, the
Company shall give notice thereof to the Holders of each Outstanding Security
affected, in the manner provided for in Section 106, setting forth in general
terms the substance of such supplemental indenture. Failure to provide such
notice shall not affect the validity of such amendment.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND
INTEREST.
The Company covenants and agrees for the benefit of the
Holders that it will duly and punctually pay the principal of (and premium, if
any) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in The City of New York, an office
or agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The office of Bankers Trust Company at Four Albany
Street, New York, New York 10006 shall be such office or agency of the Company,
unless the Company shall designate and maintain some other office or agency for
one or more of such purposes. The Company will give prompt written notice to the
Trustee of any change in the location of any such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all such purposes and may
from time to time rescind any such designation; PROVIDED, HOWEVER, that no such
designation or rescission shall in any manner
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relieve the Company of its obligation to maintain an office or agency in The
City of New York for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and any change in the
location of any such other office or agency.
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN
TRUST.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of (or premium, if any) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal of (or
premium, if any) or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Securities, it will, on or before 10:00 a.m. (New York City time) on each
due date of the principal of (or premium, if any) or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay the principal (and premium,
if any) or interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of such action or any failure so to act.
The Company will cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
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The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (or
premium, if any) or interest on any Security and remaining unclaimed for two
years after such principal, premium or interest has become due and payable shall
be paid to the Company on Company Request, or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 1004. CORPORATE EXISTENCE.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Subsidiary; PROVIDED, HOWEVER, that the Company shall not be
required to preserve any such right or franchise if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of
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the Company or any Subsidiary and (b) all lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a Lien upon the property of the
Company or any Subsidiary; PROVIDED, HOWEVER, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will cause all properties owned by the Company or
any Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; PROVIDED, HOWEVER, that nothing in this Section shall
prevent the Company from discontinuing the maintenance of any of such properties
if such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1007. INSURANCE.
The Company will at all times keep all of its and its
Subsidiaries properties which are of an insurable nature insured with insurers,
believed by the Company to be responsible, against loss or damage to the extent
that property of similar character is usually so insured by corporations
similarly situated and owning like properties.
SECTION 1008. STATEMENT BY OFFICERS AS TO DEFAULT.
(a) The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year and within 45 days after the end of each
fiscal quarter (other than the last fiscal quarter of a year), a brief
certificate from the principal executive officer, principal financial officer or
principal accounting officer as to his or her knowledge of the Company's
compliance with all conditions and covenants under this Indenture. For purposes
of this Section 1008(a), such compliance shall be determined without regard to
any period of grace or requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or
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any Subsidiary gives any notice or takes any other action with respect to a
claimed default (other than with respect to Indebtedness in the principal amount
of less than $5,000,000), the Company shall deliver to the Trustee by registered
or certified mail or by telegram, telex or facsimile transmission an officers
certificate specifying such event, notice or other action within five Business
Days of its occurrence.
SECTION 1009. PROVISION OF FINANCIAL STATEMENTS AND REPORTS.
(a) 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 Commission (if permitted by Commission practice and applicable law
and regulations) the annual reports, quarterly reports and other documents which
are required to be filed with the Commission pursuant to such Section 13(a) or
15(d) or any successor provision thereto, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing Dates")
required by such Section 13(a) or 15(d) of the Exchange Act regardless of
whether the Company is required to file such documents. 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 Commission (i) transmit (or cause to
be transmitted) by mail to all holders of Securities, as their names and
addresses appear in the applicable Security Register, without cost to such
holders, and (ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company is required to file with the
Commission 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 Commission
is not permitted by Commission practice or applicable law or regulations,
promptly upon written request supply copies of such documents to any holder of
Securities.
(b) The Company will disclose the current and accumulated
earnings and profits, if any, for any fiscal year in its annual report on form
10K so long as it is required to file such reports. Thereafter, the Company will
provide such information separately to the Holders who so request by written
notice to the Company.
SECTION 1010. LIMITATION ON ADDITIONAL INDEBTEDNESS.
(a) The Company will not, and will not permit any Restricted
Subsidiary, directly or indirectly, to incur, contingently or otherwise, any
Indebtedness, except for Permitted Indebtedness; PROVIDED that the Company will
be permitted to incur Indebtedness if after giving pro forma effect to such
incurrence (including the application of the net proceeds therefrom), the ratio
of (x) Total Consolidated Indebtedness outstanding as of the date of such
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incurrence to (y) Annualized Pro Forma Consolidated Operating Cash Flow would be
greater than zero and less than or equal to 6 to 1.
(b) The Company will not incur any Subordinated Indebtedness
unless such Indebtedness by its terms expressly prohibits the payment by the
Company of any assets or securities (including Common Stock) to the holders of
such Subordinated Indebtedness prior to the payment in full of the Securities in
the event of a bankruptcy or reorganization.
SECTION 1011. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not take, and will not permit any
Restricted Subsidiary to, directly or indirectly, take any of the following
actions:
(i) declare or pay any dividend or any other distribution on
Capital Stock of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the
Company (other than dividends or distributions payable solely in
Capital Stock (other than Redeemable Capital Stock) of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of the Company (other than any such Capital Stock
owned by the Company or a Restricted Subsidiary) or any Affiliate of
the Company (other than any Restricted Subsidiary);
(iii) make any principal payment on, or repurchase, redeem,
defease or otherwise acquire or retire for value, prior to any
scheduled principal payment, sinking fund payment or maturity, any
Subordinated Indebtedness of the Company (other than any Subordinated
Indebtedness held by a Restricted Subsidiary);
(iv) make any Investment (other than a Permitted Investment)
in any Person (other than an Investment by the Company or a Restricted
Subsidiary in either (1) a Restricted Subsidiary or the Company or (2)
a Person that becomes a Restricted Subsidiary as a result of such
Investment);
(v) create or assume any guarantee of Indebtedness of any
Affiliate of the Company (other than guarantees of any Indebtedness of
any Restricted Subsidiary by the Company or any Restricted Subsidiary);
or
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(vi) declare or pay any dividend or any other distribution on
any Capital Stock of any Restricted Subsidiary to any Person (other
than (1) dividends or distributions paid to the Company or a Restricted
Subsidiary or (2) PRO RATA dividends or distributions on Common Stock
of Restricted Subsidiaries held by minority stockholders, provided that
such dividends or distributions do not in the aggregate exceed the
minority stockholders' PRO RATA share of such Restricted Subsidiaries'
net income from the first day of the fiscal quarter beginning
immediately following the Issue Date);
(such payments or other actions described in (but not excluded from) clauses (i)
through (vi) are collectively referred to as "Restricted Payments"), unless at
the time of, and immediately after giving effect to, the proposed Restricted
Payment (1) no Default or Event of Default shall have occurred and be
continuing, (2) the Company would be able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the proviso of Section
1010; and (3) the aggregate amount of all Restricted Payments declared or made
after the Issue Date would not exceed an amount equal to the sum of:
(A) the difference between (x) the Cumulative Available Cash
Flow determined at the time of such Restricted Payment and (y) the
product of (I) 1.5 and (II) the cumulative Consolidated Interest
Expense of the Company determined for the period commencing on the
Issue Date and ending on the last day of the latest fiscal quarter for
which consolidated financial statements of the Company are available
preceding the date of such Restricted Payment (or if such difference
shall be a negative number, minus 100% of such number), PLUS (B) the
aggregate Net Cash Proceeds received by the Company from the issue or
sale (other than to a Restricted Subsidiary) of Capital Stock of the
Company (other than Redeemable Capital Stock) on or after the Issue
Date, excluding any Net Cash Proceeds that are, promptly following
receipt, invested in accordance with clause (ii), (iii) or (v) of
clause (b) hereof and except to the extent such Net Cash Proceeds are
used to incur Indebtedness pursuant to clause (i) of the definition of
Permitted Indebtedness, PLUS (C) the aggregate Net Cash Proceeds
received by the Company on or after the Issue Date from the issuance or
sale (other than to a Restricted Subsidiary) of debt securities or
Redeemable Capital Stock of the Company that have been converted into
or exchanged for Capital Stock (other than Redeemable Capital Stock) of
the Company to the extent such securities were originally sold for
cash, together with the aggregate net cash proceeds received by the
Company (other than from a Restricted Subsidiary) at the time of such
conversion or exchange, plus (D) in the case of the disposition or
repayment of any Investment (other than through share leasing
arrangements) constituting a Restricted Payment made after the Issue
Date (other than in the case contemplated by clause (E) hereof) an
amount
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equal to the lesser of the return of capital with respect to such
Investment and the cost of such Investment, in either case, less the
cost of the disposition of such Investment, plus (E) in the case of
Investments (other than through share leasing arrangements) made in any
Person other than a Restricted Subsidiary, an amount equal to the
lesser of the Fair Market Value of such Investment and the total amount
of such Investments constituting Restricted Payments if and when such
Person becomes a Restricted Subsidiary less any amounts previously
credited pursuant to clause (D).
For purposes of determining the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof and
property other than cash shall be valued at its Fair Market Value.
(b) The provisions of this covenant shall not prohibit, so
long as, with respect to clauses (ii) through (ix) below, no Default or Event of
Default shall have occurred and be continuing (i) the payment of any dividend or
other distribution within 60 days after the date of declaration thereof if at
such date of declaration such payment complied with the provisions of this
Indenture; (ii) the purchase, redemption, retirement or other acquisition of any
shares of Capital Stock 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, shares of Capital Stock of the Company (other than
Redeemable Capital Stock); (iii) the purchase, redemption, retirement,
defeasance or other acquisition of Subordinated Indebtedness made by exchange
for, or out of the net cash proceeds of, a substantially concurrent issue or
sale (other than to a Restricted Subsidiary) of (1) Capital Stock (other than
Redeemable Capital Stock) of the Company or (2) other Subordinated Indebtedness
so long as (A) the principal amount of such new Indebtedness does not exceed the
principal amount (or, if such Subordinated Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as of the
date of determination) of the Subordinated Indebtedness being so purchased,
redeemed, defeased, acquired or retired, PLUS the lesser of the amount of any
premium required to be paid in connection with such refinancing pursuant to the
terms of the Subordinated Indebtedness being refinanced or the amount of any
premium reasonably determined by the Company as necessary to accomplish such
refinancing, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing, (B) such new Subordinated
Indebtedness is subordinated to the Securities to the same extent as such
Subordinated Indebtedness so purchased, redeemed, defeased, acquired or retired
and (C) such new Subordinated Indebtedness has an Average Life longer than the
Average Life of the Securities and a final Stated Maturity of principal later
than the Stated Maturity of principal of the Securities; (iv) the extension by
the Company and the Restricted Subsidiaries of trade credit to Unrestricted
Subsidiaries, represented by accounts receivable, extended on
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usual and customary terms in the ordinary course of business; (v) Investments
(other than through share leasing arrangements) in any Person promptly made with
the proceeds of a substantially concurrent issue or sale of Capital Stock (other
than Redeemable Capital Stock) of the Company; (vi) payments made pursuant to
the Shareholder Registration Rights Agreement; (vii) the payment of reasonable
and customary regular compensation and fees to directors of the Company or any
Restricted Subsidiary who are not employees of the Company or any Restricted
Subsidiary; (viii) any "Restricted Payment" as defined in and permitted by the
PCI Indenture made by PCI or any Subsidiary thereof in accordance with the terms
of the PCI Indenture and (ix) any other Restricted Payments in an aggregate
amount not to exceed $1.0 million (or, if non-U.S. Dollar denominated, the U.S.
Dollar Equivalent thereof) at any one time outstanding.
In determining the amount of Restricted Payments permissible
under this covenant, amounts expended pursuant to clauses (i), (vi), (vii),
(viii) and (ix) above shall be included as Restricted Payments.
SECTION 1012. LIMITATION ON ISSUANCES AND SALES OF CAPITAL
STOCK OF RESTRICTED SUBSIDIARIES.
(a) The Company will not and will not permit any Restricted
Subsidiary to issue or sell any shares of Capital Stock of a Restricted
Subsidiary (other than to the Company or a Restricted Subsidiary); PROVIDED,
HOWEVER, that this covenant shall not prohibit (i) the issuance and sale of all,
but not less than all, of the issued and outstanding Capital Stock of any
Restricted Subsidiary in compliance with the other provisions of this Indenture,
(ii) issuances or sales of Common Stock of a Restricted Subsidiary if (x) the
proceeds of such issuance or sale are applied in accordance with Section 1017
and (y) immediately after giving effect thereto, the Company and its other
Restricted Subsidiaries own no less than 51% of the outstanding Voting Stock of
such Restricted Subsidiary, (iii) issuances or sales of Capital Stock of
Restricted Subsidiaries that are subsidiaries of PCI that are permitted by the
terms of the PCI Indenture or (iv) the ownership by directors of directors'
qualifying shares or the ownership by foreign nationals of Capital Stock of any
Restricted Subsidiary, to the extent mandated by applicable law.
(b) The Company will not permit the direct or indirect
ownership of the Company or any Restricted Subsidiary in the Capital Stock of
any Management Company to fall below the lesser of (i) the maximum ownership
percentage permitted by applicable law and (ii) 51% of the outstanding Capital
Stock of such Management Company, PROVIDED that any increase in such ownership
of the Capital Stock of any Management Company required by any change in
applicable law shall not be required to be completed prior to 365 days from the
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effective date of such change in applicable law, PROVIDED FURTHER that the
Company and the Restricted Subsidiaries may sell all, but not less than all, of
their Capital Stock of any Management Company in accordance with the provisions
of Section 1017.
SECTION 1013. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with, or
for the benefit of, any Affiliate of the Company (other than the Company or a
Restricted Subsidiary and after the Old Notes are no longer outstanding, a
Majority Owned Restricted Subsidiary) unless (i) such transaction or series of
related transactions is on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could have been
obtained in an arm's-length transaction with unrelated third parties who are not
Affiliates, (ii) with respect to any transaction or series of related
transactions involving aggregate consideration equal to or greater than $10
million, the Company shall have delivered an officers' certificate to the
Trustee certifying that such transaction or series of related transactions
complies with clause (i) above and such transaction or series of related
transactions has been approved by a majority of the Directors of the Board of
Directors, or the Company has obtained a written opinion from a nationally
recognized investment banking firm to the effect that such transaction or series
of related transactions is fair to the Company or such Restricted Subsidiary, as
the case may be, from a financial point of view (or if an investment banking
firm is generally not qualified to give such an opinion, by a nationally
recognized appraisal firm or accounting firm) and (iii) with respect to any
transaction or series of related transactions including aggregate consideration
in excess of $20 million, the Company shall have delivered an officers'
certificate to the Trustee certifying that such transaction or series of related
transactions complies with clause (i) above and such transaction or series of
related transactions has been approved by a majority of the Disinterested
Directors of the Board of Directors (assuming that at least two such Directors
exist), or in the event that at least two members of the Board of Directors are
not Disinterested Directors with respect to any transaction or series of
transactions included in this clause (iii), the Company shall obtain an opinion
from a nationally recognized investment banking firm (or if an investment
banking firm is generally not qualified to give such an opinion, by a nationally
recognized appraisal firm or accounting firm) as described above; PROVIDED,
HOWEVER, that this provision will not restrict (1) any transaction by the
Company or any Restricted Subsidiary with an Affiliate directly related to the
purchase, sale or distribution of products in the ordinary course of business,
including, without limitation, transactions related to the purchase, sale or
distribution of programming, subscriber management services, transmission
services and
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services related to the publication of programming guides, (2) the Company from
paying reasonable and customary regular compensation and fees to directors of
the Company or any Restricted Subsidiary who are not employees of the Company or
any Restricted Subsidiary, including, without limitation, any such fees which
the Company has agreed to pay to any director pursuant to an agreement in effect
on the Issue Date and listed on Schedule A to this Indenture, (3) the payment of
compensation (including stock options and other incentive compensation) to
officers and other employees the terms of which are approved by the Board of
Directors, (4) any transactions pursuant to a Management Agreement, (5) the
Company or any Restricted Subsidiary from making any Restricted Payment in
compliance with Section 1011, (6) (x) transactions pursuant to any Management
Contract, Overhead Agreement or Service Agreement that is entered into prior to
the Issue Date and is listed in Schedule A to this Indenture; or (y)
transactions pursuant to any Organizational Contract, Overhead Agreement or
Service Agreement that is entered into after the Issue Date and has
substantially identical terms as, and is no less favorable to the Company or any
Restricted Subsidiary than, the Organizational Contracts, Overhead Agreements or
Service Agreements, as the case may be, listed in Schedule A to this Indenture,
or (7) amendments, modifications or alterations of Management Agreements,
Organizational Contracts, Overhead Agreements and Service Agreements under (b)
below.
(b) The Company will not, and will not permit any Restricted
Subsidiary to, amend, modify, or in any way alter the terms of any Management
Agreement, Organizational Contract, Overhead Agreement or Service Agreement in a
manner materially adverse to the Company other than (i) by adding new Restricted
Subsidiaries to a Management Agreement, (ii) substituting one Restricted
Subsidiary in place of another Restricted Subsidiary under a Organizational
Contract, (iii) amendments, modifications or alterations required by applicable
law, (iv) amendments, modifications or alterations made to increase the
Company's control over, or interest in, any Management Company or (v)
amendments, modifications or alterations that are approved by a majority of the
Disinterested Directors of the Board of Directors of the Company as not
materially adverse to the Company.
SECTION 1014. LIMITATION ON LIENS.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien of any kind, except for Permitted Liens, on or with respect to any of
its property or assets, whether owned at the date of this Indenture or
thereafter acquired, or any income, profits or proceeds therefrom, or assign or
otherwise convey any right to receive income thereon, unless (x) in the case of
any Lien securing Subordinated Indebtedness, the Securities are secured by a
Lien on such
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property, assets or proceeds that is senior in priority to such Lien and (y) in
the case of any other Lien, the Securities are equally and ratably secured.
SECTION 1015. LIMITATION ON ISSUANCES OF GUARANTEES OF
INDEBTEDNESS BY SUBSIDIARIES.
(a) The Company will not permit any Restricted Subsidiary,
directly or indirectly, to guarantee, assume or in any other manner become
liable with respect to any Indebtedness of the Company unless such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture
providing for the guarantee of payment of the Securities by such Restricted
Subsidiary on a basis senior to any guarantee of Subordinated Indebtedness or at
least PARI PASSU with any guarantee of Pari Passu Indebtedness; PROVIDED that
this paragraph (a) shall not be applicable to (i) any guarantee of any
Restricted Subsidiary that existed at the time such Person became a Restricted
Subsidiary or (ii) any guarantee of any Restricted Subsidiary of Senior Bank
Indebtedness.
(b) Notwithstanding the foregoing, any guarantee of the
Securities created pursuant to the provisions described in the foregoing
paragraph (a) shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person who is not an Affiliate of the Company, of all of the Company's
Capital Stock in, or all or substantially all the assets of, such Restricted
Subsidiary (which sale, exchange or transfer is not prohibited by this
Indenture) (ii) the occurrence of any default or breach of any covenant or
agreement under any Indebtedness of the Company arising as a result of the
creation of such guarantee or (iii) the release by the holders of the
Indebtedness of the Company described in the preceding paragraph of their
guarantee by such Restricted Subsidiary (including any deemed release upon
payment in full of all obligations under such Indebtedness, except by or as a
result of payment under such guarantee), at a time when (A) no other
Indebtedness of the Company has been guaranteed by such Restricted Subsidiary or
(B) the holders of all such other Indebtedness which is guaranteed by such
Restricted Subsidiary also release their guarantee by such Restricted Subsidiary
(including any deemed release upon payment in full of all obligations under such
Indebtedness). In the event that clause (ii) of this paragraph (b) shall apply
immediately after the creation of such guarantee under paragraph (a) above, then
such guarantee need not be created.
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SECTION 1016. PURCHASE OF SECURITIES UPON A CHANGE OF
CONTROL.
If a Change of Control shall occur at any time, then each
holder of Securities shall have the right to require that the Company purchase
such holder's Securities, in whole or in part in integral multiples of $1,000
principal amount at maturity, at a purchase price (the "Change of Control
Purchase Price") in cash in an amount equal to 101% of the Accreted Value of the
Securities plus accrued and unpaid interest, if any, to the date of purchase
(the "Change of Control Purchase Date"), pursuant to the offer described below
(the "Change of Control Offer") and the other procedures set forth in this
Indenture.
Within 30 days following any Change of Control, the Company
shall notify the Trustee thereof and give written notice of such Change of
Control to each holder of Securities by first-class mail, postage prepaid, at
the address of such holder appearing in the Security Register, stating, among
other things, (a) the purchase price and the purchase date, which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed, or such later date as is necessary to comply with requirements
under the Exchange Act; (b) that any Security not tendered will continue to
accrue interest or accrete original issue discount, as applicable; (c) that,
unless the Company defaults in the payment of the purchase price, any Securities
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date; and (d) certain other
procedures that a holder of Securities must follow to accept a Change of Control
Offer or to withdraw such acceptance.
The Company will comply with the applicable tender offer
rules, including Rule l4e-l under the Exchange Act, and any other applicable
securities laws and regulations in connection with a Change of Control Offer.
The Company will not enter into any agreement that would
prohibit the Company from making a Change of Control Offer to purchase the
Securities or, if such Change of Control Offer is made, to pay for the
Securities tendered for purchase.
SECTION 1017. LIMITATION ON SALE OF ASSETS.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, engage in any Asset Sale unless (i) the
consideration received by the Company or such Restricted Subsidiary for such
Asset Sale is not less than the Fair Market Value of the shares or assets sold
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive and evidenced by a Board Resolution) and (ii) the
consideration received by the Company or the relevant Restricted Subsidiary in
respect of
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such Asset Sale consists of at least 75% cash or Cash Equivalents.
Notwithstanding the preceding sentence, the Company and its Restricted
Subsidiaries may consummate an Asset Sale without complying with clause (ii) of
the immediately preceding sentence if at least 75% of the consideration for such
Asset Sale consists of any combination of cash, Cash Equivalents and those items
described in clause (b)(ii) or (b)(iii) below.
(b) If the Company or any Restricted Subsidiary engages in an
Asset Sale, the Company may use the Net Cash Proceeds thereof, within 12 months
after the later of such Asset Sale or the receipt of such Net Cash Proceeds, (i)
to permanently repay or prepay any then outstanding Senior Bank Indebtedness of
the Company or a Restricted Subsidiary, any then outstanding Indebtedness of a
Restricted Subsidiary or any other then outstanding unsubordinated Indebtedness
of the Company, (ii) to invest in any one or more businesses (including, without
limitation, in the Capital Stock of any Person that becomes a Restricted
Subsidiary as a result of such investment or that is received in connection with
a Permitted Investment made under clause (g), (h) or (i) of the definition
thereof), make capital expenditures (including lease payments for one or more
capital assets) or invest in other tangible assets of the Company or any
Restricted Subsidiary, in each case, engaged, used or useful in the
Cable/Telecommunications Business, the DTH Business or the
Entertainment/Programming Business of the Company and its Restricted
Subsidiaries (or enter into a legally binding agreement to do so within six
months of the date on which such agreement is executed) or (iii) to invest in
properties or assets that replace the properties and assets that are the subject
to such Asset Sale (or enter into a legally binding agreement to do so within
six months of the date on which such agreement is executed). If any such legally
binding agreement to invest such Net Cash Proceeds is terminated, then the
Company may, within 90 days of such termination or within 12 months of such
Asset Sale, whichever is later, apply or invest such Net Cash Proceeds as
provided in clause (ii) or (iii) (without regard to the parenthetical contained
in clauses (ii) or (iii)) above. The amount of such Net Cash Proceeds not so
used as set forth above in this paragraph (b) constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $15
million the Company shall, within 30 business days, make an offer to purchase
(an "Excess Proceeds Offer") from all holders of Securities, on a PRO RATA basis
(together with and including any Series C Notes that may be outstanding pursuant
to the Series C Indenture), in accordance with the procedures set forth below,
the maximum Accreted Value of Securities that may be purchased with the Excess
Proceeds less the amount of Excess Proceeds, if any, required to be applied
under the PCI Indenture for the repurchase of PCI Notes and applied under the
Old Indenture and the Series C Indenture for the repurchase of the Old Notes and
Series C Notes, respectively. The offer price shall be payable in cash in an
amount equal to 100% of the Accreted Value of the Securities plus accrued and
unpaid interest, if any (the "Offered
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Price"), to the date such Excess Proceeds Offer is consummated (the "Offer
Date"). To the extent that the aggregate Accreted Value of Securities tendered
pursuant to an Excess Proceeds Offer is less than the Excess Proceeds relating
thereto, the Company may use such additional Excess Proceeds for general
corporate purposes. If the Accreted Value of Securities validly tendered and not
withdrawn by holders thereof exceeds the Excess Proceeds, Securities to be
purchased will be selected on a PRO RATA basis (together with and including the
Series C Notes that may be outstanding pursuant to the Series C Indenture). Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset to zero.
(d) If the Company becomes obligated to make an Offer pursuant
to clause (c) above, the Securities shall be purchased by the Company, at the
option of the holder thereof, in whole or in part in integral multiples of
$1,000 on a date that is not earlier than 30 days and not later than 60 days
from the date the notice is given to holders, or such later date as may be
necessary for the Company to comply with the requirements under the Exchange
Act, subject to proration in the event the amount of Excess Proceeds is less
than the aggregate Offered Price of all Securities tendered.
(e) The Company will comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, in connection with an Excess
Proceeds Offer.
SECTION 1018. LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise,
or make any other distributions to the Company or any Restricted Subsidiary on
or in respect of its Capital Stock, (b) pay any Indebtedness owed to the Company
or any other Restricted Subsidiary, (c) make loans or advances to the Company or
any other Restricted Subsidiary, or (d) transfer any of its properties or assets
to the Company or any other Restricted Subsidiary, except in all such cases for
such encumbrances or restrictions existing under or by reason of (i) any
agreement or instrument in effect on the Issue Date and listed on Schedule D
attached to this Indenture, (ii) applicable law or regulation (including
corporate governance provisions required by applicable law and regulations of
the National Bank of Poland), (iii) customary non-assignment provisions of any
lease governing a leasehold interest of the Company or any Restricted
Subsidiary, (iv) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation
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thereof), which encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, (v) any mortgage or other Lien on real
property acquired or improved by the Company or any Restricted Subsidiary after
the Issue Date that prohibits transfers of the type described in (d) above with
respect to such real property, (vi) with respect to a Restricted Subsidiary, an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Company's Capital Stock in, or substantially all the
assets of, such Restricted Subsidiary, (vii) the refinancing of Indebtedness
incurred under the agreements listed on Schedule B attached to this Indenture or
described in clause (v) above, so long as such encumbrances or restrictions are
no less favorable in any material respect to the Company or any Restricted
Subsidiary than those contained in the respective agreement as in effect on the
date of this Indenture, (viii) any such customary encumbrance or restriction
contained in a security document creating a Lien permitted under this Indenture
to the extent relating to the property or asset subject to such Lien, (ix) any
agreement or instrument governing or relating to Senior Bank Indebtedness (an
"Indebtedness Instrument") if such encumbrance or restriction applies only (X)
to amounts which at any point in time (other than during such periods as are
described in the following clause (Y)) (1) exceed amounts due and payable (or
which are to become due and payable within 30 days) in respect of the Securities
or this Indenture for interest, premium and principal (after giving effect to
any realization by the Company under any applicable Currency Agreement), or (2)
if paid, would result in an event described in the following clause (Y) of this
sentence, or (Y) during the pendency of any event that causes, permits or, after
notice or lapse of time, would cause or permit the holder(s) of the Senior Bank
Indebtedness governed by the Indebtedness Instrument to declare any such
Indebtedness to be immediately due and payable or require cash collateralization
or cash cover for such Indebtedness for so long as such cash collateralization
or cash cover has not been provided, or (Z) arising or agreed to in the ordinary
course of business, not relating to any Indebtedness and that do not
individually, or together with all such encumbrances or restrictions, detract
from the value of property or assets of the Company or any Restricted Subsidiary
in any manner material to the Company or any Restricted Subsidiary and (x) with
respect to clause (d) above, any license agreement entered in the ordinary
course of business whereby the Company or any other Restricted Subsidiary grants
a license of programming or other intellectual property to any other Person and
such license agreement prohibits or encumbers the transfer of the licensed
property.
SECTION 1019. LIMITATION ON INVESTMENTS IN UNRESTRICTED
SUBSIDIARIES.
The Company will not make, and will not permit any of its
Restricted Subsidiaries to make, any Investments in Unrestricted Subsidiaries
(other than Permitted Investments) if, at the time thereof, the amount of such
Investment would exceed the amount
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of Restricted Payments then permitted to be made pursuant to Section 1011. Any
Investments in Unrestricted Subsidiaries permitted to be made pursuant to this
covenant (a) will be treated as the making of a Restricted Payment in
calculating the amount of Restricted Payments made by the Company or a
Restricted Subsidiary (without duplication under the provisions of clause (a) of
paragraph (iv) of Section 1011 and (b) may be made in cash or property (if made
in property, the Fair Market Value thereof as determined by the Board of
Directors of the Company (whose determination shall be conclusive and evidenced
by a Board Resolution) shall be deemed to be the amount of such Investment for
the purpose of clause (a)).
SECTION 1020. LIMITATION ON LINES OF BUSINESS.
The Company will not, and will not permit any Restricted
Subsidiary of the Company to, engage in any business other than the
Cable/Telecommunications Business, the Entertainment/Programming Business or the
DTH Business or any business or activity reasonably related thereto, including
the operation of a subscriber management or service business.
SECTION 1021. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Sections 1007 through 1020,
inclusive, if before or after the time for such compliance the Holders of at
least a majority in principal amount of the Outstanding Securities, by Act of
such Holders, waive such compliance in such instance with such term, provision
or condition, but no such waiver shall extend to or affect such term, provision
or condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such term, provision or condition shall remain in full
force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. RIGHT OF REDEMPTION.
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(a) The Securities will be redeemable at the option of the
Company, in whole or in part, at any time on or after February 1, 2004 on not
less than 30 or more than 60 days' prior notice at the redemption prices
(expressed as percentages of principal amount at maturity) set forth below,
together with accrued interest, if any, to the redemption date, if redeemed
during the twelve-month period beginning on February 1 of the years indicated
below (subject to the right of holders of record on relevant record dates to
receive interest due on a relevant interest payment date):
<TABLE>
<CAPTION>
YEAR REDEMPTION
PRICE
<S> <C>
2004..................................... 108.750%
2005..................................... 105.833
2006..................................... 102.917
2007 AND THEREAFTER...................... 100.000
</TABLE>
(b) At any time or from time to time prior to February 1, 2002
the Company may redeem up to a maximum of 35% of the initially outstanding
aggregate principal amount at maturity of the Securities with some or all of the
net cash proceeds of one or more Public Equity Offerings at a redemption price
equal to 117.5% of the Accreted Value thereof on the redemption date, plus
accrued and unpaid interest, if any, to the date of redemption (subject to the
right of holders of record on relevant record dates to receive interest due on
relevant interest payment dates); PROVIDED that immediately after giving effect
to such redemption, at least 65% of the originally issued aggregate principal
amount at maturity of the Securities remains outstanding. Any such redemption
shall be effected upon not less than 30 nor more than 60 days' notice given
within 30 days after the consummation of a Public Equity Offering.
SECTION 1102. APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
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SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities pursuant
to Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee in writing of such
Redemption Date and of the principal amount of Securities to be redeemed and
shall deliver to the Trustee such documentation and records as shall enable the
Trustee to select the Securities to be redeemed pursuant to Section 1104.
SECTION 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE
REDEEMED.
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee by such method as the Trustee shall
deem fair and appropriate; PROVIDED, HOWEVER, that no partial redemption shall
reduce the portion of the principal amount of a Security not redeemed to less
than $1,000.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in part, to
the portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner provided for
in Section 106 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed at its registered address.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to
the Redemption Date payable as provided in Section 1107, if any,
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(3) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the
notice which relates to such Security shall state that on and after the
Redemption Date, upon surrender of such Security, the holder will
receive, without charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and
accrued interest, if any, to the Redemption Date payable as provided in
Section 1107) will become due and payable upon each such Security, or
the portion thereof, to be redeemed, and that interest thereon will
cease to accrue on and after said date, and
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued interest,
if any.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an amount
of money sufficient to pay the Redemption Price of, and accrued interest on, all
the Securities which are to be redeemed on that date.
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified (together with accrued
interest, if any, to the Redemption Date), and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest,
if any, to the Redemption
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Date; PROVIDED, HOWEVER, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 309.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Securities.
SECTION 1108. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holders
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
[RESERVED]
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR
COVENANT DEFEASANCE.
The Company may, at its option and at any time, with respect
to the Securities, elect to have either Section 1302 or Section 1303 be applied
to all Outstanding Securities upon compliance with the conditions set forth
below in this Article Thirteen.
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SECTION 1302. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1302, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Securities on
the date the conditions set forth in Section 1304 are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company 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 1305 and the other Sections of this Indenture
referred to in (A) and (B) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Securities to receive, solely from the trust fund
described in Section 1304 and as more fully set forth in such Section, payments
in respect of the principal of (and premium, if any, on) and interest on such
Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 304, 305, 308, 1002 and 1003, (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (D)
this Article Thirteen. Subject to compliance with this Article Thirteen, the
Company may exercise its option under this Section 1302 notwithstanding the
prior exercise of its option under Section 1303 with respect to the Securities.
SECTION 1303. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company shall be released from its
obligations under any covenant contained in Section 801 (3) and in Sections 1007
through 1020 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 to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Outstanding Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 501(4), but, except as
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<PAGE>
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT
DEFEASANCE.
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the Outstanding Securities:
(1) The Company shall irrevocably deposit or cause to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Thirteen 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, (A) money in United States Dollars, (B)
U.S. Government Obligations, or (C) a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, or a nationally
recognized investment banking firm, to pay and discharge (i) the
principal of, premium, if any, and interest on the relevant Outstanding
Securities on the Stated Maturity (or upon redemption, if applicable)
of such principal, premium, if any, or installment of interest and (ii)
any mandatory redemption or analogous payments applicable to the
Outstanding Securities on the day on which such payments are due and
payable in accordance with the terms of this Indenture and of such
Securities; PROVIDED that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities. For this
purpose, "U.S. Government Obligations" means securities that are (x)
direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act), as custodian
with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of such
depository receipt, PROVIDED that (except as required by law) such
custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation
or the specific
96
<PAGE>
payment of principal of or interest on the U.S. Government Obligation
evidenced by such depository receipt.
(2) 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 paragraphs (8) and (9) of Section 501 hereof are
concerned, at any time during 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).
(3) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the
Company is a party or by which it is bound.
(4) In the case of an election under Section 1302, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States stating that (x) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling, or (y) since
the effective date of the Registration Statement there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion 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 defeasance
and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
defeasance had not occurred.
(5) In the case of an election under Section 1303, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States 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 amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred.
(6) The Company shall have delivered to the Trustee an Opinion
of Counsel in the United States to the effect that after the 91st day
following the deposit or after the date such opinion is delivered, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(7) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of
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<PAGE>
preferring the Holders of the Securities over the other creditors of
the Company with the intent of hindering, delaying or defrauding
creditors of the Company.
(8) The Company shall have delivered to the Trustee an
Officers Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 1302 or the covenant defeasance under Section 1303 (as
the case may be) have been complied with.
SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS
TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1305, the "Trustee") pursuant to Section 1304 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 acting as its own 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 (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1304 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 s.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it as
provided in Section 1304 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
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<PAGE>
SECTION 1306. REINSTATEMENT.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1305 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1302 or 1303, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1305; PROVIDED, HOWEVER, that if the Company makes any payment of
principal of (or premium, if any) or interest on any following the reinstatement
of its obligations, the Company shall be subrogated to the rights of the Holders
to receive such payment from the money held by the Trustee or Paying Agent.
99
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and, in the case of the Company, attested, all as of the day
and year first above written.
@ENTERTAINMENT, INC.
[SEAL] By
----------------------------
Title:
By
----------------------------
Title:
BANKERS TRUST COMPANY
[SEAL] By
----------------------------
Title:
100
<PAGE>
Note: In these Schedules to this Indenture, defined terms have the same meaning
as in the Offering Memorandum.
SCHEDULE A
EXISTING MANAGEMENT CONTRACTS,
OVERHEAD AGREEMENTS AND SERVICE AGREEMENTS
<TABLE>
<CAPTION>
DATE SERVICE AGREEMENTS
<S> <C>
04/01/96 Service Agreement among Poltelkab, WCCI and PCBV.
08/31/95 Service Agreement among ETV, PCBV and WCCI.
07/07/95 Service Agreement among PTK-Lublin, WCCI and PCBV.
07/01/95 Service Agreement among Elektrim TV Sp. Z o.o., WCCI and PCBV.
05/26/95 Service Agreement among PTK-Inzynier (predecessor to
PTK-Szczecin), WCCI and PCBV.
01/01/94 Service Agreement among PTK, S.A., WCCI and PCBV.
01/01/94 Service Agreement among PTK-Katowice, WCCI and PCBV.
01/01/94 Service Agreement among PTK-Krakow, WCCI and PCBV.
01/01/94 Service Agreement among PTK-Warsaw, WCCI and PCBV.
01/11/95 Service Agreement among Telkat, WCCI and PCBV.
11/01/95 Service Agreement among WCCI and PCBV.
DATE MANAGEMENT AGREEMENTS
04/01/96 Management Agreement between WCCI and Poltelkab.
10/01/95 Management Agreement between WCCI and PTK-Inzynier
07/07/95 Management Agreement between WCCI and PTK-Lublin.
07/01/95 Management Agreement between WCCI and Elektrim TV Sp. Z o.o.
01/11/95 Management Agreement between WCCI and Telkat.
</TABLE>
101
<PAGE>
<TABLE>
<S> <C>
01/01/95 Management Agreement between WCCI and PTK-Warsaw.
01/01/95 Management Agreement between WCCI and PTK, S.A.
01/01/95 Management Agreement between WCCI and PTK-Krakow.
01/01/94 Management Agreement between WCCI and PTK-Katowice.
DATE CORPORATE OVERHEAD ALLOCATION AGREEMENTS
As of
01/01/96 Corporate Overhead Allocation Agreement dated as of January 1,
1996, among PTK, S.A., PTK-Warsaw, PTK-Ryntronik, PTK-Krakow,
PTK-Inzynier, PTK-Lublin, ETV, Telkat, WCCI and PCBV.
As of
04/01/96 Letter Agreement Between WCCI, PCBV and Poltelkab adding
Poltelkab as a party to the Corporate Overhead Allocation
Agreement.
</TABLE>
102
<PAGE>
SCHEDULE B
INDEBTEDNESS OUTSTANDING ON THE ISSUE DATE
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING
EXCLUSIVE OF
BORROWER LENDER ACCRUED INTEREST AMOUNT OF LOAN
<S> <C> <C> <C>
Poland Communications, AmerBank-Bank $6,500,000.00 $6,500,000.00
Inc. Amerykanski w
Polsce S.A.
Szczecinska Telewizja Bank Rozwoju DM 3,204,900.00 DM 3,948,615.17
Kablowa Sp. Z o.o. Eksportu S.A.
Telewizja Kablowa Polski Bank $333,334.00 $500,000.00
Gosat Sp. Z o.o. Eksportu S.A.
</TABLE>
The Indenture dated as of July 14, 1998 between Bankers Trust Company,
as Trustee, and @Entertainment, Inc., the Indenture dated as of October 31, 1996
between State Street Bank and Trust Company, as Trustee, and Poland
Communications, Inc. The Indenture dated as of January 20, 1999 between Bankers
Trust Company, as Trustee, and @ Entertainment, Inc. The Indenture dated as of
January 27, 1999 between Bankers Trust Company, as Trustee, and @Entertainment,
Inc.
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<PAGE>
SCHEDULE C
LIENS EXISTING ON THE ISSUE DATE
PLEDGES OF CAPITAL STOCK
1. 2,514,291 shares of PTK-Krakow capital stock owned by PCBV, subject to
a Lien existing on this date, are pledged in favor of AmerBank.
2. 2,400 shares of PTK-Lublin capital stock owned by Poltelkab have been
pledged to Amerbank.
3. 3,583,457 shares of PTK-Warsaw S.A. owned by PCBV subject to a Lien
existing on this date, are pledged in favor of Amerbank.
4. Pledge of 1,818 shares of Szczecinska Telewizja Kablowa Sp. Z o.o. for
the security of certain obligations undertaken by PTK Szczecin Sp. Z
o.o.
5. Lien on certain cable television fixed assets of Telewizja Kablowa
Gosat Sp. Z o.o. and pledge on insurance policies for such assets in
favor of Polski Bank Rozwoju S.A.
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<PAGE>
SCHEDULE D
AGREEMENTS NOT RESTRICTED UNDER SECTION 1018
A) LIMITATIONS ON ABILITY TO PAY DIVIDENDS OR MAKE DISTRIBUTIONS ON
CAPITAL STOCK.
The Indenture dated as of July 14, 1998 between Bankers Trust Company,
as Trustee, and @Entertainment, Inc. and the Indenture dated as of
October 31, 1996 between State Street Bank and Trust Company, as
Trustee, and Poland Communications, Inc.
The Indenture dated as of January 20, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
The Indenture dated as of January 27, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
PCI's ability to pay dividends or make distributions on its capital
stock is limited by its Restated Certificate of Incorporation.
PTK-Operator's ability to pay dividends or make distributions on its
capital stock is limited by the convertible debt of PTK-Operator.
The Statutes, Notarial Deeds or Articles of Association of each of the
Polish Subsidiaries require shareholder vote to pay dividends or make
distribution on capital stock.
B) LIMITATIONS ON THE PAYMENT OF INDEBTEDNESS OWED TO THE COMPANY OR ANY
SUBSIDIARY.
The Indenture dates as of July 14, 1998 between Bankers Trust Company,
as Trustee, and @Entertainment, Inc. and the Indenture dated as of
October 31, 1996 between State Street Bank and Trust Company, as
Trustee, and Poland Communications, Inc.
The Indenture dated as of January 20, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
The Indenture dated as of January 27, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
The statutes of PTK-Operator limit the payment on indebtedness owed to
the Company or any Subsidiary.
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<PAGE>
PCI's ability to make payments on indebtedness is limited by its
Restated Certificate of Incorporation.
PCBV and PCI have subordinated their right to receive payments on their
loans to PTK Warsaw, PTK-Krakow, and PTK-Lublin in favor of AmerBank.
C) LIMITATIONS ON THE ABILITY OF A COMPANY TO MAKE INVESTMENTS IN THE
COMPANY OR ANY SUBSIDIARY.
The Indenture dated as of July 14, 1998 between Bankers Trust Company,
as Trustee, and @Entertainment, Inc. and the Indenture dated as of
October 31, 1996 between State Street Bank and Trust Company, as
Trustee, and Poland Communications, Inc.
The Indenture dated as of January 20, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
The Indenture dated as of January 27, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
PCI's ability to make investments in any Subsidiary is limited by its
Restated Certificate of Incorporation.
The Statutes, Notarial Deeds or articles of association of each of the
Polish Subsidiaries require shareholder vote to make certain
investments in the Company or any Subsidiary.
The PCBV Shareholders agreement limits the ability to make investments
in the Company or any Subsidiary.
d) LIMITATIONS ON TRANSFERRING PROPERTY OR ANY ASSETS TO THE COMPANY OR
ANY SUBSIDIARY.
The Indenture dated as of July 14, 1998 between Bankers Trust Company,
as Trustee, and @Entertainment, Inc. and the Indenture dated as of
October 31, 1996 between State Street Bank and Trust Company, as
Trustee, and Poland Communications, Inc.
The Indenture dated as of January 20, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
106
<PAGE>
The Indenture dated as of January 27, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
PCI's ability to transfer property or assets to any Subsidiaries is
limited by the Company's Restated Certificate of Incorporation.
Certain Polish statutes restrict the transfer of property or any assets
to the Company or any Subsidiary or the conversion of convertible debt.
The PCBV shareholders agreement limits the ability to transfer property
or any assets to the Company or any Subsidiary.
2,514,291 shares of PTK-Krakow capital stock owned by PCBV, subject to
a Lien existing on this date, are pledged in favor of AmerBank.
2,400 shares of PTK-Lublin capital stock owned by Poltelkab have been
pledged to AmerBank.
3,583,457 shares of PTK-Warsaw S.A. owned by PCBV subject to a Lien
existing on this date, are pledged in favor of AmerBank.
Pledge of 1,818 shares of Szczecinska Telewizja Kablowa Sp. z o.o. for
the security of certain obligations undertaken by PTK Szczecin
Sp.z o.o.
Lien on certain cable television fixed assets of Telewizja Kablowa
Gosat Sp. z o.o. and assignment of insurance policies for such assets
in favor of Polski Bank Rozwoju S.A.
107
<PAGE>
@ENTERTAINMENT, INC.
14 1/2% Senior Discount Note due 2009
CUSIP No. 045920 AE 5
No.1 $200,000,000
@ENTERTAINMENT, INC., a Delaware corporation (the "Company",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to CEDE & CO., or its registered assigns,
the principal sum of TWO HUNDRED MILLION DOLLARS ($200,000,000), on February 1,
2009.
The following information is supplied for purposes of Sections
1273 and 1275 of the Internal Revenue Code:
<TABLE>
<CAPTION>
Issue Date: January 27, 1999
<S> <C>
Issue Price of Note: $389.43
Original issue discount under
Section 1273 of the Internal
Revenue Code (for each $1,000
principal amount): $1,357.77
Yield to Maturity: 17 1/2%
Initial Interest Rate: 14 1/2% per annum
Interest Payment Dates: February 1 and August 1 of each year,
commencing August 1, 2004
Regular Record Dates: January 15 and July 15 of each year
</TABLE>
A-1
<PAGE>
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Date: @ENTERTAINMENT, INC.
By:
-------------------------
Title:
By:
-------------------------
Title:
A-3
<PAGE>
(Form of Trustee's Certificate of Authentication)
This is one of the 14 1/2% Senior Discount Notes due 2009 described in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
as Trustee
By:
---------------------
Authorized Signatory
A-4
<PAGE>
@ENTERTAINMENT, INC.
14 1/2% Senior Discount Note due 2009
1. PRINCIPAL AND INTEREST; SUBORDINATION.
The Company will pay the principal of this Note on
February 1, 2009.
Original issue discount will accrete from the Issue Date
(January 27, 1999) up to February 1, 2004. Thereafter the Company promises to
pay cash interest on the principal amount of this Note on each Interest Payment
Date, as set forth below, at the rate of 14 1/2% per annum (subject to
adjustment as provided below).
Cash Interest will be payable semiannually (to the holders of
record of the Notes (or any predecessor Notes) at the close of business on the
January 15 and July 15 immediately preceding the Interest Payment Date) on each
Interest Payment Date, commencing August 1, 2004. Except in the case of a
Registration Default (as defined herein), the principal of this Note shall not
accrue cash interest until February 1, 2004, except in the case of a default in
payment of the amount due at Maturity, in which case the amount due on this Note
shall bear cash interest at a rate of 17 1/2% per annum (to the extent that the
payment of such interest shall be legally enforceable), which shall accrue from
the date of such default to the date the payment of such amount has been made or
duly provided for. Interest on any overdue principal amount shall be payable on
demand.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated as of January 27, 1999, between the
Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank
Securities Inc. (the "Registration Rights Agreement"). In the event that (i) the
Exchange Offer Registration Statement (as defined in the Registration Rights
Agreement) is not filed with the Securities and Exchange Commission on or prior
to the 70th calendar day following the date of original issuance of the Notes,
(ii) the Exchange Offer Registration Statement is not declared effective on or
prior to the 130th calendar day after the date of original issuance of the
Notes, (iii) the Exchange Offer (as such term is defined in the Registration
Rights Agreement) is not consummated on or prior to the 160th calendar day after
the date of original issuance of the Notes or, as the case may be, a Shelf
Registration Statement (as such term is defined in the Registration Rights
Agreement) with respect to the Notes is not declared effective on or prior to
the 160th day after the date of original issuance of the Notes or (iv) the
Exchange Offer Registration Statement or the Shelf
A-5
<PAGE>
Registration Statement is declared effective but thereafter ceases to be
effective or usable within the applicable period as provided in the Registration
Rights Agreement except pursuant to Section 2(d)(ii) of the Registration Rights
Agreement (each such event referred to in clauses (i) through (iv) above, a
"Registration Default"), then the Company will be required to pay additional
interest in cash on each Interest Payment Date in an amount equal to one-half of
one percent (0.5%) per annum of the applicable Accreted Value, with respect to
the first 90- day period following such Registration Default. The amount of such
additional interest will increase by an additional one-half of one percent
(0.5%) per annum for each subsequent 90- day period until such Registration
Default has been cured, up to a maximum of one and one-half percent (1.5%) per
annum. Such additional interest shall cease to accrue when such Registration
Default has been cured. Upon (x) the filing of the Exchange Offer Registration
Statement after the 70-day period described in clause (i) above, (y) the
effectiveness of the Exchange Offer Registration Statement after the 130-day
period described in clause (ii) above or the period during which it ceases to be
effective or usable as described in clause (iv) above or (z) the consummation of
the Exchange Offer after the 160-day period or the effectiveness of a Shelf
Registration Statement after the 160-day period, as the case may be, described
in clause (iii) above or after the period during which such Shelf Registration
Statement ceases to be effective or usable as described in clause (iv) above,
and provided that none of the conditions set forth in clauses (i), (ii), (iii)
and (iv) above continues to exist, a Registration Default will be deemed to be
cured.
Cash interest on this Note will accrue from the most recent
date to which cash interest has been paid on this Note or the Note surrendered
in exchange herefor or, if no cash interest has been paid, from February 1,
2004; PROVIDED that, if there is no existing default in the payment of cash
interest and if this Note is authenticated between a Regular Record Date
referred to on the face hereof and the next succeeding Interest Payment Date,
cash interest shall accrue from such Interest Payment Date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the extent
lawful, at a rate per annum equal to the rate of interest applicable to the
Notes.
A-6
<PAGE>
2. METHOD OF PAYMENT
The Company will pay cash interest (except defaulted interest)
on the principal amount of the Notes on each February 1 and August 1, commencing
August 1, 2004 to the persons who are Holders (as reflected in the Note Register
at the close of business on the January 15 and July 15 immediately preceding the
Interest Payment Date), in each case, even if the Note is canceled on
registration of transfer or registration of exchange after such record date;
PROVIDED that, with respect to the payment of principal, the Company will make
payment to the Holder that surrenders this Note to any Paying Agent on or after
February 1, 2009.
The Company will pay principal, premium, if any, and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal,
premium, if any, and interest by its check payable in such money. The Company
may mail an interest check to a Holder's registered address (as reflected in the
Note Register). If a payment date is a date other than a Business Day at a place
of payment, payment may be made at that place on the next succeeding day that is
a Business Day and no interest shall accrue for the intervening period.
3. PAYING AGENT AND NOTE REGISTRAR.
Initially, the Trustee will act as Paying Agent and Note
Registrar. The Company may change any Paying Agent or Note Registrar upon
written notice thereto. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Note Registrar or co-registrar.
4. INDENTURE; LIMITATIONS.
The Company issued the Notes under an Indenture dated as of
January 27, 1999 (the "Indenture"), between the Company and Bankers Trust
Company, as trustee (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
A-7
<PAGE>
The Notes are senior unsecured obligations of the Company
ranking pari passu in right of payment with all other existing and future
unsubordinated obligations of the Company and senior in right of payment to any
existing and future obligations of the Company expressly subordinated in right
of payment to the Notes. The Indenture limits the aggregate principal amount at
maturity of the Notes to $256,800,000.
5. OPTIONAL REDEMPTION AND OPTIONAL REDEMPTION UPON A PUBLIC EQUITY
OFFERING.
The Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after February 1, 2004 on not less than 30
or more than 60 days' prior notice at the redemption prices (expressed as
percentages of principal amount at maturity) set forth below, together with
accrued interest, if any, to the redemption date, if redeemed during the
twelve-month period beginning on February 1 of the years indicated below
(subject to the right of holders of record on relevant record dates to receive
interest due on a relevant interest payment date):
<TABLE>
<CAPTION>
YEAR REDEMPTION
PRICE
<S> <C>
2004.................................................. 108.750%
2005.................................................. 105.833
2006.................................................. 102.917
2007 AND THEREAFTER................................... 100.000
</TABLE>
At any time or from time to time prior to February 1, 2002 the
Company may redeem up to a maximum of 35% of the initially outstanding aggregate
principal amount at maturity of the Notes with some or all of the net cash
proceeds of one or more Public Equity Offerings at a redemption price equal to
117.5% of the Accreted Value thereof on the redemption date, plus accrued and
unpaid interest, if any, to the date of redemption (subject to the right of
holders of record on relevant record dates to receive interest due on relevant
interest payment dates); PROVIDED that immediately after giving effect to such
redemption, at least 65% of the originally issued aggregate principal amount at
maturity of the Notes remains outstanding. Any such redemption shall be effected
upon not less than 30 nor more than 60 days' notice given within 30 days after
the consummation of a Public Equity Offering.
A-8
<PAGE>
Notice of a redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder to be redeemed at
such Holder's last address as it appears in the Note Register. Notes in original
denominations larger than $1,000 principal amount at maturity may be redeemed in
part in integral multiples of $1,000 principal amount at maturity. On and after
the Redemption Date, interest will cease to accrue on Notes or portions of Notes
called for redemption, unless the Company defaults in the payment of the
Redemption Price.
6. REPURCHASE UPON A CHANGE IN CONTROL AND ASSET SALES.
(a) Upon the occurrence of a Change of Control, each holder of
Notes shall have the right to require that the Company purchase such holder's
Notes, in whole or in part in integral multiples of $1,000 principal amount at
maturity, at a purchase price in cash of 101% of the Accreted Value thereof on
the redemption date, plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of holders of record on relevant record dates to
receive interest due on relevant interest payment dates), and (b) upon the
occurrence of an Asset Sale, the Company may be obligated to make an offer to
purchase all or a portion of the outstanding Notes with a portion of the Net
Cash Proceeds of such Asset Sale at a redemption price of 100% of the Accreted
Value thereof on the redemption date plus accrued and unpaid interest, if any,
to the date of purchase.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons, in
denominations of $1,000 principal amount at maturity and any integral multiple
thereof. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Note Registrar may require a Holder, among other things,
to furnish appropriate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture. The Note Registrar need
not register the transfer or exchange of any Notes selected for redemption
(except the unredeemed portion of any Note being redeemed in part). Also, it
need not register the transfer or exchange of any Notes for a period of 15 days
before a selection of Notes to be redeemed is made.
A-9
<PAGE>
8. PERSONS DEEMED OWNERS.
A Holder may be treated as the owner of a Note for all
purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount at maturity of the Notes then
outstanding, and any existing default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount at maturity of the Notes then outstanding. Without notice to or the
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity or inconsistency and
make any change that does not materially adversely affect the rights of any
Holder.
12. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) issuances and sales of Subsidiary stock; (iv)
transactions with Affiliates; (v) Liens; (vi) guarantees of Indebtedness by
Subsidiaries; (vii) purchase of Notes upon a Change of Control, (viii) Asset
Sales and disposition of the proceeds thereof; (ix) dividends and other payment
restrictions affecting Subsidiaries; (x) investments in Unrestricted
Subsidiaries; (xi) merger and certain transfers of assets; and (xii) lines of
business. At the end of each quarter and fiscal year, the Company must report to
the Trustee on compliance with such limitations.
A-10
<PAGE>
13. SUCCESSOR PERSONS.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. REMEDIES FOR EVENTS OF DEFAULT.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of not less than 25% in principal
amount at maturity of the Notes then outstanding, by written notice to the
Company (and to the Trustee, if such notice is given by the Holders) may declare
all the Notes to be immediately due and payable and upon any such declaration
all such amounts payable in respect of the Notes shall become immediately due
and payable. If a bankruptcy or insolvency default with respect to the Company
or any of its Significant Subsidiaries occurs and is continuing, the Notes and
all such amounts payable in respect of the Notes shall automatically become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder of Notes. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of at least a majority in principal amount of the
Notes then outstanding may direct the Trustee in its exercise of any trust or
power.
15. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Company
and its Affiliates as if it were not the Trustee.
16. AUTHENTICATION.
This Note shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Note.
A-11
<PAGE>
17. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder 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) and U/G/M/A (= Uniform Gifts to Minors
Act).
18. DEFEASANCE.
The Indenture contains provisions for defeasance, at any time,
of the Indebtedness represented by this Note or the covenants governing the
Indebtedness represented by this Note, upon compliance by the Company with
certain conditions set forth in the Indenture.
A-12
<PAGE>
@ENTERTAINMENT, INC.
14 1/2% Senior Discount Note due 2009
CUSIP No. 045920 AE 5
No.2 $56,800,000
@ENTERTAINMENT, INC., a Delaware corporation (the "Company",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to CEDE & CO., or its registered assigns,
the principal sum of FIFTY SIX MILLION AND EIGHT HUNDRED MILLION DOLLARS
($56,800,000), on February 1, 2009.
The following information is supplied for purposes of Sections
1273 and 1275 of the Internal Revenue Code:
<TABLE>
<S> <C>
Issue Date: January 27, 1999
Issue Price of Note: $389.43
Original issue discount under
Section 1273 of the Internal
Revenue Code (for each $1,000
principal amount): $1,357.77
Yield to Maturity: 17 1/2%
Initial Interest Rate: 14 1/2% per annum
Interest Payment Dates: February 1 and August 1 of each year,
commencing August 1, 2004
Regular Record Dates: January 15 and July 15 of each year
</TABLE>
A-13
<PAGE>
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.]
A-14
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Date: @ENTERTAINMENT, INC.
By:
-----------------------
Title:
By:
----------------------
Title:
A-15
<PAGE>
(Form of Trustee's Certificate of Authentication)
This is one of the 14 1/2% Senior Discount Notes due 2009 described in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
as Trustee
By:
-------------------------
Authorized Signatory
A-16
<PAGE>
@ENTERTAINMENT, INC.
14 1/2% Senior Discount Note due 2009
1. PRINCIPAL AND INTEREST; SUBORDINATION.
The Company will pay the principal of this Note on February 1,
2009.
Original issue discount will accrete from the Issue Date
(January 27, 1999) up to February 1, 2004. Thereafter the Company promises to
pay cash interest on the principal amount of this Note on each Interest Payment
Date, as set forth below, at the rate of 14 1/2% per annum (subject to
adjustment as provided below).
Cash Interest will be payable semiannually (to the holders of
record of the Notes (or any predecessor Notes) at the close of business on the
January 15 and July 15 immediately preceding the Interest Payment Date) on each
Interest Payment Date, commencing August 1, 2004. Except in the case of a
Registration Default (as defined herein), the principal of this Note shall not
accrue cash interest until February 1, 2004, except in the case of a default in
payment of the amount due at Maturity, in which case the amount due on this Note
shall bear interest at a rate of 17 1/2% per annum (to the extent that the
payment of such interest shall be legally enforceable), which shall accrue from
the date of such default to the date the payment of such amount has been made or
duly provided for. Interest on any overdue principal amount shall be payable on
demand.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated as of January 27, 1999, between the
Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank
Securities Inc. (the "Registration Rights Agreement"). In the event that (i) the
Exchange Offer Registration Statement (as defined in the Registration Rights
Agreement) is not filed with the Securities and Exchange Commission on or prior
to the 70th calendar day following the date of original issuance of the Notes,
(ii) the Exchange Offer Registration Statement is not declared effective on or
prior to the 130th calendar day after the date of original issuance of the
Notes, (iii) the Exchange Offer (as such term is defined in the Registration
Rights Agreement) is not consummated on or prior to the 160th calendar day after
the date of original issuance of the Notes or, as the case may be, a Shelf
Registration Statement (as such term is defined in the Registration Rights
Agreement) with respect to the Notes is not declared effective on or prior to
the 160th day after the date of original issuance of the Notes or (iv) the
Exchange Offer Registration Statement or the Shelf
A-17
<PAGE>
Registration Statement is declared effective but thereafter ceases to be
effective or usable within the applicable period as provided in the Registration
Rights Agreement except pursuant to Section 2(d)(ii) of the Registration Rights
Agreement (each such event referred to in clauses (i) through (iv) above, a
"Registration Default"), then the Company will be required to pay additional
interest in cash on each Interest Payment Date in an amount equal to one-half of
one percent (0.5%) per annum of the applicable Accreted Value, with respect to
the first 90- day period following such Registration Default. The amount of such
additional interest will increase by an additional one-half of one percent
(0.5%) per annum for each subsequent 90- day period until such Registration
Default has been cured, up to a maximum of one and one-half percent (1.5%) per
annum. Such additional interest shall cease to accrue when such Registration
Default has been cured. Upon (x) the filing of the Exchange Offer Registration
Statement after the 70-day period described in clause (i) above, (y) the
effectiveness of the Exchange Offer Registration Statement after the 130-day
period described in clause (ii) above or the period during which it ceases to be
effective or usable as described in clause (iv) above or (z) the consummation of
the Exchange Offer after the 160-day period or the effectiveness of a Shelf
Registration Statement after the 160-day period, as the case may be, described
in clause (iii) above or after the period during which such Shelf Registration
Statement ceases to be effective or usable as described in clause (iv) above,
and provided that none of the conditions set forth in clauses (i), (ii), (iii)
and (iv) above continues to exist, a Registration Default will be deemed to be
cured.
Cash interest on this Note will accrue from the most recent
date to which cash interest has been paid on this Note or the Note surrendered
in exchange herefor or, if no cash interest has been paid, from February 1,
2004; PROVIDED that, if there is no existing default in the payment of cash
interest and if this Note is authenticated between a Regular Record Date
referred to on the face hereof and the next succeeding Interest Payment Date,
cash interest shall accrue from such Interest Payment Date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the extent
lawful, at a rate per annum equal to the rate of interest applicable to the
Notes.
A-18
<PAGE>
2. METHOD OF PAYMENT
The Company will pay interest (except defaulted interest) on
the principal amount of the Notes on each February 1 and August 1, commencing
August 1, 2004, to the persons who are Holders (as reflected in the Note
Register at the close of business on the January 15 and July 15 immediately
preceding the Interest Payment Date), in each case, even if the Note is canceled
on registration of transfer or registration of exchange after such record date;
PROVIDED that, with respect to the payment of principal, the Company will make
payment to the Holder that surrenders this Note to any Paying Agent on or after
February 1, 2009.
The Company will pay principal, premium, if any, and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal,
premium, if any, and interest by its check payable in such money. The Company
may mail an interest check to a Holder's registered address (as reflected in the
Note Register). If a payment date is a date other than a Business Day at a place
of payment, payment may be made at that place on the next succeeding day that is
a Business Day and no interest shall accrue for the intervening period.
3. PAYING AGENT AND NOTE REGISTRAR.
Initially, the Trustee will act as Paying Agent and Note
Registrar. The Company may change any Paying Agent or Note Registrar upon
written notice thereto. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Note Registrar or co-registrar.
4. INDENTURE; LIMITATIONS.
The Company issued the Notes under an Indenture dated as of
January 27, 1999 (the "Indenture"), between the Company and Bankers Trust
Company, as trustee (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
A-19
<PAGE>
The Notes are senior unsecured obligations of the Company
ranking pari passu in right of payment with all other existing and future
unsubordinated obligations of the Company and senior in right of payment to any
existing and future obligations of the Company expressly subordinated in right
of payment to the Notes. The Indenture limits the aggregate principal amount at
maturity of the Notes to $256,800,000.
5. OPTIONAL REDEMPTION AND OPTIONAL REDEMPTION UPON A PUBLIC EQUITY
OFFERING.
The Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after February 1, 2004 on not less than 30
or more than 60 days' prior notice at the redemption prices (expressed as
percentages of principal amount at maturity) set forth below, together with
accrued interest, if any, to the redemption date, if redeemed during the
twelve-month period beginning on February 1 of the years indicated below
(subject to the right of holders of record on relevant record dates to receive
interest due on a relevant interest payment date):
<TABLE>
<CAPTION>
YEAR REDEMPTION
PRICE
<S> <C>
2004............................................. 108.750%
2005............................................. 105.833
2006............................................. 102.917
2007 AND THEREAFTER.............................. 100.000
</TABLE>
At any time or from time to time prior to February 1, 2002 the
Company may redeem up to a maximum of 35% of the initially outstanding aggregate
principal amount at maturity of the Notes with some or all of the net cash
proceeds of one or more Public Equity Offerings at a redemption price equal to
117.5% of the Accreted Value thereof on the redemption date, plus accrued and
unpaid interest, if any, to the date of redemption (subject to the right of
holders of record on relevant record dates to receive interest due on relevant
interest payment dates); PROVIDED that immediately after giving effect to such
redemption, at least 65% of the originally issued aggregate principal amount at
maturity of the Notes remains outstanding. Any such redemption shall be effected
upon not less than 30 nor more than 60 days' notice given within 30 days after
the consummation of a Public Equity Offering.
A-20
<PAGE>
Notice of a redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder to be redeemed at
such Holder's last address as it appears in the Note Register. Notes in original
denominations larger than $1,000 principal amount at maturity may be redeemed in
part in integral multiples of $1,000 principal amount at maturity. On and after
the Redemption Date, interest will cease to accrue on Notes or portions of Notes
called for redemption, unless the Company defaults in the payment of the
Redemption Price.
6. REPURCHASE UPON A CHANGE IN CONTROL AND ASSET SALES.
(a) Upon the occurrence of a Change of Control, each holder of
Notes shall have the right to require that the Company purchase such holder's
Notes, in whole or in part in integral multiples of $1,000 principal amount at
maturity, at a purchase price in cash of 101% of the Accreted Value thereof on
the redemption date, plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of holders of record on relevant record dates to
receive interest due on relevant interest payment dates), and (b) upon the
occurrence of an Asset Sale, the Company may be obligated to make an offer to
purchase all or a portion of the outstanding Notes with a portion of the Net
Cash Proceeds of such Asset Sale at a redemption price of 100% of the Accreted
Value thereof on the redemption date plus accrued and unpaid interest, if any,
to the date of purchase.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons, in
denominations of $1,000 principal amount at maturity and any integral multiple
thereof. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Note Registrar may require a Holder, among other things,
to furnish appropriate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture. The Note Registrar need
not register the transfer or exchange of any Notes selected for redemption
(except the unredeemed portion of any Note being redeemed in part). Also, it
need not register the transfer or exchange of any Notes for a period of 15 days
before a selection of Notes to be redeemed is made.
A-21
<PAGE>
8. PERSONS DEEMED OWNERS.
A Holder may be treated as the owner of a Note for all
purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount at maturity of the Notes then
outstanding, and any existing default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount at maturity of the Notes then outstanding. Without notice to or the
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity or inconsistency and
make any change that does not materially adversely affect the rights of any
Holder.
12. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) issuances and sales of Subsidiary stock; (iv)
transactions with Affiliates; (v) Liens; (vi) guarantees of Indebtedness by
Subsidiaries; (vii) purchase of Notes upon a Change of Control, (viii) Asset
Sales and disposition of the proceeds thereof; (ix) dividends and other payment
restrictions affecting Subsidiaries; (x) investments in Unrestricted
Subsidiaries; (xi) merger and certain transfers of assets; and (xii) lines of
business. At the end of each quarter and fiscal year, the Company must report to
the Trustee on compliance with such limitations.
A-22
<PAGE>
13. SUCCESSOR PERSONS.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. REMEDIES FOR EVENTS OF DEFAULT.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of not less than 25% in principal
amount at maturity of the Notes then outstanding, by written notice to the
Company (and to the Trustee, if such notice is given by the Holders) may declare
all the Notes to be immediately due and payable and upon any such declaration
all such amounts payable in respect of the Notes shall become immediately due
and payable. If a bankruptcy or insolvency default with respect to the Company
or any of its Significant Subsidiaries occurs and is continuing, the Notes and
all such amounts payable in respect of the Notes shall automatically become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder of Notes. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of at least a majority in principal amount of the
Notes then outstanding may direct the Trustee in its exercise of any trust or
power.
15. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Company
and its Affiliates as if it were not the Trustee.
16. AUTHENTICATION.
This Note shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Note.
A-23
<PAGE>
17. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder 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) and U/G/M/A (= Uniform Gifts to Minors
Act).
18. DEFEASANCE.
The Indenture contains provisions for defeasance, at any time,
of the Indebtedness represented by this Note or the covenants governing the
Indebtedness represented by this Note, upon compliance by the Company with
certain conditions set forth in the Indenture.
A-24
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
INSERT TAXPAYER IDENTIFICATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
- --------------------------------------------------------------------------------
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES]
In connection with any transfer of this Note occurring prior
to the date which is the earlier of the date of an effective Registration
Statement or __________________, the undersigned confirms that without utilizing
any general solicitation or general advertising that:
[CHECK ONE]
/ /(a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
OR
/ /(b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
A-25
<PAGE>
If none of the foregoing boxes is checked, the Trustee or other Note Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
Date:
------------------------------- -----------------------------------------
NOTICE: The signature to this
assignment must correspond with the name
as written upon the face of the within-
mentioned instrument in every particular,
without alteration or any change
whatsoever.
Signature Guarantee:
--------------------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
-------------------------- -----------------------------
NOTICE: To be executed by an
executive officer
A-26
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 1016 or Section 1017 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1016 or Section 1017 of the Indenture, state the
amount (in original principal amount) below:
$
---------------------.
Date:
------------------------
Your Signature:
-------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
--------------------------------
A-27
<PAGE>
EXHIBIT B
FORM OF RULE 144A CERTIFICATE
To: Bankers Trust Company
Four Albany Street
New York, NY 10006
Attention: Corporate Trust Trustee Administration
Re: @Entertainment, Inc. (the "COMPANY")
14 1/2% SENIOR DISCOUNT NOTES DUE 2009 (THE "NOTEs")
Ladies and Gentlemen:
In connection with our proposed sale of $____ aggregate
principal amount of Notes, we confirm that such sale has been effected pursuant
to and in accordance with Rule 144A ("RULE 144A") under the Securities Act of
1933, as amended (the "SECURITIES ACT"). We are aware that the transfer of Notes
to us is being made in reliance on the exemption from the provisions of Section
5 of the Securities Act provided by Rule 144A. Prior to the date of this
Certificate we have been given the opportunity to obtain from the Company the
information referred to in Rule 144A(d)(4), and have either declined such
opportunity or have received such information.
You and the Company are entitled to rely upon this Certificate
and are irrevocably authorized to produce this Certificate 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 PURCHASER]
By:
-----------------------------
Name:
Title:
Address:
A-28
<PAGE>
Date of this Certificate: __________ __, ____
A-29
<PAGE>
Exhibit 4.4
EXECUTION COPY
================================================================================
PREFERENCE WARRANT AGREEMENT
Dated as of January 27, 1999
By and Between
@ENTERTAINMENT, INC.
and
BANKERS TRUST COMPANY,
Preference Warrant Agent
--------------------
5.5 million Warrants to Purchase an Aggregate of 5.5
million Shares of Common Stock
(Par Value $0.01 Per Share)
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TABLE OF CONTENTS
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF PREFERENCE WARRANT CERTIFICATES ....................2
SECTION 1.01. Issuance of Preference Warrants.........................2
SECTION 1.02. Form of Preference Warrant Certificate[s]...............2
SECTION 1.03. Execution of Preference Warrant Certificates............3
SECTION 1.04. Authentication and Delivery.............................3
SECTION 1.05. Registration............................................4
SECTION 1.06. Registration of Transfers or Exchanges..................5
SECTION 1.07. Lost, Stolen, Destroyed, Defaced or Mutilated
Preference Warrant Certificates......................10
SECTION 1.08. Offices for Exercise, etc..............................11
ARTICLE II
DURATION, EXERCISE OF PREFERENCE WARRANTS; EXERCISE PRICE
AND REPURCHASE OF PREFERENCE WARRANTS...................12
SECTION 2.01. Duration of Preference Warrants........................12
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery......12
SECTION 2.03. Cancellation of Preference Warrant Certificates........16
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF PREFERENCE WARRANTS..............................16
SECTION 3.01. Enforcement of Rights..................................16
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY......................................17
SECTION 4.01. Payment of Taxes.......................................17
SECTION 4.02. Rule 144A..............................................17
SECTION 4.03. Securities Act and Applicable State Securities Laws....17
SECTION 4.05. Notice of Proposal to Issue or Sell....................18
SECTION 4.06. Sale or Issuance After Notice..........................19
SECTION 4.07. Redemption of Certain New Securities...................19
SECTION 4.08. Termination............................................19
SECTION 4.09. Assignment.............................................20
SECTION 4.10. Definitions............................................20
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ARTICLE V
ADJUSTMENTS...........................................................21
SECTION 5.01. Adjustment of Preference Exercise Rate; Notices........21
SECTION 5.02. Fractional Preference Warrant Shares...................30
SECTION 5.03. Exceptions to Antidilution Provisions..................30
ARTICLE VI
CONCERNING THE PREFERENCE WARRANT AGENT ..............................31
SECTION 6.01. Preference Warrant Agent...............................31
SECTION 6.02. Conditions of Preference Warrant Agent's Obligations...31
SECTION 6.03. Resignation and Appointment of Successor...............36
ARTICLE VII
MISCELLANEOUS.........................................................37
SECTION 7.01. Amendment..............................................37
SECTION 7.02. Notices and Demands to the Company and Preference
Warrant Agent.........................................38
SECTION 7.03. Addresses for Notices to Parties and for Transmission
of Documents..........................................39
SECTION 7.04. Notices to Holders.....................................39
SECTION 7.05. Applicable Law.........................................39
SECTION 7.06. Persons Having Rights Under Agreement..................40
SECTION 7.07. Headings...............................................40
SECTION 7.08. Counterparts...........................................40
SECTION 7.09. Inspection of Agreement................................40
SECTION 7.10. Availability of Equitable Remedies.....................40
SECTION 7.11. Obtaining of Governmental Approvals....................40
EXHIBIT A - Form of Preference Warrant Certificate.......................A-1
EXHIBIT B - Form of Legend for Global Preference Warrant.................B-1
EXHIBIT C - Certificate to Be Delivered upon Exchange or Registration
of Transfer of Warrants.....................................C-1
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INDEX OF DEFINED TERMS
Defined Term Page
Agreement....................................................................1
Business Day.....................................................12, A-8, A-16
Capital Stock...............................................................28
Cashless Exercise...........................................................13
Cashless Exercise Ratio.....................................................13
Common Stock.................................................................2
Definitive Warrants..........................................................2
Election to Exercise........................................................13
Exercise Date...............................................................14
Exercise Price..............................................................13
Exercise Rate...............................................................13
Expiration Date.............................................................12
Global Shares...............................................................15
Global Warrants..............................................................2
Independent Financial Expert................................................29
Initial Purchasers...........................................................1
Notes........................................................................1
Officers' Certificate........................................................8
Private Placement Legend.....................................................9
Purchase Agreement...........................................................1
Related Parties.............................................................32
Requisite Warrant Holders...................................................38
Resale Restriction Termination Date..........................................5
Surviving Person............................................................25
Time of Determination............................................29, A-4, A-12
Warrant......................................................................1
Warrant Agent................................................................1
Warrant Agent Office........................................................12
Warrant Exercise Office.....................................................11
Warrant Register.............................................................5
Warrant Registration Rights Agreement........................................1
Warrant Shares...............................................................2
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PREFERENCE WARRANT AGREEMENT
PREFERENCE WARRANT AGREEMENT ("Agreement"), dated as of January 27,
1999 by and between @ENTERTAINMENT, INC. (the "Company"), a Delaware
corporation, and Bankers Trust Company, as preference warrant agent (with any
successor Preference Warrant Agent, the "Preference Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement (the
"MGPE Purchase Agreement") dated January 22, 1999 with Morgan Grenfell Private
Equity Limited on behalf of Morgan Grenfell Development Capital Syndication
Limited ("MGPE"), in which the Company has agreed to sell to MGPE 45,000 shares
of the Company's Series A 12% cumulative preference shares (the "Series A
Preference Shares"), and (ii) 45,000 warrants (the "Series A Preference
Warrants"), each initially entitling the holder thereof to purchase 110 shares
of Common Stock (as defined herein) of the Company; and
WHEREAS, the Company has entered into a purchase agreement (the
"Chase Purchase Agreement") dated January 22, 1999 with Mr. Arnold Chase
("Arnold Chase"), Ms. Cheryl Chase ("Cheryl Chase") and Ms. Rhoda Chase ("Rhoda
Chase", and together with Arnold Chase and Cheryl Chase, the "Initial Chase
Purchasers" and together with the Darland Trust, the "Chase Purchasers"), in
which the Company has agreed to sell to the Chase Purchasers an aggregate of
5,000 shares of the Company's Series B 12% cumulative preference shares (the
"Series B Preference Shares"), and (ii) 5,000 warrants (the "Series B Preference
Warrants"), each initially entitling the holder thereof to purchase 110 shares
of Common Stock (as defined herein) of the Company; the Chase Purchasers and
MGPE are herein after collectively referred to as the "Purchasers"; the Series A
Preference Shares and the Series B Preference Shares are hereinafter referred to
collectively as the "Preference Shares"; the Series A Preference Warrants and
the Series B Preference Warrants are hereinafter referred to as the "Preference
Warrants" and the certificates evidencing the Preference Warrants are
hereinafter referred to collectively as the "Preference Warrant Certificates";
and
WHEREAS, the holders of the Preference Warrants are entitled to the
benefits of a Preference Warrant Registration Rights Agreement dated as of
January 27, 1999 between the Company and the Purchasers (the "Preference Warrant
Registration Rights Agreement"); and
WHEREAS, the Company desires the Preference Warrant Agent as
preference warrant agent to assist the Company in connection with the issuance,
exchange, cancellation, replacement and exercise of the Preference Warrants, and
in this Agreement wishes to set forth, among other things, the terms and
conditions on which the Preference Warrants may be issued, exchanged, canceled,
replaced and exercised;
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NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF PREFERENCE WARRANT CERTIFICATES
SECTION 1.01. Issuance of Preference Warrants. Preference Warrants
shall be originally issued in connection with the sale of the Preference Shares
to the Purchasers.
Each Preference Warrant Certificate shall evidence the number of
Preference Warrants specified therein. Each Preference Warrant evidenced by a
Preference Warrant Certificate shall, when it becomes exercisable as provided
herein and therein, initially represent the right, subject to the provisions
contained herein and therein, to purchase from the Company (and the Company
shall issue and sell to the holder of such Preference Warrant) 110 fully paid
and non-assessable Preference Warrant Shares at an exercise price of $10.00 per
share. The number of shares of the Company's common stock, par value $0.01 per
share (the "Common Stock") issuable upon exercise of a Preference Warrant is
subject to adjustment as provided herein and in the Preference Warrants. The
shares of Common Stock issuable upon exercise of a Preference Warrant are
hereinafter referred to as the "Preference Warrant Shares" and, unless the
context otherwise requires, such term shall also include any other securities
issuable and deliverable upon exercise of a Preference Warrant as provided in
Article V, subject to adjustment as provided herein and in the Preference
Warrant Certificates.
SECTION 1.02. Form of Preference Warrant Certificate[s]. The
Preference Warrant Certificate[s] will initially be issued either in global form
(the "Global Preference Warrants") or in registered form as Certificated
Preference Warrant Certificates (the "Certificated Preference Warrants"), in
either case substantially in the form of Exhibit A attached hereto. Any Global
Preference Warrants to be delivered pursuant to this Agreement shall bear the
legend set forth in Exhibit B attached hereto. The Global Preference Warrants
shall represent such of the outstanding Preference Warrants as shall be
specified therein, and each Global Preference Warrant shall provide that it
shall represent the aggregate amount of outstanding Preference Warrants from
time to time endorsed thereon and that the aggregate amount of outstanding
Preference Warrants represented thereby may from time to time be reduced or
increased, as appropriate. Any endorsement of a Global Preference Warrant to
reflect the amount of any increase or decrease in the amount of outstanding
Preference Warrants represented thereby shall be made by the Preference Warrant
Agent and the Depositary (as defined below) in accordance with instructions
given by the holder thereof. The Depository Trust Company shall act as the
"Depositary" with respect to the Global Preference Warrants until a successor
shall be appointed by the Company and the Preference Warrant Agent. Upon written
request, a holder of Preference Warrants may receive from the
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Preference Warrant Agent or the Depositary Certificated Preference Warrants as
set forth in Section 1.07 hereof.
SECTION 1.03. Execution of Preference Warrant Certificates. The
Preference Warrant Certificates shall be executed on behalf of the Company by
the chairman of its board of directors, its president, its chief executive
officer, its chief financial officer or any vice president and by its treasurer,
assistant treasurer, secretary or assistant secretary. Such signatures may be
the manual or facsimile signatures of the present or any future such officers.
The seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Preference Warrant
Shares. Typographical and other minor errors or defects in any such reproduction
of any such signature shall not affect the validity or enforceability of any
Preference Warrant Certificate that has been duly countersigned and delivered by
the Preference Warrant Agent.
In case any officer of the Company who shall have signed any of the
Preference Warrant Certificates shall cease to be such officer before the
Preference Warrant Certificate so signed shall be authenticated and delivered by
the Preference Warrant Agent or disposed of by the Company, such Preference
Warrant Certificate nevertheless may be authenticated and delivered or disposed
of as though the person who signed such Preference Warrant Certificate had not
ceased to be such officer of the Company. Any Preference Warrant Certificate may
be signed on behalf of the Company by such persons as, at the actual date of the
execution of such Preference Warrant Certificate, shall be the proper officers
of the Company, although at the date of the execution and delivery of this
Agreement any such person was not such an officer.
SECTION 1.04. Authentication and Delivery. Subject to the
immediately following paragraph, Preference Warrant Certificates shall be
authenticated by manual signature and dated the date of authentication by the
Preference Warrant Agent and shall not be valid for any purpose unless so
authenticated and dated. The Preference Warrant Certificates shall be numbered
and shall be registered in the Preference Warrant Register (as defined in
Section 1.06 hereof).
Upon the receipt by the Preference Warrant Agent of a written order
of the Company, which order shall be signed by the chairman of its board of
directors, its president, its chief executive officer, its chief financial
officer or any vice president and by its treasurer, assistant treasurer,
secretary or assistant secretary, and shall specify the amount of Preference
Warrants to be authenticated, whether the Preference Warrants are to be Global
Preference Warrants or Certificated Preference Warrants, the date of such
Preference Warrants and such other information as the Preference Warrant Agent
may reasonably request, without any further action by the Company, the
Preference Warrant Agent is authorized, upon receipt from the Company at any
time and from time to time of the Preference Warrant Certificates, duly executed
as provided in Section 1.03 hereof, to authenticate the Preference Warrant
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Certificates and upon the holder's request deliver them. Such authentication
shall be by a duly authorized signatory of the Preference Warrant Agent
(although it shall not be necessary for the same signatory to sign all
Preference Warrant Certificates).
In case any authorized signatory of the Preference Warrant Agent who
shall have authenticated any of the Preference Warrant Certificates shall cease
to be such authorized signatory before the Preference Warrant Certificate shall
be disposed of by the Company or the Preference Warrant Agent, such Preference
Warrant Certificate nevertheless may be delivered or disposed of as though the
person who authenticated such Preference Warrant Certificate had not ceased to
be such authorized signatory of the Preference Warrant Agent; and any Preference
Warrant Certificate may be authenticated on behalf of the Preference Warrant
Agent by such persons as, at the actual time of authentication of such
Preference Warrant Certificates, shall be the duly authorized signatories of the
Preference Warrant Agent, although at the time of the execution and delivery of
this Agreement any such person is not such an authorized signatory.
The Preference Warrant Agent's authentication on all Preference
Warrant Certificates shall be in substantially the form set forth in Exhibit A
hereto.
SECTION 1.05. Registration. The Company will keep, at the office or
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and exchange
of, Preference Warrants as provided in this Article. Each person designated by
the Company from time to time as a person authorized to register the transfer
and exchange of the Preference Warrants is hereinafter called, individually and
collectively, the "Preference Registrar." The Company hereby initially appoints
the Preference Warrant Agent as Preference Registrar. Upon written notice to the
Preference Warrant Agent and any acting Preference Registrar, the Company may
appoint a successor Preference Registrar for such purposes.
In connection with the separate units offering being conducted
simultaneously, the Company is issuing a number of Warrants. The Company agrees
to keep separate registers for the Warrants and the Preference Warrants. The
Company may utilize the same entity as Registrar for the Warrants and for the
Preference Warrants. The Preference Warrant Agent is also the warrant agent for
the Warrants being issued by the Company in the Units Offering. The functions
and obligations of the Registrar and of the Preference Registrar are virtually
identical. Likewise, the functions and obligations of the Preference Warrant
Agent and of the Warrant Agent are virtually identical. In each case, this
Agreement relates only to the relationship between the Company and the
Preference Warrants Agent and Preference Registrar. The relationship between the
Company and the Warrant Agent and Registrar of the Units is covered by a
separate warrant agreement which is dated as of the date hereof.
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The Company will at all times designate one person (which may be the
Company and which need not be a Preference Registrar) to act as repository of a
master list of names and addresses of the holders of Preference Warrants (the
"Preference Warrant Register"). The Preference Warrant Agent will act as such
repository unless and until some other person is, by written notice from the
Company to the Preference Warrant Agent and the Preference Registrar, designated
by the Company to act as such. The Company shall cause each Preference Registrar
to furnish to such repository, on a current basis, such information as to all
registrations of transfer and exchanges effected by such Preference Registrar,
as may be necessary to enable such repository to maintain the Preference Warrant
Register on as current a basis as is practicable.
SECTION 1.06. Registration of Transfers or Exchanges.
(a) Transfer or Exchange of Certificated Preference Warrants. When
Certificated Preference Warrants are presented to the Preference Warrant Agent
with a request from the holder:
(i) to register the transfer of the Certificated Preference Warrants; or
(ii) to exchange such Certificated Preference Warrants for an equal
number of Certificated Preference Warrants of other authorized
denominations,
the Preference Warrant Agent shall register the transfer or make the exchange as
requested if the requirements under this Preference Warrant Agreement as set
forth in this Section 1.06 for such transactions are met; provided, however,
that the Certificated Preference Warrants presented or surrendered by a holder
for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer or exchange in form satisfactory to the Company and the
Preference Warrant Agent, duly executed by such holder or by his
attorney, duly authorized in writing; and
(y) in the case of Preference Warrants the offer and sale of which have
not been registered under the Securities Act of 1933 (the
"Securities Act") and are presented for transfer or exchange prior
to (X) the date which is two years (or such shorter period as may be
prescribed by Rule 144(k) (or any successor provision thereto))
after the later of the date of original issuance of the Preference
Warrants and the last date on which the Company or any affiliate of
the Company was the owner of such Preference Warrants, or any
predecessor thereto, and (Y) such later date, if any, as may be
required by any subsequent change in applicable law (the "Resale
Restriction Termination Date"), such
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Preference Warrants shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Preference Warrants are being delivered to the
Preference Warrant Agent by a holder for registration in the
name of such holder, without transfer, a certification from
such holder to that effect (in substantially the form of
Exhibit C hereto); or
(B) if such Preference Warrants are being transferred to a
qualified institutional buyer as such term is defined in Rule
144A under the Securities Act (a "QIB") in accordance with
Rule 144A under the Securities Act, a certification from the
transferor to that effect (in substantially the form of
Exhibit C hereto); or
(C) if such Preference Warrants are being transferred in reliance
on Rule 144 under the Securities Act, delivery by the
transferor of (i) a certification from the transferor to that
effect (in substantially the form of Exhibit C hereto), and
(ii) an opinion of counsel reasonably satisfactory to the
Company to the effect that such transfer is in compliance with
the Securities Act; or
(D) if such Preference Warrants are being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification from the transferor to that
effect (in substantially the form of Exhibit C hereto) and an
opinion of counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; provided that the Company may, based upon the
views of its own counsel, instruct the Preference Warrant
Agent not to register such transfer in any case where the
proposed transferee is not a QIB.
(b) Restrictions on Transfer of a Certificated Preference Warrant
for a Beneficial Interest in a Global Preference Warrant. A Certificated
Preference Warrant may not be transferred by a holder for a beneficial interest
in a Global Preference Warrant except upon satisfaction of the requirements set
forth below. Upon receipt by the Preference Warrant Agent of a Certificated
Preference Warrant, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Preference Warrant Agent, together with:
(A) certification from such holder (in substantially the form of
Exhibit C hereto) that such Certificated Preference Warrant is
being transferred to a QIB in accordance with Rule 144A under
the Securities Act; and
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(B) written instructions directing the Preference Warrant Agent to
make, or to direct the Depositary to make, an endorsement on
the Global Preference Warrant to reflect an increase in the
aggregate amount of the Preference Warrants represented by the
Global Preference Warrant,
then the Preference Warrant Agent shall cancel such Certificated Preference
Warrant and cause, or direct the Depositary to cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Preference Warrant Agent, the number of Preference Warrant Shares represented by
the Global Preference Warrant to be increased accordingly. If no Global
Preference Warrant is then outstanding, the Company shall issue, and the
Preference Warrant Agent shall upon written instructions from the Company
authenticate, a new Global Preference Warrant in the appropriate amount.
(c) Transfer or Exchange of Global Preference Warrants. The transfer
or exchange of Global Preference Warrants or beneficial interests therein shall
be effected through the Depositary, in accordance with this Section 1.06, the
Private Placement Legend (as defined below), this Agreement (including those
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) Transfer or Exchange of a Beneficial Interest in a Global
Preference Warrant for a Certificated Preference Warrant.
(i) Any person having a beneficial interest in a Global Preference
Warrant may transfer or exchange such beneficial interest for a
Certificated Preference Warrant upon receipt by the Preference
Warrant Agent of written instructions (or such other form of
instructions as is customary for the Depositary) from the Depositary
or its nominee on behalf of any person having a beneficial interest
in a Global Preference Warrant, including a written order containing
registration instructions and, in the case of any such transfer or
exchange prior to the Resale Restriction Termination Date, the
following additional information and documents:
(A) if such beneficial interest is being transferred to the person
designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in
substantially the form of Exhibit C hereto); or
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a
certification from the transferor to that effect (in
substantially the form of Exhibit C hereto); or
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(C) if such beneficial interest is being transferred in reliance
on Rule 144 under the Securities Act, delivery by the
transferor of (i) a certification to that effect (in
substantially the form of Exhibit C hereto) and (ii) an
opinion of counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
(D) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification from the transferor to that
effect (in substantially the form of Exhibit C hereto) and an
opinion of counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; provided that the Company may instruct the
Preference Warrant Agent not to register such transfer in any
case where the proposed transferee is not a QIB;
then, upon receipt of such written instructions and additional
information and documents, the Preference Warrant Agent will cause,
in accordance with the standing instructions and procedures existing
between the Depositary and the Preference Warrant Agent, the
aggregate amount of the Global Preference Warrant 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
(a certificate signed by the chairman or a co-chairman of the board,
the president, the chief executive officer, the chief financial
officer, any executive vice president or any senior vice president
of the Company signing alone, or by any vice president signing
together with the secretary, any assistant secretary, the treasurer,
or any assistant treasurer of the Company) (an "Officers'
Certificate"), the Preference Warrant Agent will authenticate and
deliver to the transferee a Certificated Preference Warrant.
(ii) Certificated Preference Warrants issued in exchange for a beneficial
interest in a Global Preference Warrant pursuant to this Section
1.06(d) shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the
Preference Warrant Agent in writing. The Preference Warrant Agent
shall deliver such Certificated Preference Warrants to the persons
in whose names such Preference Warrants are so registered and adjust
the Global Preference Warrant pursuant to paragraph (h) of this
Section 1.06.
(e) Restrictions on Transfer or Exchange of Global Preference
Warrants. Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (f) of this Section 1.06), a Global
Preference Warrant may not be transferred or
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exchanged as a whole except by the Depositary to a nominee of the Depositary; by
a nominee of the Depositary to the Depositary or another nominee of the
Depositary; or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
(f) Authentication of Certificated Preference Warrants in Absence of
Depositary. If at any time:
(i) the Depositary for the Global Preference Warrants notifies the
Company that the Depositary is unwilling or unable to continue as
Depositary for the Global Preference Warrant and a successor
Depositary for the Global Preference Warrant is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Preference Warrant
Agent in writing that it elects to cause the issuance of
Certificated Preference Warrants for all Global Preference Warrants
under this Agreement,
then the Company will execute, and the Preference Warrant Agent will, upon
receipt of an Officers' Certificate requesting the authentication and delivery
of Certificated Preference Warrants, authenticate and deliver Certificated
Preference Warrants, in an aggregate number equal to the aggregate number of
Preference Warrants represented by the Global Preference Warrant, in exchange
for such Global Preference Warrant.
(g) Private Placement Legend. Upon the transfer or exchange of
Preference Warrant Certificates not bearing the legend set forth in the first
paragraph of Exhibit A attached hereto (the "Private Placement Legend"), the
Preference Warrant Agent shall deliver Preference Warrant Certificates that do
not bear the Private Placement Legend. Upon the transfer, exchange or
replacement of Preference Warrant Certificates bearing the Private Placement
Legend, the Preference Warrant Agent shall deliver Preference Warrant
Certificates that bear the Private Placement Legend unless, and the Preference
Warrant Agent is hereby authorized to deliver Preference Warrant Certificates
without the Private Placement Legend if, (i) there is delivered to the
Preference Warrant Agent an opinion of counsel reasonably satisfactory to the
Company to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act or (ii) there is delivered to the Preference Warrant Agent an
Officers' Certificate stating that the Preference Warrants to be transferred or
exchanged represented by such Preference Warrant Certificates are being
transferred or exchanged pursuant to an effective registration statement under
the Securities Act.
(h) Cancellation or Adjustment of a Global Preference Warrant. At
such time as all beneficial interests in a Global Preference Warrant have either
been exchanged for
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Certificated Preference Warrants, redeemed, repurchased or canceled, such Global
Preference Warrant shall be returned to the Company or, upon written order to
the Preference Warrant Agent in the form of an Officers' Certificate from the
Company, retained and canceled by the Preference Warrant Agent. At any time
prior to such cancellation, if any beneficial interest in a Global Preference
Warrant is exchanged for Certificated Preference Warrants, redeemed, repurchased
or canceled, the number of Preference Warrants represented by such Global
Preference Warrant shall be reduced and an endorsement shall be made on such
Global Preference Warrant by the Preference Warrant Agent to reflect such
reduction.
(i) Obligations with Respect to Transfers or Exchanges of
Certificated Preference Warrants.
(i) To permit registrations of transfers or exchanges completed in
accordance with the provisions hereof, the Company shall execute, at
the Preference Warrant Agent's request, and the Preference Warrant
Agent shall authenticate, Certificated Preference Warrants and
Global Preference Warrants.
(ii) All Certificated Preference Warrants and Global Preference Warrants
issued upon any registration of transfer or exchange of Certificated
Preference Warrants or Global Preference Warrants, as the case may
be, completed in accordance with the provisions hereof, shall be the
valid obligations of the Company, entitled to the same benefits
under this Preference Warrant Agreement as the Certificated
Preference Warrants or Global Preference Warrants surrendered upon
the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Preference Warrant, the Preference Warrant Agent and the Company may
deem and treat the person in whose name any Preference Warrant is
registered as the absolute owner of such Preference Warrant, and
neither the Preference Warrant Agent nor the Company shall be
affected by notice to the contrary.
SECTION 1.07. Lost, Stolen, Destroyed, Defaced or Mutilated
Preference Warrant Certificates. Upon receipt by the Company and the Preference
Warrant Agent (or any agent of the Company or the Preference Warrant Agent, if
requested by the Company) of evidence satisfactory to them of the loss, theft,
destruction, defacement, or mutilation of any Preference Warrant Certificate and
of indemnity satisfactory to them and, in the case of mutilation or defacement,
upon surrender thereof to the Preference Warrant Agent for cancellation, then,
in the absence of notice to the Company or the Preference Warrant Agent that
such Preference Warrant Certificate has been acquired by a bona fide purchaser
or holder in due course, the Company shall execute, and an authorized signatory
of the Preference Warrant Agent shall manually authenticate and deliver, in
exchange for or in lieu of the lost,
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stolen, destroyed, defaced or mutilated Preference Warrant Certificate, a new
Preference Warrant Certificate representing a like number of Preference
Warrants, bearing a number or other distinguishing symbol not contemporaneously
outstanding. Prior to the issuance of any new Preference Warrant Certificate
under this Section in a name other than the prior registered holder of the lost,
stolen, destroyed, defaced or mutilated Preference Warrant Certificate, the
Company may require the payment from the holder of such Preference Warrant
Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Preference Warrant Agent and
the Preference Registrar or any agent thereof) in connection therewith. Every
substitute Preference Warrant Certificate executed and delivered pursuant to
this Section 1.07 in lieu of any lost, stolen or destroyed Preference Warrant
Certificate shall constitute an additional contractual obligation of the
Company, whether or not the lost, stolen or destroyed Preference Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
the benefits of (but shall be subject to all the limitations of rights set forth
in) this Agreement equally and proportionately with any and all other Preference
Warrant Certificates duly executed and delivered hereunder. The provisions of
this Section 1.07 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Preference Warrant Certificates and shall
preclude (to the extent lawful) any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement of lost, stolen, destroyed, defaced or mutilated
Preference Warrant Certificates.
The Preference Warrant Agent is hereby authorized to authenticate in
accordance with the provisions of this Agreement and deliver the new Preference
Warrant Certificates required pursuant to the provisions of this Section 1.07.
SECTION 1.08. Offices for Exercise, etc. So long as any of the
Preference Warrants remain outstanding, the Company will designate and maintain
in the Borough of Manhattan, The City of New York: (a) an office or agency where
the Preference Warrant Certificates may be presented for exercise (each a
"Preference Warrant Exercise Office"), (b) an office or agency where the
Preference Warrant Certificates may be presented for registration of transfer
and for exchange, and (c) an office or agency where notices and demands to or
upon the Company in respect of the Preference Warrants or of this Agreement may
be served. The Company may from time to time change or rescind such designation,
as it may deem desirable or expedient; provided, however, that an office or
agency shall at all times be maintained in the Borough of Manhattan, The City of
New York, as provided in the first sentence of this Section. In addition to such
office or offices or agency or agencies, the Company may from time to time
designate and maintain one or more additional offices or agencies within or
outside The City of New York, where Preference Warrant Certificates may be
presented for exercise or for registration of transfer or for exchange, and the
Company may from time to time change or rescind such designation, as it may deem
desirable or expedient.
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12
The Company will give to the Preference Warrant Agent written notice of the
location of any such office or agency and of any change of location thereof. The
Company hereby designates the Preference Warrant Agent at its principal
corporate trust office identified in Section 7.03 in the Borough of Manhattan,
The City of New York (the "Preference Warrant Agent Office"), as the initial
agency maintained for each such purpose. In case the Company shall fail to
maintain any such office or agency or shall fail to give such notice of the
location or of any change in the location thereof, presentations and demands may
be made and notice may be served at the Preference Warrant Agent Office and the
Company appoints the Preference Warrant Agent as its agent to receive all such
presentations, surrenders, notices and demands.
ARTICLE II
DURATION, EXERCISE OF PREFERENCE WARRANTS; EXERCISE PRICE
AND REPURCHASE OF PREFERENCE WARRANTS
SECTION 2.01. Duration of Preference Warrants. Subject to the terms
and conditions established herein, the Preference Warrants shall expire at 5:00
p.m., New York City time, on February 1, 2010. The applicable date of expiration
of a particular Preference Warrant is referred to herein as the "Preference
Expiration Date" of such Preference Warrant. Each Preference Warrant may be
exercised as set forth in Section 2.02. The Company will give notice of
expiration to then registered holders of Preference Warrants not less than 90
nor more than 120 days prior to the Preference Expiration Date. Failure to give
such notice however, will not prevent the Preference Warrants from expiring and
becoming void on the Preference Expiration Date.
Any Preference Warrant not exercised before 5:00 p.m., New York City
time, on the Preference Expiration Date shall become void, and all rights of the
holder under the Preference Warrant Certificate evidencing such Preference
Warrant and under this Agreement shall cease.
"Business Day" shall mean any day on which (i) banks in The City of
New York, (ii) the principal U.S. securities exchange or market, if any, on
which any Common Stock is listed or admitted to trading and (iii) the principal
U.S. securities exchange or market, if any, on which the Preference Warrants are
listed or admitted to trading, are open for business.
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery. (a)
Subject to the provisions of this Agreement, each Preference Warrant shall
entitle the registered holder thereof to purchase from the Company on any
Business Day during the period beginning on the Preference Exercise Date and
ending at 5:00 p.m., New York City
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13
time, on the Preference Expiration Date 110 fully paid, registered and
non-assessable Preference Warrant Shares (and any other securities purchasable
or deliverable upon exercise of such Preference Warrant as provided in Article
V), subject to adjustment in accordance with Article V hereof, at the purchase
price of $10.00 for each share purchased (the "Preference Exercise Price"). The
number and amount of Preference Warrant Shares issuable upon exercise of a
Preference Warrant (the "Preference Exercise Rate") at the Preference Exercise
Price shall be subject to adjustment from time to time as set forth in Article V
hereof.
"Preference Exercise Date" means any date after the Issue Date on
which the Preference Warrants are exercised and Preference Warrant Shares issued
in connection with such exercise.
(b) Preference Warrants may be exercised on or after the date they
are exercisable hereunder by (i) surrendering at any Preference Warrant Exercise
Office the Preference Warrant Certificate evidencing such Preference Warrants
with the form of election to purchase Preference Warrant Shares set forth on the
reverse side of the Preference Warrant Certificate (the "Election to Exercise")
duly completed and signed by the registered holder or holders thereof or by the
duly appointed legal representative thereof or by a duly authorized attorney,
and in the case of a transfer, such signature shall be guaranteed by an eligible
guarantor institution, and (ii) paying in full the Preference Exercise Price for
each such Preference Warrant exercised. Each Preference Warrant may be exercised
only in whole. The Preference Warrants may be exercised in whole or in part
prior to the Preference Expiration Date.
(c) Simultaneously with the exercise of each Preference Warrant,
payment in full of the aggregate Preference Exercise Price may be made, at the
option of the holder, (i) in cash or by certified or official bank check, (ii)
by a Cashless Exercise (as defined below) or (iii) by any combination of (i) and
(ii), to the office or agency where the Preference Warrant Certificate is being
surrendered. For purposes of this Agreement, a "Cashless Exercise" shall mean an
exercise of a Preference Warrant in accordance with the immediately following
two sentences. To effect a Cashless Exercise, the holder may exercise a
Preference Warrant or Preference Warrants without payment of the Preference
Exercise Price in cash by surrendering such Preference Warrant or Preference
Warrants (represented by one or more Preference Warrant Certificates) and, in
exchange therefor, receiving such number of shares of Common Stock equal to the
product of (1) that number of shares of Common Stock for which such Preference
Warrant or Preference Warrants are exercisable and which would be issuable in
the event of an exercise with payment in cash of the Preference Exercise Price
and (2) the Cashless Exercise Ratio (as defined below). The "Cashless Exercise
Ratio" shall equal a fraction, the numerator of which is the excess of the
Current Market Value (calculated as set forth in this Agreement) per share of
Common Stock on the date of exercise over the Preference Exercise Price per
share of Common Stock as of the date of exercise and the denominator of which is
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14
the Current Market Value per share of Common Stock on the date of exercise. Upon
surrender of a Preference Warrant Certificate representing more than one
Preference Warrant in connection with a holder's option to elect a Cashless
Exercise, such holder must specify the number of Preference Warrants for which
such Preference Warrant Certificate is to be exercised (without giving effect to
such Cashless Exercise). All provisions of this Agreement shall be applicable
with respect to a Cashless Exercise of a Preference Warrant Certificate for less
than the full number of Preference Warrants represented thereby. No payment or
adjustment shall be made on account of any distributions of dividends on the
Common Stock issuable upon exercise of a Preference Warrant. If the Company has
not effected the registration under the Securities Act of the offer and sale of
the Preference Warrant Shares by the Company to the holders of the Preference
Warrants on or prior to the Effective Preference Exercise Date (as defined
below), the Company may elect to require that the holders of the Warrants effect
the exercise thereof solely pursuant to the Cashless Exercise option and may
also amend the Preference Warrants to eliminate the requirement for payment of
the Preference Exercise Price with respect to such Cashless Exercise option. The
Preference Warrant Agent shall have no obligation under this section to
calculate the Cashless Exercise Ratio.
(d) Upon surrender of a Preference Warrant Certificate and payment
and collection of the Preference Exercise Price at any Preference Warrant
Exercise Office (other than any Preference Warrant Exercise Office that also is
an office of the Preference Warrant Agent), such Preference Warrant Certificate
and payment shall be promptly delivered to the Preference Warrant Agent. The
"Effective Preference Exercise Date" for a Preference Warrant shall be the date
when all of the items referred to in the first sentence of paragraphs (b) and
(c) of this Section 2.02 are received by the Preference Warrant Agent at or
prior to 11:00 a.m., New York City time, on a Business Day and the exercise of
the Preference Warrants will be effective as of such Effective Preference
Exercise Date. If any items referred to in the first sentence of paragraphs (b)
and (c) are received after 11:00 a.m., New York City time, on a Business Day,
the exercise of the Preference Warrants to which such item relates will be
effective on the next succeeding Business Day. Notwithstanding the foregoing, in
the case of an exercise of Preference Warrants on the Preference Expiration
Date, if all of the items referred to in the first sentence of paragraphs (b)
and (c) are received by the Preference Warrant Agent at or prior to 5:00 p.m.,
New York City time, on the Preference Expiration Date, the exercise of the
Preference Warrants to which such items relate will be effective on the
Preference Expiration Date.
(e) Upon the exercise of a Preference Warrant in accordance with the
terms hereof, the receipt of a Preference Warrant Certificate and payment of the
Preference Exercise Price (or election of the Cashless Exercise option), the
Preference Warrant Agent shall: (i) except to the extent exercise of the
Preference Warrant has been effected through a Cashless Exercise, cause an
amount equal to the aggregate Preference Exercise Price to be paid to the
Company by crediting such amount in immediately available funds to the account
designated
<PAGE>
15
by the Company in writing to the Preference Warrant Agent for that purpose; (ii)
advise the Company immediately by telephone of the amount so deposited to the
Company's account and promptly confirm such telephonic advice in writing; and
(iii) as soon as practicable, advise the Company in writing of the number of
Preference Warrants exercised in accordance with the terms and conditions of
this Agreement and the Preference Warrant Certificates, the instructions of each
exercising holder of the Preference Warrant Certificates with respect to
delivery of the Preference Warrant Shares to which such holder is entitled upon
such exercise, and such other information as the Company shall reasonably
request.
(f) Subject to Section 5.02 hereof, as soon as practicable after the
exercise of any Preference Warrant or Preference Warrants in accordance with the
terms hereof, the Company shall issue or cause to be issued to or upon the
written order of the registered holder of the Preference Warrant Certificate
evidencing such exercised Preference Warrant or Preference Warrants, a
certificate or certificates evidencing the Preference Warrant Shares to which
such holder is entitled, in fully registered form, registered in such name or
names as may be directed by such holder pursuant to the Election to Exercise, as
set forth on the reverse of the Preference Warrant Certificate. Such certificate
or certificates evidencing the Preference Warrant Shares shall be deemed to have
been issued and any persons who are designated to be named therein shall be
deemed to have become the holders of record of such Preference Warrant Shares as
of the close of business on the Effective Exercise Date; the Preference Warrant
Shares may initially be issued in Global form (the "Global Preference Shares").
Such Global Preference Shares shall represent such of the outstanding Preference
Warrant Shares as shall be specified therein and each Global Preference Share
shall provide that it represents the aggregate amount of outstanding Preference
Warrant Shares from time to time endorsed thereon and that the aggregate amount
of outstanding Preference Warrant Shares represented thereby may from time to
time be reduced or increased, as appropriate. Any endorsement of a Global
Preference Share to reflect any increase or decrease in the amount of
outstanding Preference Warrant Shares represented thereby shall be made by the
registrar for the Preference Warrant Shares and the Depositary (referred to
below) in accordance with instructions given by the holder thereof. The
Depository Trust Company shall (if possible) act as the Depositary with respect
to the Global Preference Shares until a successor shall be appointed by the
Company and the registrar for the Preference Warrant Shares. After exercise of
any Preference Warrant or Preference Warrant Shares, the Company shall also
issue or cause to be issued to or upon the written order of the registered
holder of such Preference Warrant Certificate, a new Preference Warrant
Certificate, countersigned by the Preference Warrant Agent pursuant to written
instruction, evidencing the number of Preference Warrants, if any, remaining
unexercised unless such Preference Warrants shall have expired.
(g) The Holders of the Preference Warrants have agreed with the
Company that while they may exercise their Preference Warrants at any time, in
whole or in part, prior to the Preference Expiration Date, such Holders of the
Preference Warrants will not be
<PAGE>
16
allowed to sell or otherwise dispose of any Preference Warrant Shares prior to
one year from the date hereof.
SECTION 2.03. Cancellation of Preference Warrant Certificates. In
the event the Company shall purchase or otherwise acquire Preference Warrants,
the Preference Warrant Certificates evidencing such Preference Warrants may
thereupon be delivered to the Preference Warrant Agent, and if so delivered,
shall at the Company's written instruction be canceled by it and retired. The
Preference Warrant Agent shall cancel all Preference Warrant Certificates
properly surrendered for exchange, substitution, transfer or exercise. Upon the
Company's written request, the Preference Warrant Agent shall deliver such
canceled Preference Warrant Certificates to the Company.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF PREFERENCE WARRANTS
SECTION 3.01. Enforcement of Rights. (a) Notwithstanding any of the
provisions of this Agreement, any holder of any Preference Warrant Certificate,
without the consent of the Preference Warrant Agent, the holder of any
Preference Warrant Shares or the holder of any other Preference Warrant
Certificate, may, in and for his own behalf enforce, and may institute and
maintain any suit, action or proceeding against the Company suitable to enforce,
his right to exercise the Preference Warrant or Preference Warrants evidenced by
his Preference Warrant Certificate in the manner provided in such Preference
Warrant Certificate and in this Agreement.
(b) Neither the Preference Warrants nor any Preference Warrant
Certificate shall entitle the holders thereof to any of the rights of
shareholders of the Company, including, without limitation, the right to vote or
to receive any dividends or other payments or to consent or to exercise any
preemptive rights (except as provided in Section 4.04 hereof) or to receive
notice as stockholders in respect of the meetings of stockholders or for the
election of directors of the Company or any other matter, or any rights
whatsoever as stockholders of the Company.
SECTION 3.02. Obtaining Stock Exchange Listings. The Company will
use its best efforts from time to time to list the Preference Warrant Shares,
immediately upon their issuance upon the exercise of Preference Warrants, on the
Nasdaq National Market.
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17
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Preference Warrants and of
the Preference Warrant Shares upon the exercise of Preference Warrants;
provided, however, that the Company shall not be required to pay any tax or
other governmental charge which may be payable in respect of any transfer or
exchange of any Preference Warrant Certificates or any certificates for
Preference Warrant Shares in a name other than the registered holder of a
Preference Warrant Certificate surrendered upon the exercise of a Preference
Warrant. In any such case, no transfer or exchange shall be made unless or until
the person or persons requesting issuance thereof shall have paid to the Company
the amount of such tax or other governmental charge or shall have established to
the satisfaction of the Company that such tax or other governmental charge has
been paid or an exemption is available therefrom.
SECTION 4.02. Rule 144A. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules, regulations
and policies adopted by the Securities and Exchange Commission thereunder in a
timely manner in accordance with the requirements of the Securities Act and the
Exchange Act and, if at any time prior to the Preference Expiration Date the
Company is not required to file such reports, it will mail to each owner or
beneficial owner of Preference Warrants upon request such information as is
referred to in Rule 144A(d)(4) under the Securities Act.
SECTION 4.03. Securities Act and Applicable State Securities Laws.
The Company will also agree to comply with all applicable laws, including the
Securities Act and any applicable state securities laws, in connection with the
offer and sale of Common Stock (and other securities and property deliverable)
upon exercise of the Preference Warrants.
SECTION 4.04. Grant of Right of First Refusal
(a) The Company hereby grants to each Purchaser the right of first
refusal to purchase, at the same per share price and on the same terms and
conditions, such Purchaser's pro rata share of New Securities as the
Company may, from time to time, sell or issue after the date of this
Agreement; provided however, that this right of first refusal shall not
provide the Purchasers with additional rights to acquire securities if the
provisions of Section 5.01 (c) or (d) of this Agreement are applicable.
(b) For purposes of this Agreement, each Purchaser's "pro rata
share" is the ratio of the number of Shares of Common Stock that such
Purchaser has the right to
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18
acquire pursuant to the Preference Warrants held by it immediately prior
to the issuance of New Securities, to the total number of shares of Common
Stock outstanding immediately prior to the issuance of New Securities,
assuming full conversion of all outstanding Shares convertible into or
exchangeable for Common Stock and exercise of all outstanding rights,
options and warrants for Common Stock. Any shares of Common Stock acquired
by any Purchaser (including pursuant to the Preference Warrants) and any
other rights to acquire shares of Common Stock acquired by any Purchaser
(other than the Preference Warrants) shall not be included in the "pro
rata share" that such Purchaser may be entitled to purchase.
(c) This right of first refusal shall be subject to the remaining
provisions of this Agreement.
(d) Notwithstanding anything in this Agreement to the contrary, no
adjustment in the number of shares of Common Stock issuable or issued upon
exercise, exchange or conversion of any outstanding securities convertible
into or exchangeable for Common Stock and exercise for Common Stock of any
outstanding right, option or warrant held by such Person (or which such
Person is entitled to hold pursuant to a right of conversion or exchange
on any security) by reason of original provisions of or relating to such
security which provide for an automatic adjustment upon the occurrence of
specified events shall be deemed an issuance or sale or a proposed
issuance or sale of New Securities, nor shall such adjustment give rise to
any rights of first refusal under this Agreement.
SECTION 4.05. Notice of Proposal to Issue or Sell
(a) In the event the Company proposes to issue or sell New
Securities, it shall give each Purchaser written notice of the proposal (a
"Section 4.05 Notice"), describing the proposed New Securities, and the
terms (including the cash to be paid for, plus the fair market value of
any other consideration to be given for, the New Securities) upon which
the Company proposes to sell or issue the New Securities and the proposed
buyers, if known.
(b) Each Purchaser shall have 30 days after any Section 4.05 Notice
is given to agree to purchase such New Securities upon the terms specified
in the Section 4.05 Notice, and in the event that any Purchaser wishes to
do so it shall give written notice to the Company, stating therein the
quantity of New Securities to be purchased, which in any event may not
exceed such Purchaser's pro rata share thereof. In the event that any
Purchaser fails to give such notice, it shall be deemed to have waived its
right of first refusal under this Agreement.
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19
(c) In the event that any Purchaser exercises its right pursuant to
Section 4.05(b) such Purchaser shall purchase the quantity of New
Securities specified in such Purchaser's notice to the Company on the
terms specified in the Section 4.05 Notice (except that if such terms
include the giving of consideration other than cash, such Purchaser shall
pay the fair market value of such other consideration in lieu thereof) on
a date (other than a date on which banks in The City of New York City are
closed) not more than 210 days after the date of the Section 4.05 Notice.
The Company shall give such Purchaser notice of the purchase date not less
than ten days in advance of the purchase date.
SECTION 4.06. Sale or Issuance After Notice
(a) From the first day after the first day on which the Purchasers
have (i) exercised their right of first refusal as provided for in Section
4.05(b), (ii) waived their right of first refusal in writing, or (iii)
been deemed to have waived their right of first refusal pursuant to the
last sentence of Section 4.05(b), the Company shall have 180 days to sell
or issue, or enter into an agreement (pursuant to which the sale of New
Securities covered thereby shall be closed, if at all, not later than 180
days from the date of such agreement) to sell or issue, all those New
Securities covered by the applicable Section 4.05 Notice, at a price and
upon terms no more favorable to the purchasers thereof than specified in
such Section 4.05 Notice.
(b) If the Company does not sell such New Securities within the time
periods specified in Section 4.06(a), the Company shall not be permitted
to issue or sell such New Securities, unless it first offers such
securities to each Purchaser again pursuant to the terms of this
Agreement.
SECTION 4.07. Redemption of Certain New Securities
Any options, warrants, or other rights to purchase Common Stock that
any Purchaser purchases pursuant to this Agreement (collectively, "Option
Rights") shall be subject to redemption by the Company if the Company does not
complete a sale or issuance pursuant to Section 4.05(a) of the New Securities
the proposed sale or issuance of which caused the Company to give the Section
4.05 Notice that led to such Purchaser's purchase of such Option Rights.
SECTION 4.08. Termination
Upon the disposition by any Purchaser of all of its Preference
Warrants, such Purchaser shall have no further rights under this Agreement.
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20
SECTION 4.09. Assignment. The rights granted by the Company under
Section 4.04 can be assigned by a Purchaser only to a transferee or assignee of
some of all of the Preference Warrant Shares or Preference Warrants (as adjusted
for stock splits and the like) that is owned and controlled by such Purchaser.
SECTION 4.10. Definitions. For purposed of this Article IV, the
following terms shall have the following definitions:
"Common Stock" means the commons stock of the Company, par value
$0.01 per share.
"New Securities" means any Common Stock, whether now authorized or
not, and any rights, options or warrants to purchase any such Common Stock, and
securities of any type whatsoever that are, or may become, convertible into
Common Stock; provided that the term "New Securities" does not include:
(i) securities issued in connection with an acquisition by the
Company of another business entity or business segment of such an entity,
whether by merger, purchase of substantially all the stock or assets, or
by other reorganization;
(ii) securities issued to employees, consultants, officers or
directors of the Company either
(x) pursuant to any stock option, stock purchase, stock bonus
or similar plan that is or has been approved by the Board of
Directors of the Company on or before the date of this Agreement, or
(y) pursuant to any stock option, stock purchase, stock bonus
or similar plan that is approved by the Compensation Committee of
the Board of Directors of the Company, provided that such securities
have an exercise price of no less than the Common Stock fair market
value on the date of the grant;
(iii) securities issued in connection with any stock split, stock
dividend, recapitalization or other reorganization of the Company;
(iv) securities issued upon the exchange, exercise or conversion of
any security that was the subject of a right of first refusal pursuant to
this Agreement;
(v) treasury shares;
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21
(vi) any right, option or warrant to acquire any security
convertible solely into the securities excluded from the definition of New
Securities pursuant to subsections (i) through (v) above;
(vii) any Common Stock, or any rights, options, warrants, or Shares
convertible into or exchangeable for Common Stock, which the Company was,
on or before the date of this Agreement, required to issue;
(viii) any Common Stock, or any rights, options, warrants or Shares
convertible into or exchangeable for Common Stock which the Company shall
issue on January 27, 1999 in connection with its offering of certain
senior discount notes due 2009; and
(ix) any Common Stock, or any rights, options, warrants or Shares
convertible into or exchangeable for Common Stock, issued or sold to any
Person by the operation of any rights described in this Article IV or
pursuant to any other anti-dilution arrangement with any other Person
(including but not limited to any such rights granted to the Purchaser).
"Person" means any individual, partnership, company, corporation or
other legal entity, as the context requires.
"Shares" means shares of any class or series of the capital stock of
the Company.
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Preference Exercise Rate; Notices. The
Preference Exercise Rate is subject to adjustment from time to time as provided
in this Section 5.01.
(a) Adjustment for Changes in Common Stock. In the event that at any
time on or after the Issue Date or from time to time the Company shall (i) pay a
dividend or make a distribution on its Common Stock payable in shares of its
Common Stock or other equity interests of the Company, (ii) subdivide any of its
outstanding shares of Common Stock into a larger number of shares of Common
Stock, (iii) combine any of its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) increase or decrease the number
of shares of Common Stock outstanding by reclassification of its Common Stock,
then the number of shares of Common Stock issuable upon exercise of each
Preference
<PAGE>
22
Warrant immediately after the happening of such event shall be adjusted to a
number determined by multiplying the number of shares of Common Stock that such
holder would have owned or have been entitled to receive upon exercise had such
Warrants been exercised immediately prior to the happening of the events
described above (or, in the case of a dividend or distribution of Common Stock
or other shares of Capital Stock, immediately prior to the record date therefor)
by a fraction, the numerator of which shall be the total number of shares of
Common Stock outstanding immediately after the happening of the events described
above and the denominator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the happening of the events described
above; and subject to Section 5.01(n), the Preference Exercise Price for each
Preference Warrant shall be adjusted to a number determined by dividing the
Preference Exercise Price immediately prior to such event by the aforementioned
fraction. An adjustment made pursuant to this Section 5.01(a) shall become
effective immediately after the effective date of such event, retroactive to the
record date therefor in the case of a dividend or distribution in shares of
Common Stock or other shares of the Company's capital stock.
(b) Adjustment for Cash Dividends and Other Distributions. In the
event that at any time or from time to time the Company shall distribute to all
holders of Common Stock (i) any dividend or other distribution of cash,
evidences of its indebtedness, shares of its capital stock or any other assets,
properties or debt securities or (ii) any options, warrants or other rights to
subscribe for or purchase any of the foregoing (other than, in each case, (x)
any distributions described in Sections 5.01(a), 5.01(c) or 5.01(d) that result
in an adjustment; and (z) any cash dividends or other cash distributions from
current or retained earnings), then the number of shares of Common Stock
issuable upon the exercise of each Preference Warrant shall be increased to a
number determined by multiplying the number of shares of Common Stock issuable
upon the exercise of such Preference Warrant immediately prior to the record
date for any such dividend or distribution by a fraction, the numerator of which
shall be the Current Market Value per share of Common Stock on the record date
for such dividend or distribution and the denominator of which shall be such
Current Market Value per share of Common Stock on the record date for such
dividend or distribution less the sum of (x) the amount of cash, if any,
distributed per share of Common Stock and (y) the fair value (as determined in
good faith by the Board, whose determination shall be evidenced by a board
resolution filed with the Preference Warrant Agent, a copy of which will be sent
to Holders upon request) of the portion, if any, of the distribution applicable
to one share of Common Stock consisting of evidences of indebtedness, shares of
stock, securities, other assets or property, warrants, options or subscription
or purchase rights; and, subject to Sections 5.01(n) and 5.03, the Preference
Exercise Price shall be adjusted to a number determined by dividing the
Preference Exercise Price immediately prior to such record date by the
aforementioned fraction. Such adjustments shall be made whenever any
distribution is made and shall become effective as of the date of distribution,
retroactive to the record date for any such distribution; provided, however,
that the Company is not required to make an adjustment pursuant to this
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23
Section 5.01(b) if at the time of such distribution the Company makes the same
distribution to Holders of Preference Warrants as it makes to holders of Common
Stock pro rata based on the number of shares of Common Stock for which such
Preference Warrants are exercisable (whether or not currently exercisable). No
adjustment shall be made pursuant to this Section 5.01(b) which shall have the
effect of decreasing the number of shares of Common Stock issuable upon exercise
of each Preference Warrant or increasing the Preference Exercise Price.
(c) Adjustment for Rights Issued to All Holders of Common Stock. In
the event that at any time or from time to time the Company shall issue to all
holders of Common Stock without any charge, rights, options or warrants
entitling the holders thereof to subscribe for additional shares of Common
Stock, or securities convertible into or exchangeable or exercisable for
additional shares of Common Stock, entitling such holders to subscribe for or
purchase shares of Common Stock at a price per share that is lower at the record
date for such issuance than the then Current Market Value per share of Common
Stock (other than issuances referred to in Sections 5.01(a), 5.01(b) or
5.01(d)that result in an adjustment), then the number of shares of Common Stock
issuable upon the exercise of each Preference Warrant shall be increased to a
number determined by multiplying the number of shares of Common Stock
theretofore issuable upon exercise of each Preference Warrant by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights, options, warrants or securities plus the
number of additional shares of Common Stock offered for subscription or purchase
or into or for which such securities that are issued are convertible,
exchangeable or exercisable, and the denominator of which shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights,
options, warrants or securities plus the total number of shares of Common Stock
which the aggregate consideration expected to be received by the Company
(assuming the exercise or conversion of all such rights, options, warrants or
securities) would purchase at the then Current Market Value per share of Common
Stock. Subject to Sections 5.01(n) and 5.03, in the event of any such
adjustment, the Preference Exercise Price shall be adjusted to a number
determined by dividing the Preference Exercise Price immediately prior to such
date of issuance by the aforementioned fraction. Such adjustment shall be made
immediately after such rights, options or warrants are issued and shall become
effective, retroactive to the record date for the determination of stockholders
entitled to receive such rights, options, warrants or securities. No adjustment
shall be made pursuant to this Section 5.01(c) which shall have the effect of
decreasing the number of shares of Common Stock purchasable upon exercise of
each Preference Warrant or of increasing the Preference Exercise Price.
(d) Adjustment for Other Issuances of Common Stock or Rights. In the
event that at any time or from time to time the Company shall issue (i) shares
of Common Stock (subject to the provisions below), (ii) rights, options or
warrants entitling the holder thereof to subscribe for shares of Common Stock
(provided, however, that no adjustment shall be made upon the exercise of such
rights, options or warrants), or (iii) securities convertible
<PAGE>
24
into or exchangeable or exercisable for Common Stock (provided, however, that no
adjustment shall be made upon the conversion, exchange or exercise of such
securities (other than issuances specified in (i), (ii) or (iii) which are made
as the result of anti-dilution adjustments in such securities)), at a price per
share at the record date of such issuance that is less than the then Current
Market Value per share of Common Stock (other than issuances referred to in
Sections 5.01(a), 5.01(b) or 5.01(d)that result in an adjustment), then the
number of shares of Common Stock issuable upon the exercise of each Preference
Warrant shall be increased to a number determined by multiplying the number of
shares of Common Stock theretofore issuable upon exercise of each Preference
Warrant by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately after such sale or issuance plus the number
of additional shares of Common Stock offered for subscription or purchase or
into or for which such securities that are issued are convertible, exchangeable
or exercisable, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such sale or issuance plus the
total number of shares of Common Stock which the aggregate consideration
expected to be received by the Company (assuming the exercise or conversion of
all such rights, options, warrants or securities, if any) would purchase at the
then Current Market Value per share of Common Stock, and subject to Sections
5.01(n) and 5.03 the Preference Exercise Price shall be adjusted to a number
determined by dividing the Preference Exercise Price immediately prior to such
date of issuance by the aforementioned fraction. Such adjustments shall be made
whenever such rights, options or warrants or convertible securities are issued.
No adjustment shall be made pursuant to this Section 5.01(d) which shall have
the effect of decreasing the number of shares of Common Stock issuable upon
exercise of each warrant or of increasing the Preference Exercise Price. For
purposes of this Section 5.01(d) only, any issuance of Common Stock, or rights,
options or warrants to subscribe for, or other securities convertible into or
exercisable or exchangeable for, Common Stock, which issuance (or agreement to
issue) (A) is in exchange for or otherwise in connection with the acquisition of
the property (excluding any such exchange exclusively for cash) of any Person
and (B) is at a price per share equal to the Current Market Value at the time of
signing a definitive agreement, shall be deemed to have been made at a price per
share equal to the Current Market Value per share at the record date with
respect to such issuance (the time of closing or consummation of such exchange
or acquisition) if such definitive agreement is entered into within 90 days of
the date of such agreement in principle.
(e) Notice of Adjustment. Whenever the Preference Exercise Price or
the number of shares of Common Stock and other property, if any, issuable upon
exercise of the Preference Warrants is adjusted, as herein provided, the Company
shall deliver to the Preference Warrant Agent and to the holder of the
Preference Warrants a certificate of a firm of independent accountants selected
by the Board (who may be the regular accountants employed by the Company)
setting forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated (including a description of
<PAGE>
25
the basis on which (i) the Board determined the fair value of any evidences of
indebtedness, other securities or property or warrants, options or other
subscription or purchase rights and (ii) the Current Market Value of the Common
Stock was determined, if either of such determinations were required), and
specifying the Preference Exercise Price and the number of shares of Common
Stock issuable upon exercise of Preference Warrants after giving effect to such
adjustment. The Company shall, by Company Order, promptly cause the Preference
Warrant Agent to mail a copy of such certificate to each Holder in accordance
with Section 5.01(l). The Preference Warrant Agent shall be entitled to rely on
such certificate and shall be under no duty or responsibility with respect to
any such certificate, except to exhibit the same from time to time, to any
Holder desiring an inspection thereof during reasonable business hours. The
Preference Warrant Agent shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist which may
require any adjustment of the Preference Exercise Price or the number of shares
of Common Stock or other stock issuable on exercise of the Preference Warrants,
or with respect to the nature or extent of any such adjustment when made, or
with respect to the method employed in making such adjustment or the validity or
value of any shares of Common Stock, evidences of indebtedness, warrants,
options, or other securities or property.
(f) Reorganization of Company; Special Distributions. (i) If the
Company, in a single transaction or through a series of related transactions,
consolidates with or merges with or into any other person or sells, assigns,
transfers, leases, conveys or otherwise disposes of all or substantially all of
its properties and assets to another person or group of affiliated persons or is
a party to a merger or binding share exchange which reclassifies or changes its
outstanding Common Stock (a "Fundamental Transaction"), as a condition to
consummating any such transaction the person formed by or surviving any such
consolidation or merger if other than the Company or the person to whom such
transfer has been made (the "Surviving Person") shall enter into a supplemental
preference warrant agreement. The supplemental preference warrant agreement
shall provide (a) that the holder of a Preference Warrant then outstanding may
exercise it for the kind and amount of securities, cash or other assets which
such holder would have received immediately after the Fundamental Transaction if
such holder had exercised the Preference Warrant immediately before the
effective date of the transaction (whether or not the Preference Warrants were
then exercisable and without giving effect to the Cashless Exercise option); it
being understood that the Preference Warrants will remain exercisable only in
accordance with their terms so that conditions to exercise will remain
applicable, such as payment of Preference Exercise Price, assuming (to the
extent applicable) that such holder (i) was not a constituent person or an
affiliate of a constituent person to such transactions, (ii) made no election
with respect to the form of consideration payable in such transaction, and (iii)
was treated alike with the plurality of non-electing holders, and (b) that the
Surviving Person shall succeed to and be substituted to every right and
obligation of the Company in respect of this Agreement and the Preference
Warrants. The supplemental warrant agreement shall provide for adjustments which
shall be as nearly equivalent as may be
<PAGE>
26
practicable to the adjustments provided for in this Article V. The Surviving
Person shall mail to holders of Preference Warrants at the addresses appearing
on the Preference Warrant Register a notice briefly describing the supplemental
warrant agreement. If the issuer of securities deliverable upon exercise of
Preference Warrants is an affiliate of the Surviving Person, that issuer shall
join in the supplemental warrant agreement.
(ii) Notwithstanding the foregoing, (a) if the Company enters into a
Fundamental Transaction with another Person (other than a subsidiary of the
Company) and consideration is payable to holders of shares of Common Stock (or
other securities) issuable or, deliverable upon exercise of the Preference
Warrants in connection with such Fundamental Transaction which consists solely
of cash or (b) if there is a dissolution, liquidation or winding up of the
Company, then the holders of Preference Warrants shall be entitled to receive
distributions on the date of such event on an equal basis with holders of such
shares (or other securities issuable upon exercise of the Preference Warrants)
as if the Preference Warrants had been exercised immediately prior to such
event, less the aggregate Preference Exercise Price therefor. Upon receipt of
such payment, if any, the rights of a holder of such Preference Warrant shall
terminate and cease and such holder's Preference Warrants shall expire.
(iii) If this paragraph (f) applies, it shall supersede the
application of paragraph (a) of this Section 5.01.
(g) Company Determination Final. Any determination that the Company
or the board of directors of the Company must make pursuant to this Article V
shall be conclusive.
(h) Preference Warrant Agent's Adjustment Disclaimer. The Preference
Warrant Agent shall have no duty to determine when an adjustment under this
Article V should be made, how it should be made or what it should be. The
Preference Warrant Agent shall have no duty to determine whether a supplemental
warrant agreement under paragraph (f) need be entered into or whether any
provisions of any supplemental warrant agreement are correct. The Preference
Warrant Agent shall not be accountable for and makes no representation as to the
validity or value of any securities or assets issued upon exercise of Preference
Warrants. The Preference Warrant Agent shall not be responsible for the
Company's failure to comply with this Article V.
(i) Underlying Preference Warrant Shares. The Company shall at all
times reserve and keep available, free from preemptive rights (except as
otherwise authorized in this Agreement), out of its authorized but unissued
Common Stock or Common Stock held in the treasury of the Company, for the
purpose of effecting the exercise of Preference Warrants, the full number of
Preference Warrant Shares then deliverable upon the exercise of all Preference
<PAGE>
27
Warrants then outstanding and payment of the exercise price, and the shares so
deliverable shall be fully paid and nonassessable and free from all liens and
security interests.
(j) Specificity of Adjustment. Regardless of any adjustment in the
number or kind of shares purchasable upon the exercise of the Preference
Warrants, Preference Warrant Certificates theretofore or thereafter issued may
continue to express the same number and kind of Preference Warrant Shares per
Preference Warrant as are stated on the Preference Warrant Certificates
initially issuable pursuant to this Agreement.
(k) Notice of Voluntary Adjustment. In the event that the Company
shall propose to (a) pay any dividend payable in securities of any class to the
holders of its Common Stock or to make any other non-cash dividend or
distribution to the holders of its Common Stock, (b) offer the holders of its
Common Stock rights to subscribe for or to purchase any securities convertible
into shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (c) issue any (i) shares of Common Stock, (ii)
rights, options or warrants entitling the holders thereof to subscribe for
shares of Common Stock, or (iii) securities convertible into or exchangeable or
exercisable for Common Stock (in the case of (i), (ii) and (iii), only if such
issuance or adjustment would result in an adjustment hereunder), (d) effect any
capital reorganization, reclassification, consolidation or merger, (e) effect
the voluntary or involuntary dissolution, liquidation or winding-up of the
Company or (f) make a tender offer or exchange offer with respect to the Common
Stock, the Company shall within five (5) days send the Holder and the Preference
Warrant Agent a notice of such proposed action or offer. Such notice shall be
mailed by the Company to the Holders at their addresses as they appear in the
Preference Certificate Register, which shall specify the record date for the
purposes of such dividend, distribution or rights, or the date such issuance or
event is to take place and the date of participation therein by the holders of
Common Stock, if any such date is to be fixed, and shall briefly indicate the
effect of such action on the Common Stock and on the number and kind of any
other shares of stock and on other property, if any, and the number of shares of
Common Stock and other securities, if any, issuable upon exercise of each
Preference Warrant and the Preference Exercise Price after giving effect to any
adjustment pursuant to Article 5 which will be required as a result of such
action. Such notice shall be given by the Company as promptly as possible and
(x) in the case of any action covered by clause (a) or (b) above, at least 10
days prior to the record date for determining holders of the Common Stock for
purposes of such action or (y) in the case of any other such action, at least 20
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Common Stock, whichever shall be the
earlier.
(l) Multiple Adjustments. After an adjustment to the Exercise Rate
for outstanding Preference Warrants under this Article V, any subsequent event
requiring an adjustment under this Article V shall cause an adjustment to the
Exercise Rate for outstanding Preference Warrants as so adjusted.
<PAGE>
28
(m) Definitions.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, partnership interests, participations, rights in or other
equivalents (however designated and whether voting or non-voting) of, such
person's capital stock, and any rights (other than debt securities convertible
into capital stock), warrants or options exchangeable for or convertible into
such capital stock whether outstanding on the Issue Date (as defined below) or
issued after the Issue Date.
"Current Market Value" per share of Common Stock of the Company or
any other security at any date shall mean (i) if the security is not registered
under the Exchange Act, (a) the value of the security, determined in good faith
by the board of directors of the Company and certified in a board resolution,
based on the most recently completed arm's-length transaction between the
Company and a person other than an affiliate of the Company and the closing of
which occurs on such date or shall have occurred within the six-month period
preceding such date, or (b) if no such transaction shall have occurred on such
date or within such six-month period, the fair market value of the security as
determined by a nationally or regionally recognized Independent Financial Expert
(as defined herein) (provided that in the case of the calculation of Current
Market Value for determining the cash value of fractional shares, any such
determination within six months that is, in the good faith judgment of the
Board, a reasonable determination of value, may be utilized) or (ii)(a) if the
security is registered under the Exchange Act, the average of the daily closing
sales prices of the securities for the 20 consecutive trading days immediately
preceding such date, or (b) if the security has been registered under the
Exchange Act for less than 20 consecutive trading days before such date, then
the average of the daily closing sales prices for all of the trading days before
such date for which closing sales prices are available, in the case of each of
(ii)(a) and (ii)(b), as certified by the president, the chief executive officer,
any vice president or the chief financial officer of the Company in a writing
delivered to the Preference Warrant Agent. The closing sales price for each such
trading day shall be: (A) in the case of a security listed or admitted to
trading on any U.S. national securities exchange or quotation system, the
closing sales price, regular way, on such day, or if no sale takes place on such
day, the average of the closing bid and asked prices on such day, (B) in the
case of a security not then listed or admitted to trading on any U.S. national
securities exchange or quotation system, the last reported sale price on such
day, or if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reputable quotation source designated
by the Company, (C) in the case of a security not then listed or admitted to
trading on any U.S. national securities exchange or quotation system and as to
which no such reported sale price or bid and asked prices are available, the
average of the reported high bid and low asked prices on such day, as reported
by a reputable quotation service, or a newspaper of general circulation in the
Borough of Manhattan, The City and State of New York customarily published on
each Business Day, designated by the Company, or, if there shall be no bid and
<PAGE>
29
asked prices on such day, the average of the high bid and low asked prices, as
so reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are not bid
and asked prices reported during the 30 days prior to the date in question, the
Current Market Value shall be determined as if the securities were not
registered under the Exchange Act.
"Independent Financial Expert" means a U.S. investment banking firm
of national standing in the United States (i) which does not, and whose
directors, officers and employees or affiliates do not have a direct or indirect
material financial interest for its proprietary account in the Company or any of
its affiliates and (ii) which, in the judgment of the board of directors of the
Company, is otherwise independent with respect to the Company and its affiliates
and qualified to perform the task for which it is to be engaged.
"Issue Date" means January 27, 1999.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity, including any predecessor of any such entity.
(n) When De Minimis Adjustment May Be Deferred. The adjustments
required by the preceding Sections of this Article V shall be made whenever and
as often as any specified event requiring an adjustment shall occur, except that
no adjustment of the Preference Exercise Price or the number of shares of Common
Stock issuable upon exercise of Preference Warrants that would otherwise be
required shall be made unless and until such adjustment either by itself or with
other adjustments not previously made increases or decreases by at least 1% the
Preference Exercise Price or the number of shares of Common Stock issuable upon
exercise of Preference Warrants immediately prior to the making of such
adjustment. Any adjustment representing a change of less than such minimum
amount shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Article V and not previously made, would
result in a minimum adjustment. For the purpose of any adjustment, any specified
event shall be deemed to have occurred at the close of business on the date of
its occurrence. In computing adjustments under this Article V, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(o) Adjustment of Exercise Price. In addition, notwithstanding any
other provisions of this Article V, the Company may reduce the Preference
Exercise Price (to an amount not less than the par value of the Common Stock)
for a period of time not less then 20 business days as deemed appropriate and
determined in good faith by the Board.
<PAGE>
30
SECTION 5.02. Fractional Preference Warrant Shares. The Company
shall not be required to issue fractional Preference Warrant Shares upon
exercise of the Preference Warrants or distribute Preference Warrant
Certificates that evidence fractional shares of Common Stock. In addition, in no
event shall any holder of Preference Warrants be required to make any payment of
a fractional cent. In lieu of fractional Preference Warrant Shares, there shall
be paid to the registered holders of Preference Warrant Certificates at the time
Preference Warrants evidenced thereby are exercised as herein provided an amount
in cash equal to the same fraction of the Current Market Value per Warrant Share
on the Business Day preceding the date the Preference Warrant Certificates
evidencing such Preference Warrants are surrendered for exercise. Such payments
shall be made by check or by transfer to an account maintained by such
registered holder with a bank in The City of New York. If any holder surrenders
for exercise more than one Preference Warrant Certificate, the number of
Preference Warrant Shares deliverable to such holder may, at the option of the
Company, be computed on the basis of the aggregate amount of all the Preference
Warrants exercised by such holder.
SECTION 5.03. Exceptions to Antidilution Provisions. Without
limiting any other exception contained in this Agreement, including in
particular, without limiting any preemptive rights identified in Section 4.04 of
this Agreement, and in addition thereto, no adjustment need be made for:
(i) grants or exercises of rights granted to employees of the
Company or any of its subsidiaries of shares of Common Stock issued or
granted to such employees under any stock incentive plan or otherwise,
whether or not upon the exercise, exchange or conversion of any such
rights, issued in good faith and, except for Section 5.01(c) and (d), at
fair market value (as determined in good faith by the Board of Directors
of the Company);
(ii) grants or exercises of rights granted to employees of the
Company or any of its subsidiaries of shares of Common Stock issued or
granted to such employees under any employee stock purchase plan or
otherwise, whether or not upon the exercise, exchange or conversion of any
such rights, issued in good faith (as determined in good faith by the
Board of Directors of the Company);
(iii) options, warrants or other agreements or rights to purchase
capital stock of the Company entered into prior to the date of the
issuance of the Preference Warrants and any issuance of shares of Common
Stock in connection therewith;
(iv) rights to purchase shares of Common Stock pursuant to a Company
plan for reinvestment of dividends or interest;
<PAGE>
31
(v) a change in the par value of shares of Common Stock (including a
change from par value to no par value or vice versa); and
(vi) bona fide public offerings or private placements pursuant to
Section 4(2) of the Securities Act, Rule 144A, Regulation D or Regulation
S thereunder of any security trading on any national securities exchange
or in the over the counter market, or of a security directly or indirectly
convertible or exchangeable for any such security, involving at least one
investment bank of national reputation.
ARTICLE VI
CONCERNING THE PREFERENCE WARRANT AGENT
SECTION 6.01. Preference Warrant Agent. The Company hereby appoints
Bankers Trust Company as Preference Warrant Agent of the Company in respect of
the Preference Warrants and the Preference Warrant Certificates upon the terms
and subject to the conditions set forth herein and in the Preference Warrant
Certificates; and Bankers Trust Company hereby accepts such appointment. The
Preference Warrant Agent shall have the powers and authority specifically
granted to and conferred upon it in the Preference Warrant Certificates and
hereby and such further powers and authority to act on behalf of the Company as
the Company may hereafter grant to or confer upon it and it shall accept in
writing. All of the terms and provisions with respect to such powers and
authority contained in the Preference Warrant Certificates are subject to and
governed by the terms and provisions hereof. The Preference Warrant Agent may
act through agents and shall not be responsible for the misconduct or negligence
of any such agent appointed with due care.
SECTION 6.02. Conditions of Preference Warrant Agent's Obligations.
The Preference Warrant Agent accepts its obligations herein set forth upon the
terms and conditions hereof and in the Preference Warrant Certificates,
including the following, to all of which the Company agrees and to all of which
the rights hereunder of the holders from time to time of the Preference Warrant
Certificates shall be subject:
(a) The Preference Warrant Agent shall be entitled to compensation
to be agreed upon with the Company in writing for all services rendered by
it and the Company agrees promptly to pay such compensation and to
reimburse the Preference Warrant Agent for its reasonable out-of-pocket
expenses (including reasonable fees and expenses of counsel) incurred
without gross negligence or willful misconduct on its part in connection
with the services rendered by it hereunder. The Company also agrees to
indemnify the Preference Warrant Agent and any predecessor Preference
Warrant Agent, their directors, officers, affiliates, agents and employees
for, and to hold them
<PAGE>
32
and their directors, officers, affiliates, agents and employees harmless
against, any loss, liability or expense of any nature whatsoever
(including, without limitation, reasonable fees and expenses of counsel)
incurred without gross negligence or willful misconduct on the part of the
Preference Warrant Agent, arising out of or in connection with its acting
as such Preference Warrant Agent hereunder and its exercise of its rights
and performance of its obligations hereunder. The obligations of the
Company under this Section 6.02 shall survive the exercise and the
expiration of the Preference Warrant Certificates and the resignation and
removal of the Preference Warrant Agent.
(b) In acting under this Agreement and in connection with the
Preference Warrant Certificates, the Preference Warrant Agent is acting
solely as agent of the Company and does not assume any obligation or
relationship of agency or trust for or with any of the owners or holders
of the Preference Warrant Certificates.
(c) The Preference Warrant Agent may consult with counsel of its
selection and any advice or written opinion of such counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with
such advice or opinion.
(d) The Preference Warrant Agent shall be fully protected and shall
incur no liability for or in respect of any action taken or omitted to be
taken or thing suffered by it in reliance upon any Preference Warrant
Certificate, notice, direction, consent, certificate, affidavit, opinion
of counsel, instruction, statement or other paper or document reasonably
believed by it to be genuine and to have been presented or signed by the
proper parties.
(e) The Preference Warrant Agent, and its officers, directors,
affiliates and employees ("Related Parties"), may become the owners of, or
acquire any interest in, Preference Warrant Certificates, shares or other
obligations of the Company with the same rights that it or they would have
if it were not the Preference Warrant Agent hereunder and, to the extent
permitted by applicable law including, but not limited to, the Trust
Indenture Act of 1939, it or they may engage or be interested in any
financial or other transaction with the Company and may act on, or as
depositary, trustee or agent for, any committee or body of holders of
shares or other obligations of the Company as freely as if it were not the
Preference Warrant Agent hereunder. Nothing in this Agreement shall be
deemed to prevent the Preference Warrant Agent or such Related Parties
from acting in any other capacity for the Company.
(f) The Preference Warrant Agent shall not be under any liability
for interest on, and shall not be required to invest, any monies at any
time received by it
<PAGE>
33
pursuant to any of the provisions of this Agreement or of the Preference
Warrant Certificates.
(g) The Preference Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement (or any term
or provision hereof) or the execution and delivery hereof (except the due
execution and delivery hereof by the Preference Warrant Agent) or in
respect of the validity or execution of any Preference Warrant Certificate
(except its authentication thereof).
(h) The recitals and other statements contained herein and in the
Preference Warrant Certificates (except as to the Preference Warrant
Agent's authentication thereon) shall be taken as the statements of the
Company and the Preference Warrant Agent assumes no responsibility for the
correctness of the same. The Preference Warrant Agent does not make any
representation as to the validity or sufficiency of this Agreement or the
Preference Warrant Certificates, except for its due execution and delivery
of this Agreement; provided, however, that the Preference Warrant Agent
shall not be relieved of its duty to authenticate the Preference Warrant
Certificates as authorized by this Agreement. The Preference Warrant Agent
shall not be accountable for the use or application by the Company of the
proceeds of the exercise of any Preference Warrant.
(i) Before the Preference Warrant Agent acts or refrains from acting
with respect to any matter contemplated by this Preference Warrant
Agreement, it may require and may conclusively rely on:
(1) an Officers' Certificate (as defined in the Indenture)
stating on behalf of the Company that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Preference Warrant Agreement relating to the proposed action have
been complied with; and
(2) an opinion of counsel for the Company stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with, provided that such matter is one customarily opined
upon by counsel.
Each Officers' Certificate or, if requested, an opinion of counsel
with respect to compliance with a condition or covenant provided for in
this Preference Warrant Agreement shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
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34
(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, he or she
has made such examination or investigation as is necessary to enable
him or her 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.
(j) The Preference Warrant Agent shall be obligated to perform such
duties as are specifically set forth herein and in the Preference Warrant
Certificates, and no implied duties or obligations shall be read into this
Agreement or the Preference Warrant Certificates against the Preference
Warrant Agent. The Preference Warrant Agent shall not be accountable or
under any duty or responsibility for the use by the Company of any of the
Preference Warrant Certificates duly authenticated by the Preference
Warrant Agent and delivered by it to the Company pursuant to this
Agreement. The Preference Warrant Agent shall have no duty or
responsibility in case of any default by the Company in the performance of
its covenants or agreements contained in the Warrant Certificates or in
the case of the receipt of any written demand from a holder of a
Preference Warrant Certificate with respect to such default, including,
without limiting the generality of the foregoing, any duty or
responsibility to initiate or attempt to initiate any proceedings at law
or otherwise or, except as provided in Section 7.02 hereof, to make any
demand upon the Company.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the
Company made or given under any provision of this Agreement shall be
sufficient if signed by the chairman or a co-chairman of the board, the
chief executive officer, the president, the chief financial officer, any
executive vice president or any senior vice president of the Company
signing alone, or by any vice president signing together with the
secretary, any assistant secretary, the treasurer, or any assistant
treasurer of the Company.
(l) The Preference Warrant Agent shall have no responsibility in
respect of any adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform, execute, acknowledge
and deliver, or cause to be performed, executed, acknowledged and
delivered, all such further and other acts, instruments and assurances as
may reasonably be required by the
<PAGE>
35
Preference Warrant Agent for the carrying out or performing by the
Preference Warrant Agent of the provisions of this Agreement.
(n) The Preference Warrant Agent is hereby authorized and directed
to accept written instructions with respect to the performance of its
duties hereunder from any one of the chairman or a co-chairman of the
board, the president, the chief executive officer, the chief financial
officer, any executive vice president or any senior vice president alone,
or any vice president together with the secretary, assistant secretary,
the treasurer or any assistant treasurer, of the Company or any other
officer or official of the Company reasonably believed to be authorized to
give such instructions and to apply to such officers or officials for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions with respect to any matter arising in
connection with the Preference Warrant Agent's duties and obligations
arising under this Agreement. Such application by the Preference Warrant
Agent for written instructions from the Company may, at the option of the
Preference Warrant Agent, set forth in writing any action proposed to be
taken or omitted by the Preference Warrant Agent with respect to its
duties or obligations under this Agreement and the date on or after which
such action shall be taken and the Preference Warrant Agent shall not be
liable for any action taken or omitted in accordance with a proposal
included in any such application on or after the date specified therein
(which date shall be not less than 10 Business Days after the Company
receives such application unless the Company consents to a shorter
period); provided that (i) such application includes a statement to the
effect that it is being made pursuant to this paragraph (n) and that
unless objected to prior to such date specified in the application, the
Preference Warrant Agent will not be liable for any such action or
omission to the extent set forth in such paragraph (n) and (ii) prior to
taking or omitting any such action, the Preference Warrant Agent has not
received written instructions objecting to such proposed action or
omission.
(o) Whenever in the performance of its duties under this Agreement
the Preference Warrant Agent shall deem it necessary or desirable that any
fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed on behalf of
the Company by any one of the chairman of the board of directors, the
president, the chief executive officer, the treasurer, the controller, any
vice president or the secretary or assistant secretary of the Company or
any other officer or official of the Company reasonably believed to be
authorized to give such instructions and delivered to the Preference
Warrant Agent; and such certificate shall be full authorization to the
Preference Warrant Agent for any action taken or suffered in
<PAGE>
36
good faith by it under the provisions of this Agreement in reliance upon
such certificate.
(p) The Preference Warrant Agent shall not be required to risk or
expend its own funds in the performance of its obligations and duties
hereunder.
SECTION 6.03. Resignation and Appointment of Successor. (a) The
Company agrees, for the benefit of the holders from time to time of the
Preference Warrant Certificates, that there shall at all times be a Preference
Warrant Agent hereunder.
(b) The Preference Warrant Agent may at any time resign as
Preference Warrant Agent by giving written notice to the Company of such
intention on its part, specifying the date on which its desired resignation
shall become effective; provided, however, that such date shall be at least 60
days after the date on which such notice is given unless the Company agrees to
accept less notice. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor Preference Warrant Agent, qualified as provided in
Section 6.03(d) hereof, by written instrument in duplicate signed on behalf of
the Company, one copy of which shall be delivered to the resigning Preference
Warrant Agent and one copy to the successor Preference Warrant Agent. As
provided in Section 6.03(d) hereof, such resignation shall become effective upon
the earlier of (x) the acceptance of the appointment by the successor Preference
Warrant Agent or (y) 60 days after receipt by the Company of notice of such
resignation. The Company may, at any time and for any reason, and shall, upon
any event set forth in the next succeeding sentence, remove the Preference
Warrant Agent and appoint a successor Preference Warrant Agent by written
instrument in duplicate, specifying such removal and the date on which it is
intended to become effective, signed on behalf of the Company, one copy of which
shall be delivered to the Preference Warrant Agent being removed and one copy to
the successor Preference Warrant Agent. The Preference Warrant Agent shall be
removed as aforesaid if it shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Preference Warrant Agent
or of its property shall be appointed, or any public officer shall take charge
or control of it or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation. Any removal of the Preference
Warrant Agent and any appointment of a successor Preference Warrant Agent shall
become effective upon acceptance of appointment by the successor Preference
Warrant Agent as provided in Section 6.03(d). As soon as practicable after
appointment of the successor Preference Warrant Agent, the Company shall cause
written notice of the change in the Preference Warrant Agent to be given to each
of the registered holders of the Warrants in the manner provided for in Section
7.04 hereof.
(c) Upon resignation or removal of the Preference Warrant Agent, if
the Company shall fail to appoint a successor Preference Warrant Agent within a
period of 60 days after receipt of such notice of resignation or removal, then
the holder of any Warrant
<PAGE>
37
Certificate or the retiring Preference Warrant Agent may apply to a court of
competent jurisdiction for the appointment of a successor to the Preference
Warrant Agent. Pending appointment of a successor to the Preference Warrant
Agent, either by the Company or by such a court, the duties of the Preference
Warrant Agent shall be carried out by the Company.
(d) Any successor Preference Warrant Agent, whether appointed by the
Company or by a court, shall be a bank or trust company in good standing,
incorporated under the laws of the United States of America or any State thereof
and having, at the time of its appointment, a combined capital surplus of at
least $50 million. Such successor Preference Warrant Agent shall execute and
deliver to its predecessor and to the Company an instrument accepting such
appointment hereunder and all the provisions of this Agreement, and thereupon
such successor Preference Warrant Agent, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Preference Warrant Agent hereunder, and such predecessor shall
thereupon become obligated to (i) transfer and deliver, and such successor
Preference Warrant Agent shall be entitled to receive, all securities, records
or other property on deposit with or held by such predecessor as Preference
Warrant Agent hereunder and (ii) upon payment of the amounts then due it
pursuant to Section 6.02(a) hereof, pay over, and such successor Preference
Warrant Agent shall be entitled to receive, all monies deposited with or held by
any predecessor Preference Warrant Agent hereunder.
(e) Any corporation or bank into which the Preference Warrant Agent
hereunder may be merged or converted, or any corporation or bank with which the
Preference Warrant Agent may be consolidated, or any corporation or bank
resulting from any merger, conversion or consolidation to which the Preference
Warrant Agent shall be a party, or any corporation or bank to which the
Preference Warrant Agent shall sell or otherwise transfer all or substantially
all of its corporate trust business, shall be the successor to the Preference
Warrant Agent under this Agreement (provided that such corporation or bank shall
be qualified as aforesaid) without the execution or filing of any document or
any further act on the part of any of the parties hereto.
(f) No Preference Warrant Agent under this Preference Warrant
Agreement shall be personally liable for any action or omission of any successor
Preference Warrant Agent.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment. This Agreement and the terms of the
Preference Warrants may be amended by the Company, the Purchasers and the
Preference Warrant Agent,
<PAGE>
38
without the consent of any other holder of any Preference Warrant Certificate,
for the purpose of curing any ambiguity, or of curing, correcting or
supplementing any defective or inconsistent provision contained herein or
therein, or to effect any assumptions of the Company's obligations hereunder and
thereunder by a successor corporation under certain circumstances or in any
other manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of the Preference Warrant
Certificates.
The Company and the Preference Warrant Agent may amend, modify or
supplement this Agreement and the terms of the Preference Warrants, and waivers
to departures from the terms hereof and thereof may be given, with the consent
of the Requisite Preference Warrant Holders (as defined below) for the purpose
of adding any provision to or changing in any manner or eliminating any of the
provisions of this Agreement or modifying in any manner the rights of the
holders of the outstanding Preference Warrants. "Requisite Preference Warrant
Holders" means (i) in the case of any amendment, modification, supplement or
waiver affecting only Preference Warrant Holders as such holders of a majority
in number of the outstanding Preference Warrants, voting separately as a class,
or (ii) in the case of any amendment, modification, supplement or waiver
affecting Preference Warrant Shares, a majority in number of Preference Warrant
Shares represented by the Preference Warrants that would be issuable assuming
exercise thereof at the time such amendment, modification, supplement or waiver
is voted upon. Notwithstanding any other provision of this Agreement, the
Preference Warrant Agent's consent must be obtained regarding any supplement or
amendment which alters the Preference Warrant Agent's rights or duties (it being
expressly understood that the foregoing shall not be in derogation of the right
of the Company to remove the Preference Warrant Agent in accordance with Section
6.03 hereof). For purposes of any amendment, modification or waiver hereunder,
Preference Warrants held by the Company or any of its Affiliates (other than the
Purchasers) shall be disregarded.
Any modification or amendment made in accordance with this Agreement
will be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and Preference
Warrant Agent. If the Preference Warrant Agent shall receive any notice or
demand addressed to the Company by the holder of a Preference Warrant
Certificate pursuant to the provisions hereof or of the Preference Warrant
Certificates, the Preference Warrant Agent shall promptly forward such notice or
demand to the Company.
<PAGE>
39
SECTION 7.03. Addresses for Notices to Parties and for Transmission
of Documents. All notices hereunder to the parties hereto shall be deemed to
have been given when sent by certified or registered mail, postage prepaid, or
by facsimile transmission, confirmed by first class mail, postage prepaid,
addressed to any party hereto as follows:
To the Company:
@Entertainment, Inc.
One Commercial Plaza
Hartford, Connecticut 06103-3585
Facsimile: 00 1 860 549 1674
Attention: Robert E. Fowler, III
with copies to:
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006-4078
Facsimile: (202) 452-7074
Attention: Marc R. Paul, Esq.
To the Preference Warrant Agent:
Bankers Trust Company
Corporate Trust Office
Four Albany Street
New York, New York 10006
Facsimile: (212) 250-0933
Attention: Corporate Trust Manager
or at any other address of which either of the foregoing shall have notified the
other in writing.
SECTION 7.04. Notices to Holders. Notices to holders of Preference
Warrants shall be mailed to such holders at the addresses of such holders as
they appear in the Preference Warrant Register. Any such notice shall be
sufficiently given if sent by first-class mail, postage prepaid to the address
of such holder.
SECTION 7.05. Applicable Law. THIS AGREEMENT AND EACH PREFERENCE
WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
40
SECTION 7.06. Persons Having Rights Under Agreement. Nothing in this
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Preference Warrant
Agent and the holders of the Preference Warrant Certificates and, with respect
to Sections 4.03 and 4.04, the holders of Preference Warrant Shares issued
pursuant to Preference Warrants, any right, remedy or claim under or by reason
of this Agreement or of any covenant, condition, stipulation, promise or
agreement hereof; and all covenants (except for Section 4.03 which shall be for
the benefit of all holders of Preference Warrant Shares issued pursuant to
Preference Warrants), conditions, stipulations, promises and agreements in this
Agreement contained shall be for the sole and exclusive benefit of the Company
and the Preference Warrant Agent and their successors and of the holders of the
Preference Warrant Certificates.
SECTION 7.07. Headings. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
SECTION 7.08. Counterparts. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
SECTION 7.09. Inspection of Agreement. A copy of this Agreement
shall be available during regular business hours at the principal corporate
trust office of the Preference Warrant Agent, for inspection by the holder of
any Preference Warrant Certificate. The Preference Warrant Agent may require
such holder to submit his Preference Warrant Certificate for inspection by it.
SECTION 7.10. Availability of Equitable Remedies. Since a breach of
the provisions of this Agreement could not adequately be compensated by money
damages, holders of Preference Warrants shall be entitled, in addition to any
other right or remedy available to them, to an injunction restraining such
breach or a threatened breach and to specific performance of any such provision
of this Agreement, and in either case no bond or other security shall be
required in connection therewith, and the parties hereby consent to such
injunction and to the ordering of specific performance.
SECTION 7.11. Obtaining of Governmental Approvals. The Company will
from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and securities acts filings
under U.S. federal and state laws, and the rules and regulations of all stock
exchanges on which the Preference Warrant Shares may become listed
<PAGE>
41
which may be or become requisite in connection with the issuance, sale, transfer
and delivery of the Preference Warrant Shares issued upon exercise of the
Preference Warrants.
[Signature Page Follows]
<PAGE>
42
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
@ENTERTAINMENT, INC.
By: /S/ ROBERT E. FOWLER, III
-------------------------------
Title: CHIEF EXECUTIVE OFFICER
By: /S/ DONALD MILLER JONES
-------------------------------
Title: CHIEF FINANCIAL OFFICER
BANKERS TRUST COMPANY,
Preference Warrant Agent
By: /S/ DOROTHY ROBINSON
-------------------------------
Title: ASSISTANT VICE PRESIDENT
<PAGE>
43
Arnold Chase
By:
-----------------------------------
Name:
Cheryl Chase
By:
-----------------------------------
Name:
Rhoda Chase
By:
-----------------------------------
Name:
The Darland Trust
By: Rothschild Trust Guernsey Limited
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR ACCREDITED INVESTORS (AS DEFINED IN REGULATION D UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE 144(K) (OR ANY SUCCESSOR
PROVISION THEREOF) UNDER THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ITS
SUBSIDIARY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THESE SECURITIES
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE PREFERENCE WARRANT AGENT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
A-1
<PAGE>
CUSIP No. 045920 15 4
No. 1 45,000 Preference Warrants
PREFERENCE WARRANT CERTIFICATE
@ENTERTAINMENT, INC.
This Preference Warrant Certificate certifies that Cede & Co., or
its registered assigns, is the registered holder of 45,000 Preference Warrants
(the "Preference Warrants") to purchase an aggregate of 4,950,000 shares of
Common Stock, par value $0.01 per share, issuable upon exercise of the
Preference Warrants (the "Preference Warrant Shares") of @ENTERTAINMENT, INC., a
Delaware corporation (the "Company," which term includes its successors and
assigns). Each Preference Warrant entitles the holder to purchase from the
Company at any time from 9:00 a.m. New York City time on or after the Exercise
Date until 5:00 p.m., New York City time, on February 1, 2010 (the "Preference
Expiration Date"), 110 fully paid, registered and non-assessable Preference
Warrant Shares, subject to adjustment as provided in Article V of the Preference
Warrant Agreement, at a preference exercise price of $10.00 for each share
purchased (the "Preference Exercise Price"); upon surrender of this Preference
Warrant Certificate and payment of the Preference Exercise Price (i) in cash or
by certified or official bank check, (ii) by a Cashless Exercise or (iii) by any
combination of (i) and (ii), at any office or agency maintained for that purpose
by the Company (the "Preference Warrant Exercise Office"), subject to the
conditions set forth herein and in the Preference Warrant Agreement. For
purposes of this Warrant, a "Cashless Exercise" shall mean an exercise of a
Preference Warrant in accordance with the immediately following two sentences.
To effect a Cashless Exercise, the holder may exercise a Preference Warrant or
Preference Warrants without payment of the Preference Exercise Price in cash by
surrendering such Preference Warrant or Preference Warrants (represented by one
or more Preference Warrant Certificates) and in exchange therefor, receiving
such number of shares of Common Stock equal to the product of (1) that number of
shares of Common Stock for which such Preference Warrant or Preference Warrants
are exercisable and which would be issuable in the event of an exercise with
payment of the Preference Exercise Price and (2) the Cashless Exercise Ratio.
The "Cashless Exercise Ratio" shall equal a fraction, the numerator of which is
the excess of the Current Market Value (calculated as set forth in this
Preference Warrant) per share of Common Stock on the date of exercise over the
Preference Exercise Price per share of Common Stock as of the date of exercise
and the denominator of which is the Current Market Value per share of Common
Stock on the date of exercise. Upon surrender of a Preference Warrant
Certificate representing more than one Preference Warrant in connection with the
holder's option to elect a Cashless Exercise, the holder must specify the number
of Preference Warrants for which such Preference Warrant Certificate is to be
exercised (without giving effect to the Cashless Exercise). All provisions of
the Preference Warrant Agreement shall be
A-2
<PAGE>
applicable with respect to a Cashless Exercise of a Preference Warrant
Certificate for less than the full number of Preference Warrants represented
thereby. Capitalized terms used herein without being defined herein shall have
the definitions ascribed to such terms in the Preference Warrant Agreement.
"Current Market Value" per share of Common Stock of the Company or
any other security at any date shall mean (i) if the security is not registered
under the Exchange Act, (a) the value of the security, determined in good faith
by the board of directors of the Company and certified in a board resolution,
based on the most recently completed arm's-length transaction between the
Company and a person other than an affiliate of the Company and the closing of
which occurs on such date or shall have occurred within the six-month period
preceding such date, or (b) if no such transaction shall have occurred on such
date or within such six-month period, the fair market value of the security as
determined by a nationally or regionally recognized Independent Financial Expert
(as defined herein) (provided that in the case of the calculation of Current
Market Value for determining the cash value of fractional shares, any such
determination within six months that is, in the good faith judgment of the
Board, a reasonable determination of value, may be utilized) or (ii)(a) if the
security is registered under the Exchange Act, the average of the daily closing
sales prices of the securities for the 20 consecutive trading days immediately
preceding such date, or (b) if the security has been registered under the
Exchange Act for less than 20 consecutive trading days before such date, then
the average of the daily closing sales prices for all of the trading days before
such date for which closing sales prices are available, in the case of each of
(ii)(a) and (ii)(b), as certified by the president, the chief executive officer,
any vice president or the chief financial officer of the Company in a writing
delivered to the Preference Warrant Agent. The closing sales price for each such
trading day shall be: (A) in the case of a security listed or admitted to
trading on any U.S. national securities exchange or quotation system, the
closing sales price, regular way, on such day, or if no sale takes place on such
day, the average of the closing bid and asked prices on such day, (B) in the
case of a security not then listed or admitted to trading on any U.S. national
securities exchange or quotation system, the last reported sale price on such
day, or if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reputable quotation source designated
by the Company, (C) in the case of a security not then listed or admitted to
trading on any U.S. national securities exchange or quotation system and as to
which no such reported sale price or bid and asked prices are available, the
average of the reported high bid and low asked prices on such day, as reported
by a reputable quotation service, or a newspaper of general circulation in the
Borough of Manhattan, The City and State of New York customarily published on
each Business Day, designated by the Company, or, if there shall be no bid and
asked prices on such day, the average of the high bid and low asked prices, as
so reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are not bid
and asked prices reported during the 30 days prior to the date in question, the
Current Market Value shall be determined as if the securities were not
registered under the Exchange Act.
A-3
<PAGE>
"Independent Financial Expert" means a U.S. investment banking firm
of national standing in the United States, (i) which does not, and whose
directors, officers and employees or affiliates do not have a direct or indirect
material financial interest for its proprietary account in the Company or any of
its affiliates and (ii) which, in the judgment of the board of directors of the
Company, is otherwise independent with respect to the Company and its affiliates
and qualified to perform the task for which it is to be engaged.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity, including any predecessor of any such entity.
The Company has initially designated the principal corporate trust
office of the Preference Warrant Agent in the Borough of Manhattan, The City of
New York, as the initial Preference Warrant Agent Office. The number of shares
of Common Stock issuable upon exercise of the Preference Warrants ("Exercise
Rate") is subject to adjustment upon the occurrence of certain events set forth
in the Preference Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City
time, on February 1, 2010 shall thereafter be void.
If the Company in a single transaction or through a series of
related transactions, consolidates with or merges with or into any other person
or sells, assigns, transfers, leases, conveys or otherwise disposes of all or
substantially all of its properties and assets to another person or group of
affiliated persons or is a party to a merger or binding share exchange which
reclassifies or changes its outstanding Common Stock (a "Fundamental
Transaction"), as a condition to consummating any such transaction the person
formed by or surviving any such consolidation or merger if other than the
Company or the person to whom such transfer has been made (the "Surviving
Person") shall enter into a supplemental preference warrant agreement. The
supplemental preference warrant agreement shall provide (a) that the holder of a
Preference Warrant then outstanding may exercise it for the kind and amount of
securities, cash or other assets which such holder would have received
immediately after the Fundamental Transaction if such holder had exercised the
Preference Warrant immediately before the effective date of the transaction
(regardless of whether the Preference Warrants were then exercisable and without
giving effect to the Cashless Exercise option), assuming (to the extent
applicable) that such holder (i) made no election with respect to the form of
consideration payable in such transaction and (ii) was treated alike with the
plurality of non-electing holders, and (b) that the Surviving Person shall
succeed to and be substituted for every right and obligation of the Company in
respect of the Preference Warrant Agreement and the Preference Warrants. The
Surviving Person shall mail to holders of Preference Warrants at the addresses
appearing on the Warrant Register a notice briefly describing the supplemental
warrant agreement. If the issuer of securities deliverable upon exercise of
Preference Warrants
A-4
<PAGE>
is an affiliate of the Surviving Person, that company shall join in the
supplemental warrant agreement.
Notwithstanding the foregoing, (i) if the Company enters into a
Fundamental Transaction and the consideration payable to holders of the Common
Stock (or other securities) issuable or deliverable upon exercise of the
Preference Warrants in connection with such Fundamental Transaction consists
solely of cash or (ii) there is a dissolution, liquidation or winding up of the
issuer, then the holders of Preference Warrants shall be entitled to receive
distributions on the date of such event on an equal basis with holders of Common
Stock (or other securities issuable or delivered upon exercise of the Preference
Warrants) as if the Preference Warrants had been exercised immediately prior to
such event, less the Exercise Price therefor. Upon receipt of such payment, if
any, the rights of a holder of a Preference Warrant shall terminate and cease
and such holder's Preference Warrants shall expire.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Preference Warrant Certificate shall not be valid unless
authenticated by the Preference Warrant Agent, as such term is used in the
Preference Warrant Agreement.
The Holders of Preference Warrants have agreed with the Company that
while they may exercise their Preference Warrants at any time, in whole or in
part, prior to the Preference Expiration Date, such Holder of Preference
Warrants will not be allowed to sell or otherwise dispose of the Preference
Warrant Shares prior to one year from the date hereof.
THIS PREFERENCE WARRANT CERTIFICATE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
A-5
<PAGE>
WITNESS the facsimile seal of the Company and facsimile signatures
of its duly authorized officers.
Dated: January 27, 1999
@ENTERTAINMENT, INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Preference Warrants
referred to in the within
mentioned Preference Warrant Agreement:
BANKERS TRUST COMPANY,
Preference Warrant Agent
By:
-----------------------------------
Authorized Signatory
A-6
<PAGE>
@ENTERTAINMENT, INC.
The Preference Warrants evidenced by this Preference Warrant
Certificate are part of a duly authorized issue of Preference Warrants expiring
at 5:00 p.m., New York City time, on February 1, 2010 (the "Preference
Expiration Date"). Each Preference Warrant initially represents the right to
purchase at any time on or after the Preference Exercise Date (as defined in the
Preference Warrant Agreement) and on or prior to the Preference Expiration Date
110 Preference Warrant Shares, subject to adjustment as set forth in the
Preference Warrant Agreement. The Preference Warrants are issued pursuant to a
Preference Warrant Agreement dated as of January 27, 1999 (the "Preference
Warrant Agreement"), duly executed and delivered by the Company to Bankers Trust
Company, as Preference Warrant Agent (the "Preference Warrant Agent"), which
Preference Warrant Agreement is hereby incorporated by reference in and made a
part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Preference Warrant Agent, the Company and the holders (the words "holders"
or "holder" meaning the registered holders or registered holder) of the
Preference Warrants.
Preference Warrants may be exercised by (i) surrendering at any
Preference Warrant Exercise Office this Preference Warrant Certificate with the
form of Election to Exercise set forth hereon duly completed and executed and
(ii) to the extent such exercise is not being effected through a Cashless
Exercise by paying in full, in cash or by certificated or official bank check,
the Warrant Preference Exercise Price for each such Preference Warrant exercised
and any other amounts required to be paid pursuant to the Preference Warrant
Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Preference Warrant Agent at or prior to
11:00 a.m., New York City time, on a Business Day, the exercise of the
Preference Warrant to which such items relate will be effective on such Business
Day. If any items referred to in the last sentence of the preceding paragraph
are received after 11:00 a.m., New York City time, on a Business Day, the
exercise of the Preference Warrants to which such item relates will be deemed to
be effective on the next succeeding Business Day. Notwithstanding the foregoing,
in the case of an exercise of Preference Warrants on February 1, 2010, if all of
the items referred to in the last sentence of the preceding paragraph are
received by the Preference Warrant Agent at or prior to 5:00 p.m., New York City
time, on such Preference Expiration Date, the exercise of the Preference
Warrants to which such items relate will be effective on the Preference
Expiration Date.
As soon as practicable after the exercise of any Preference Warrant
or Preference Warrants, the Company shall issue or cause to be issued to or upon
the written order of the registered holder of this Preference Warrant
Certificate, a certificate or certificates evidencing such Preference Warrant
Share or Preference Warrant Shares to which such holder is entitled, in fully
registered form, registered in such name or names as may be directed by
A-7
<PAGE>
such holder pursuant to the Election to Exercise, as set forth on the reverse of
this Preference Warrant Certificate. Such certificate or certificates evidencing
the Preference Warrant Share or Preference Warrant Shares shall be deemed to
have been issued and any persons who are designated to be named therein shall be
deemed to have become the holder of record of such Preference Warrant Share or
Preference Warrant Shares as of the close of business on the date upon which the
exercise of this Preference Warrant was deemed to be effective as provided in
the preceding paragraph.
The Company shall not be required to issue fractional Preference
Warrant Shares upon exercise of the Preference Warrants or distribute Preference
Warrant Certificates that evidence fractional Preference Warrant Shares. In lieu
of fractional Preference Warrant Shares, there shall be paid to the registered
Holder of this Preference Warrant Certificate at the time such Preference
Warrant Certificate is exercised an amount in cash equal to the same fraction of
the Current Market Value per share of Common Stock on the Business Day preceding
the date this Preference Warrant Certificate is surrendered for exercise.
Preference Warrant Certificates, when surrendered at any office or
agency maintained by the Company for that purpose by the registered holder
thereof in person or by legal representative or attorney duly authorized in
writing, may be exchanged for a new Preference Warrant Certificate or new
Preference Warrant Certificates evidencing in the aggregate a like number of
Preference Warrants, in the manner and subject to the limitations provided in
the Preference Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Preference
Warrant Certificate at any office or agency maintained by the Company for that
purpose, a new Preference Warrant Certificate evidencing in the aggregate a like
number of Preference Warrants shall be issued to the transferee in exchange for
this Preference Warrant Certificate, subject to the limitations provided in the
Preference Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company and the Preference Warrant Agent may deem and treat the
registered holder hereof as the absolute owner of this Preference Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone) for the purpose of any exercise hereof and for all other
purposes, and neither the Company nor the Preference Warrant Agent shall be
affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in The
City of New York, (ii) the principal U.S. securities exchange or market, if any,
on which any Common Stock is listed or admitted to trading and (iii) the
principal U.S. securities exchange or market, if any, on which the Preference
Warrants are listed or admitted to trading, are open for business.
A-8
<PAGE>
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR ACCREDITED INVESTORS (AS DEFINED IN REGULATION D UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE 144(K) (OR ANY SUCCESSOR
PROVISION THEREOF) UNDER THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ITS
SUBSIDIARY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THESE SECURITIES
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE PREFERENCE WARRANT AGENT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
A-9
<PAGE>
CUSIP No.
No. Preference Warrants
FORM OF
PREFERENCE WARRANT CERTIFICATE
@ENTERTAINMENT, INC.
This Preference Warrant Certificate certifies that Cede & Co., or
its registered assigns, is the registered holder of _______ Preference Warrants
(the "Preference Warrants") to purchase an aggregate of _________ shares of
Common Stock, par value $0.01 per share, issuable upon exercise of the
Preference Warrants (the "Preference Warrant Shares") of @ENTERTAINMENT, INC., a
Delaware corporation (the "Company," which term includes its successors and
assigns). Each Preference Warrant initially entitles the holder to purchase from
the Company at any time from 9:00 a.m. New York City time on or after the
Exercise Date until 5:00 p.m., New York City time, on February 1, 2010 (the
"Preference Expiration Date"), 110 fully paid, registered and non-assessable
Preference Warrant Shares, subject to adjustment as provided in Article V of the
Preference Warrant Agreement, at an exercise price of $10.00 for each share
purchased (the "Preference Exercise Price"); upon surrender of this Preference
Warrant Certificate and payment of the Preference Exercise Price (i) in cash or
by certified or official bank check, (ii) by a Cashless Exercise or (iii) by any
combination of (i) and (ii), at any office or agency maintained for that purpose
by the Company (the "Preference Warrant Exercise Office"), subject to the
conditions set forth herein and in the Preference Warrant Agreement. For
purposes of this Warrant, a "Cashless Exercise" shall mean an exercise of a
Preference Warrant in accordance with the immediately following two sentences.
To effect a Cashless Exercise, the holder may exercise a Preference Warrant or
Preference Warrants without payment of the Preference Exercise Price in cash by
surrendering such Preference Warrant or Preference Warrants (represented by one
or more Preference Warrant Certificates) and in exchange therefor, receiving
such number of shares of Common Stock equal to the product of (1) that number of
shares of Common Stock for which such Preference Warrant or Preference Warrants
are exercisable and which would be issuable in the event of an exercise with
payment of the Preference Exercise Price and (2) the Cashless Exercise Ratio.
The "Cashless Exercise Ratio" shall equal a fraction, the numerator of which is
the excess of the Current Market Value (calculated as set forth in this
Preference Warrant) per share of Common Stock on the date of exercise over the
Preference Exercise Price per share of Common Stock as of the date of exercise
and the denominator of which is the Current Market Value per share of Common
Stock on the date of exercise. Upon surrender of a Preference Warrant
Certificate representing more than one Preference Warrant in connection with the
holder's option to elect a Cashless Exercise, the holder must specify the number
of Preference
A-10
<PAGE>
Warrants for which such Preference Warrant Certificate is to be exercised
(without giving effect to the Cashless Exercise). All provisions of the
Preference Warrant Agreement shall be applicable with respect to a Cashless
Exercise of a Preference Warrant Certificate for less than the full number of
Preference Warrants represented thereby. Capitalized terms used herein without
being defined herein shall have the definitions ascribed to such terms in the
Preference Warrant Agreement.
"Current Market Value" per share of Common Stock of the Company or
any other security at any date shall mean (i) if the security is not registered
under the Exchange Act, (a) the value of the security, determined in good faith
by the board of directors of the Company and certified in a board resolution,
based on the most recently completed arm's-length transaction between the
Company and a person other than an affiliate of the Company and the closing of
which occurs on such date or shall have occurred within the six-month period
preceding such date, or (b) if no such transaction shall have occurred on such
date or within such six-month period, the fair market value of the security as
determined by a nationally or regionally recognized Independent Financial Expert
(as defined herein) (provided that in the case of the calculation of Current
Market Value for determining the cash value of fractional shares, any such
determination within six months that is, in the good faith judgment of the
Board, a reasonable determination of value, may be utilized) or (ii)(a) if the
security is registered under the Exchange Act, the average of the daily closing
sales prices of the securities for the 20 consecutive trading days immediately
preceding such date, or (b) if the security has been registered under the
Exchange Act for less than 20 consecutive trading days before such date, then
the average of the daily closing sales prices for all of the trading days before
such date for which closing sales prices are available, in the case of each of
(ii)(a) and (ii)(b), as certified by the president, the chief executive officer,
any vice president or the chief financial officer of the Company in a writing
delivered to the Preference Warrant Agent. The closing sales price for each such
trading day shall be: (A) in the case of a security listed or admitted to
trading on any U.S. national securities exchange or quotation system, the
closing sales price, regular way, on such day, or if no sale takes place on such
day, the average of the closing bid and asked prices on such day, (B) in the
case of a security not then listed or admitted to trading on any U.S. national
securities exchange or quotation system, the last reported sale price on such
day, or if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reputable quotation source designated
by the Company, (C) in the case of a security not then listed or admitted to
trading on any U.S. national securities exchange or quotation system and as to
which no such reported sale price or bid and asked prices are available, the
average of the reported high bid and low asked prices on such day, as reported
by a reputable quotation service, or a newspaper of general circulation in the
Borough of Manhattan, The City and State of New York customarily published on
each Business Day, designated by the Company, or, if there shall be no bid and
asked prices on such day, the average of the high bid and low asked prices, as
so reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are not bid
and asked prices reported during the 30 days prior
A-11
<PAGE>
to the date in question, the Current Market Value shall be determined as if the
securities were not registered under the Exchange Act.
"Independent Financial Expert" means a U.S. investment banking firm
of national standing in the United States, (i) which does not, and whose
directors, officers and employees or affiliates do not have a direct or indirect
material financial interest for its proprietary account in the Company or any of
its affiliates and (ii) which, in the judgment of the board of directors of the
Company, is otherwise independent with respect to the Company and its affiliates
and qualified to perform the task for which it is to be engaged.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity, including any predecessor of any such entity.
The Company has initially designated the principal corporate trust
office of the Preference Warrant Agent in the Borough of Manhattan, The City of
New York, as the initial Preference Warrant Agent Office. The number of shares
of Common Stock issuable upon exercise of the Preference Warrants ("Exercise
Rate") is subject to adjustment upon the occurrence of certain events set forth
in the Preference Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City
time, on February 1, 2010 shall thereafter be void.
If the Company in a single transaction or through a series of
related transactions, consolidates with or merges with or into any other person
or sells, assigns, transfers, leases, conveys or otherwise disposes of all or
substantially all of its properties and assets to another person or group of
affiliated persons or is a party to a merger or binding share exchange which
reclassifies or changes its outstanding Common Stock (a "Fundamental
Transaction"), as a condition to consummating any such transaction the person
formed by or surviving any such consolidation or merger if other than the
Company or the person to whom such transfer has been made (the "Surviving
Person") shall enter into a supplemental preference warrant agreement. The
supplemental preference warrant agreement shall provide (a) that the holder of a
Preference Warrant then outstanding may exercise it for the kind and amount of
securities, cash or other assets which such holder would have received
immediately after the Fundamental Transaction if such holder had exercised the
Preference Warrant immediately before the effective date of the transaction
(regardless of whether the Preference Warrants were then exercisable and without
giving effect to the Cashless Exercise option), assuming (to the extent
applicable) that such holder (i) made no election with respect to the form of
consideration payable in such transaction and (ii) was treated alike with the
plurality of non-electing holders, and (b) that the Surviving Person shall
succeed to and be substituted for every right and obligation of the Company in
respect of the Preference Warrant Agreement and the Preference Warrants. The
Surviving Person shall mail to holders of Preference Warrants
A-12
<PAGE>
at the addresses appearing on the Warrant Register a notice briefly describing
the supplemental warrant agreement. If the issuer of securities deliverable upon
exercise of Preference Warrants is an affiliate of the Surviving Person, that
company shall join in the supplemental warrant agreement.
Notwithstanding the foregoing, (i) if the Company enters into a
Fundamental Transaction and the consideration payable to holders of the Common
Stock (or other securities) issuable or deliverable upon exercise of the
Preference Warrants in connection with such Fundamental Transaction consists
solely of cash or (ii) there is a dissolution, liquidation or winding up of the
issuer, then the holders of Preference Warrants shall be entitled to receive
distributions on the date of such event on an equal basis with holders of Common
Stock (or other securities issuable or delivered upon exercise of the Preference
Warrants) as if the Preference Warrants had been exercised immediately prior to
such event, less the Exercise Price therefor. Upon receipt of such payment, if
any, the rights of a holder of a Preference Warrant shall terminate and cease
and such holder's Preference Warrants shall expire.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Preference Warrant Certificate shall not be valid unless
authenticated by the Preference Warrant Agent, as such term is used in the
Preference Warrant Agreement.
The Holders of Preference Warrants have agreed with the Company that
while they may exercise their Preference Warrants at any time, in whole or in
part, prior to the Preference Expiration Date, such Holders of Preference
Warrants will not be allowed to sell or otherwise dispose of the Preference
Warrant Shares prior to one year from the date hereof.
THIS PREFERENCE WARRANT CERTIFICATE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
A-13
<PAGE>
WITNESS the facsimile seal of the Company and facsimile signatures
of its duly authorized officers.
Dated: January 27, 1999
@ENTERTAINMENT, INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Preference Warrants
referred to in the within
mentioned Preference Warrant Agreement:
BANKERS TRUST COMPANY,
Preference Warrant Agent
By:
-----------------------------------
Authorized Signatory
A-14
<PAGE>
@ENTERTAINMENT, INC.
The Preference Warrants evidenced by this Preference Warrant
Certificate are part of a duly authorized issue of Preference Warrants expiring
at 5:00 p.m., New York City time, on February 1, 2010 (the "Preference
Expiration Date"). Each Preference Warrant initially represents the right to
purchase at any time on or after the Preference Exercise Date (as defined in the
Preference Warrant Agreement) and on or prior to the Preference Expiration Date
110 Preference Warrant Shares, subject to adjustment as set forth in the
Preference Warrant Agreement. The Preference Warrants are issued pursuant to a
Preference Warrant Agreement dated as of January 27, 1999 (the "Preference
Warrant Agreement"), duly executed and delivered by the Company to Bankers Trust
Company, as Preference Warrant Agent (the "Preference Warrant Agent"), which
Preference Warrant Agreement is hereby incorporated by reference in and made a
part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Preference Warrant Agent, the Company and the holders (the words "holders"
or "holder" meaning the registered holders or registered holder) of the
Preference Warrants.
Preference Warrants may be exercised by (i) surrendering at any
Preference Warrant Exercise Office this Preference Warrant Certificate with the
form of Election to Exercise set forth hereon duly completed and executed and
(ii) to the extent such exercise is not being effected through a Cashless
Exercise by paying in full, in cash or by certificated or official bank check,
the Warrant Preference Exercise Price for each such Preference Warrant exercised
and any other amounts required to be paid pursuant to the Preference Warrant
Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Preference Warrant Agent at or prior to
11:00 a.m., New York City time, on a Business Day, the exercise of the
Preference Warrant to which such items relate will be effective on such Business
Day. If any items referred to in the last sentence of the preceding paragraph
are received after 11:00 a.m., New York City time, on a Business Day, the
exercise of the Preference Warrants to which such item relates will be deemed to
be effective on the next succeeding Business Day. Notwithstanding the foregoing,
in the case of an exercise of Preference Warrants on February 1, 2010, if all of
the items referred to in the last sentence of the preceding paragraph are
received by the Preference Warrant Agent at or prior to 5:00 p.m., New York City
time, on such Preference Expiration Date, the exercise of the Preference
Warrants to which such items relate will be effective on the Preference
Expiration Date.
As soon as practicable after the exercise of any Preference Warrant
or Preference Warrants, the Company shall issue or cause to be issued to or upon
the written order of the registered holder of this Preference Warrant
Certificate, a certificate or certificates evidencing such Preference Warrant
Share or Preference Warrant Shares to which such holder is entitled, in fully
registered form, registered in such name or names as may be directed by
A-15
<PAGE>
such holder pursuant to the Election to Exercise, as set forth on the reverse of
this Preference Warrant Certificate. Such certificate or certificates evidencing
the Preference Warrant Share or Preference Warrant Shares shall be deemed to
have been issued and any persons who are designated to be named therein shall be
deemed to have become the holder of record of such Preference Warrant Share or
Preference Warrant Shares as of the close of business on the date upon which the
exercise of this Preference Warrant was deemed to be effective as provided in
the preceding paragraph.
The Company shall not be required to issue fractional Preference
Warrant Shares upon exercise of the Preference Warrants or distribute Preference
Warrant Certificates that evidence fractional Preference Warrant Shares. In lieu
of fractional Preference Warrant Shares, there shall be paid to the registered
Holder of this Preference Warrant Certificate at the time such Preference
Warrant Certificate is exercised an amount in cash equal to the same fraction of
the Current Market Value per share of Common Stock on the Business Day preceding
the date this Preference Warrant Certificate is surrendered for exercise.
Preference Warrant Certificates, when surrendered at any office or
agency maintained by the Company for that purpose by the registered holder
thereof in person or by legal representative or attorney duly authorized in
writing, may be exchanged for a new Preference Warrant Certificate or new
Preference Warrant Certificates evidencing in the aggregate a like number of
Preference Warrants, in the manner and subject to the limitations provided in
the Preference Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Preference
Warrant Certificate at any office or agency maintained by the Company for that
purpose, a new Preference Warrant Certificate evidencing in the aggregate a like
number of Preference Warrants shall be issued to the transferee in exchange for
this Preference Warrant Certificate, subject to the limitations provided in the
Preference Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company and the Preference Warrant Agent may deem and treat the
registered holder hereof as the absolute owner of this Preference Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone) for the purpose of any exercise hereof and for all other
purposes, and neither the Company nor the Preference Warrant Agent shall be
affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in The
City of New York, (ii) the principal U.S. securities exchange or market, if any,
on which any Common Stock is listed or admitted to trading and (iii) the
principal U.S. securities exchange or market, if any, on which the Preference
Warrants are listed or admitted to trading, are open for business.
A-16
<PAGE>
[FORM OF ELECTION TO EXERCISE]
(To be executed upon exercise of Preference Warrants on the Effective Preference
Exercise Date)
The undersigned hereby irrevocably elects to exercise [ ] of
the Preference Warrants represented by this Preference Warrant Certificate and
purchase the whole number of Preference Warrant Shares issuable upon the
exercise of such Preference Warrants and herewith tenders payment for such
Preference Warrant Shares as follows:
$ ________ in cash or by certified or official bank check; or by
surrender of Preference Warrants pursuant to a Cashless Exercise (as defined in
the Preference Warrant Agreement) for [ ] shares of Common Stock at the current
Cashless Exercise Ratio.
The undersigned requests that a certificate representing such
Preference Warrant Shares be registered in the name of __________ whose address
is ____________________ and that such shares be delivered to _____________ whose
address is ____________. Any cash payments to be paid in lieu of a fractional
share of Common Stock should be delivered to ____________________ whose address
is ____________________ and the check representing payment thereof should be
delivered to ______________ whose address is _______________.
Dated ___________, ____
Name of holder of
Preference Warrant
Certificate:_________________________________________________
(Please Print)
Tax Identification or
Social Security Number:____________________________________________
Address: _________________________________________________________
_________________________________________________________
Signature:_________________________________________________________
Note: The above signature must correspond with the name
as written upon the face of this Preference
Warrant Certificate in every particular, without
alteration or enlargement or any change whatever
and if the certificate representing the Preference
Warrant Shares or any
A-17
<PAGE>
Preference Warrant Certificate representing
Preference Warrants not exercised is to be
registered in a name other than that in which this
Preference Warrant Certificate is registered, or
if any cash payment to be paid in lieu of a
fractional share is to be made to a person other
than the registered holder of this Preference
Warrant Certificate, the signature of the holder
hereof must be guaranteed as provided in the
Preference Warrant Agreement.
Dated ______________, ____
Signature:________________________________________
Note: The above signature must correspond
with the name as written upon the
face of this Preference Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
Signature Guaranteed:_____________________________
[FORM OF ASSIGNMENT]
For value received __________________________ hereby sells, assigns
and transfers unto _____________________________ the within Preference Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint __________________ attorney, to
transfer said Preference Warrant Certificate on the books of the within-named
Company, with full power of substitution in the premises.
Dated ________________, ____
Signature:________________________________________
Note: The above signature must correspond
with the name as written upon the
face of this Preference Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
Signature Guaranteed:_____________________________
A-18
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED PREFERENCE WARRANTS
The following exchanges of a part of this Global Preference Warrant for
Certificated Preference Warrants have been made:
Number of
Amount of Amount of Preference
decrease in increase in Warrants of this
Number of Number of Global
Preference Preference Preference Signature of
Warrants of this Warrants of this Warrant authorized
Global Global following officer of
Date of Preference Preference such decrease Preference
Exchange Warrant Warrant (or increase) Warrant Agent
- --------------------------------------------------------------------------------
A-19
<PAGE>
EXHIBIT B
FORM OF LEGEND FOR GLOBAL PREFERENCE WARRANT
Any Global Preference Warrant authenticated and delivered hereunder
shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL PREFERENCE WARRANT WITHIN THE MEANING OF
THE PREFERENCE WARRANT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME 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 PREFERENCE WARRANT AGREEMENT, 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 PREFERENCE
WARRANT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS 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.
B-1
<PAGE>
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Preference Warrants to Purchase Common Stock (the "Preference Warrants")
of @ENTERTAINMENT, INC.
This Certificate relates to ____ Preference Warrants held in* ___
book-entry or* _______ Certificated Preference form by ______ (the
"Transferor").
The Transferor:*
|_| has requested the Preference Warrant Agent by written order to deliver
in exchange for its beneficial interest in the Global Preference Warrant held by
the Depositary a Preference Warrant or Preference Warrants in definitive,
registered form of authorized denominations and an aggregate number equal to its
beneficial interest in such Global Preference Warrant (or the portion thereof
indicated above); or
|_| has requested the Preference Warrant Agent by written order to
exchange or register the transfer of a Preference Warrant or Preference
Warrants.
In connection with such request and in respect of each such
Preference Warrant, the Transferor does hereby certify that the Transferor is
familiar with the Preference Warrant Agreement relating to the above captioned
Preference Warrants and the restrictions on transfers thereof as provided in
Section 1.07 of such Preference Warrant Agreement, and that the transfer of this
Preference Warrant does not require registration under the Securities Act of
1933, as amended (the "Act") because*:
|_| Such Preference Warrant is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 1.07 (a)(y)(A) or Section
1.07 (d)(i)(A) of the Preference Warrant Agreement).
|_| Such Preference Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Act), in reliance on Rule
144A.
- -----------------------------
* Check applicable box.
C-1
<PAGE>
|_| Such Preference Warrant is being transferred in accordance with Rule
144 under the Act.
|_| Such Preference Warrant is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act.
------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------------
Date:_____________________
C-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exhibit 4.5
Registration Rights Agreement
Dated as of January 27, 1999
among
@Entertainment, Inc.
and
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
and
Deutsche Bank Securities
Deutsche Bank Securities Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as
of January 27, 1999 is made and entered into among @ENTERTAINMENT, INC. (the
"Company"), a Delaware corporation, and MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED ("Merrill Lynch") and Deutsche Bank Securities Inc. ("Deutsche Bank
Securities") (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated January 22, 1999 between the Company and the Initial Purchasers (the
"Purchase Agreement"), which provides for the sale by the Company to the Initial
Purchasers of 256,800 of the Company's Units, each Unit consisting of $1,000
aggregate principal amount at maturity of the Company's 14 1/2% Senior Discount
Notes due 2009 (the "Notes") and four Warrants, each Warrant entitling the
holder thereof to purchase 1.7656 shares of common stock, par value $0.01 per
share of the Company. In order to induce the Initial Purchasers to enter into
the Purchase Agreement, the Company has agreed to provide to the Initial
Purchasers and their direct and indirect transferees the registration rights set
forth in this Agreement. The execution of this Agreement is a condition to the
closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"COMPANY" shall have the meaning set forth in the preamble and
also includes the Company's successors.
"DEPOSITARY" shall mean The Depository Trust Company, or any
other depositary appointed by the Company; PROVIDED, HOWEVER, that such
depositary must have an address in the Borough of Manhattan in the City
of New York.
<PAGE>
2
"EXCHANGE NOTES" shall mean 14 1/2% Series B Senior Notes due
2009 of the Company, issued under the Indenture, containing terms
identical to the Notes (except that (a) the Accreted Value of the
Exchange Notes shall be the Accreted Value of the Notes on the date of
the consummation of the Exchange Offer and the issuance of the Exchange
Notes (b) the transfer restrictions thereon pertaining to United States
securities laws shall be eliminated and (c) certain provisions relating
to an increase in the stated rate of interest thereon shall be
eliminated), to be offered to Holders of Registrable Notes in exchange
for Notes pursuant to the Exchange Offer.
"EXCHANGE OFFER" shall mean the exchange offer by the Company
of Exchange Notes for Registrable Notes pursuant to Section 2(a)
hereof.
"EXCHANGE OFFER REGISTRATION" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"HOLDERS" shall mean the Initial Purchasers, for so long as
they own any Registrable Notes, and each of their successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Notes under the Indenture.
"INDENTURE" shall mean the Indenture relating to the Notes
dated as of January 27, 1999 between the Company and Bankers Trust
Company as trustee (the "TRUSTEE"), as the same may be amended from
time to time in accordance with the terms thereof.
"INITIAL PURCHASERS" shall have the meaning set forth in the
preamble.
"ISSUE DATE" means January 27, 1999.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount at maturity of Registrable Notes
outstanding; PROVIDED that whenever the consent or approval of Holders
of a specified percentage of Registrable Notes is required hereunder,
Registrable Notes held by the Company or any of its affiliates (as such
term is defined in Rule 405 under the 1933 Act) shall be disregarded in
determining whether such consent or approval was given by the Holders
of such required percentage or amount.
<PAGE>
3
"NOTES" shall have the meaning set forth in the Preamble.
"PARTICIPATING BROKER-DEALER" shall have the meaning set forth
in Section 3(f).
"PERSON" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Notes covered by a
Shelf Registration Statement, and by all other amendments and
supplements to a prospectus, including post-effective amendments, and
in each case including all material incorporated by reference therein.
"PURCHASE AGREEMENT" shall have the meaning set forth in the
preamble.
"REGISTRABLE NOTES" shall mean the Notes; PROVIDED, HOWEVER,
that any Notes shall cease to be Registrable Notes when (i) a
Registration Statement with respect to such Notes shall have been
declared effective under the 1933 Act and such Notes shall have been
disposed of pursuant to such Registration Statement, (ii) such Notes
shall have been sold to the public pursuant to Rule 144(k) (or any
similar provision then in force, but not Rule 144A) under the 1933 Act,
(iii) such Notes shall have ceased to be outstanding or (iv) such Notes
have been exchanged for Exchange Notes upon consummation of the
Exchange Offer.
"REGISTRATION EXPENSES" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. ("NASD") registration
and filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws and compliance with
the rules of the NASD (including reasonable fees and disbursements of
United States and local counsel for any underwriters or Holders in
connection with blue sky qualification of any of the Exchange Notes or
Registrable Notes), (iii) all expenses of the Company in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and
other documents relating to the performance of and compliance with this
Agreement, (iv) all rating agency fees, (v) all fees and expenses
incurred in connection with the listing, if any, of any of the
Registrable Notes on any securities exchange or exchanges,
<PAGE>
4
(vi) the fees and disbursements of counsel for the Company and of the
independent public accountants of the Company, including the expenses
of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, (vii) the fees and expenses of the
Trustees, and any escrow agent or custodian, and (viii) in the case of
any Underwritten Offering, any fees and disbursements of the
underwriters customarily required to be paid by issuers or sellers of
securities and the reasonable fees and expenses of any special experts
retained by the Company in connection with any Registration Statement,
but excluding (except as otherwise provided herein) fees of United
States, United Kingdom, Polish and other counsel to the underwriters or
the Holders and underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of Registrable Notes
by a Holder.
"REGISTRATION STATEMENT" shall mean any registration statement
of the Company which covers any of the Exchange Notes or Registrable
Notes pursuant to the provisions of this Agreement, and all amendments
and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"SHELF REGISTRATION" shall mean a registration effected
pursuant to Section 2(b) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a shelf registration
statement of the Company pursuant to the provisions of Section 2(b) of
this Agreement which covers all of the Registrable Notes on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to
such registration statement, including post-effective amendments, in
each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"UNDERWRITTEN OFFERING" shall mean an underwritten offering of
a minimum of US$15 million aggregate principal amount at maturity of
Notes.
2. REGISTRATION UNDER THE 1933 ACT. (a) EXCHANGE OFFER
REGISTRATION. To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Company shall use its best efforts
(A) to file within 70 days after the Issue Date an Exchange Offer Registration
Statement covering the offer by the Company to the Holders to exchange all of
the Registrable Notes for Exchange Notes, (B) to cause such Exchange Offer
Registration Statement to be declared effective by the SEC within 130 days after
the Issue Date,
<PAGE>
5
(C) to cause such Registration Statement to remain effective until the closing
of the Exchange Offer and (D) to consummate the Exchange Offer within 160 days
following the Issue Date. The Exchange Notes will be issued under the Indenture.
As soon as practicable, but in no event more than one week, after the
effectiveness of the Exchange Offer Registration Statement, the Company shall
commence the Exchange Offer, it being the objective of such Exchange Offer to
enable each Holder (other than Participating Broker-Dealers) eligible and
electing to exchange Registrable Notes for Exchange Notes (assuming that such
Holder (i) is not an affiliate of the Company within the meaning of Rule 405
under the 1933 Act, (ii) acquires the Exchange Notes in the ordinary course of
such Holder's business and (iii) has no arrangements or understandings with any
Person to participate in the Exchange Offer for the purpose of distributing the
Exchange Notes) to trade such Exchange Notes from and after their receipt
without any limitations or restrictions under the 1933 Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30 days
after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(iii) use the services of the Depositary for the Exchange
Offer with respect to Notes evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Notes at
any time prior to 5:00 P.M. New York City time, on the last business
day on which the Exchange Offer shall remain open, by sending to the
institution specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the
principal amount of Registrable Notes delivered for exchange, and a
statement that such Holder is withdrawing his election to have such
Notes exchanged; and
(v) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
<PAGE>
6
As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange Registrable Notes duly tendered and
not validly withdrawn pursuant to the Exchange Offer in accordance with
the terms of the Exchange Offer Registration Statement and the letter
of transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes so accepted for exchange by the
Company; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Notes to each Holder of Registrable Notes equal in principal
amount at maturity to the principal amount at maturity of the
Registrable Notes of such Holder so accepted for exchange.
Original issue discount will accrete, if prior to February 1,
2004, and cash interest will accrue, if on or after February 1, 2004, on each
Exchange Note exchanged for a Registrable Note, in either case from the last
date on which original issue discount accreted or cash interest was paid, as the
case may be, on the Notes surrendered in exchange therefor. If no cash interest
has been paid on the Notes, such interest will accrue from February 1, 2004. The
Exchange Offer shall not be subject to any conditions, other than (i) that the
Exchange Offer, or the making of any exchange by a Holder, does not violate
applicable law or any applicable interpretation of the Staff of the SEC, and
(ii) the due tendering of Registrable Notes in accordance with the Exchange
Offer. Each Holder of Registrable Notes (other than Participating
Broker-Dealers) who wishes to exchange such Registrable Notes for Exchange Notes
in the Exchange Offer shall represent that (i) it is not an affiliate (as
defined in Rule 405 under the 1933 Act) of the Company, (ii) any Exchange Notes
to be received by it will be acquired in the ordinary course of business and
(iii) at the time of the commencement of the Exchange Offer it has no
arrangement with any Person to participate in the distribution (within the
meaning of the 1933 Act) of the Exchange Notes and shall have made such other
representations as may be reasonably necessary under applicable SEC rules,
regulations or interpretations to render the use of Form S-4 or another
appropriate form under the 1933 Act available. To the extent permitted by law,
the Company shall inform the Initial Purchasers of the names and addresses of
the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall
have the right to contact such Holders and otherwise facilitate the tender of
Registrable Notes in the Exchange Offer.
(b) SHELF REGISTRATION. In the event that (i) any changes in
law or the applicable interpretations of the Staff of the SEC do not permit the
Company to effect the Exchange Offer; (ii) for any reason the Exchange Offer is
not consummated within 160 days following the Issue Date; (iii) any Holder of
Notes notifies the Company prior to the
<PAGE>
7
effectiveness of the Exchange Offer Registration Statement that (A) due to a
change in law or SEC policy it is not entitled to participate in the Exchange
Offer, (B) due to a change in law or SEC policy it may not resell the Exchange
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus is not appropriate or available for such resales
by such Holder, (C) it is a broker-dealer and owns Registrable Notes acquired
directly from the Company or an affiliate of the Company or (D) the Majority
Holders of Notes that are Registrable Notes may not resell the Exchange Notes
acquired by them in the Exchange Offer to the public without restriction under
the 1933 Act and without restriction under applicable blue sky or state
securities laws, the Company shall, at its cost,
(A) as promptly as practicable, file with the SEC a Shelf
Registration Statement relating to the offer and sale of the
Registrable Notes by the Holders from time to time in accordance with
the methods of distribution elected by the Majority Holders of Notes
that are Registrable Notes and set forth in such Shelf Registration
Statement, and use its best efforts to cause such Shelf Registration
Statement to be declared effective by the SEC within 160 days after the
Issue Date. In the event that the Company is required to file a Shelf
Registration Statement upon the request of any Holder (other than the
Initial Purchasers) not eligible to participate in the Exchange Offer
pursuant to clause (iii) above or upon the request of any Initial
Purchaser pursuant to clause (iii)(C) above, the Company shall file and
have declared effective by the SEC both an Exchange Offer Registration
Statement pursuant to Section 2(a) with respect to all Registrable
Notes and a Shelf Registration Statement (which may be a combined
Registration Statement with the Exchange Offer Registration Statement)
with respect to offers and sales of Registrable Notes held by such
Holder or the Initial Purchasers after completion of the Exchange
Offer;
(B) subject to clause d(ii) below, use its best efforts to
keep the Shelf Registration Statement continuously effective in order
to permit the Prospectus forming part thereof to be usable by Holders
for a period of two years from the date the Shelf Registration
Statement is declared effective by the SEC (or one year from the date
the Shelf Registration Statement is declared effective if such Shelf
Registration Statement is filed upon the request of the Initial
Purchasers pursuant to clause (iii)(C) above) or such shorter period
which will terminate when all of the Registrable Notes covered by the
Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement; and
(C) notwithstanding any other provisions hereof, use its best
efforts to ensure that (x) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any
supplement thereto comply in all material respects with the 1933 Act
and the rules and regulations thereunder, (y) any Shelf
<PAGE>
8
Registration Statement and any amendment thereto do not, upon
effectiveness, contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (z) any Prospectus
forming part of any Shelf Registration Statement, and any supplement to
such Prospectus (as amended or supplemented from time to time), do not
include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements, in light of
the circumstances under which they were made, not misleading.
The Company further agrees, if necessary, to supplement or
amend the Shelf Registration Statement if reasonably requested by the Majority
Holders of Notes that are Registrable Notes with respect to information relating
to the Holders and otherwise as required by Section 3(b) below, to use all
reasonable efforts to cause any such amendment to become effective and such
Shelf Registration to become usable as soon as thereafter practicable and to
furnish to the Holders of Registrable Notes copies of any such supplement or
amendment promptly after its being used or filed with the SEC.
(c) EXPENSES. The Company shall pay all Registration Expenses
in connection with the registration pursuant to Section 2(a) or 2(b) and, in the
case of any Shelf Registration Statement, will reimburse the Holders or the
Initial Purchasers for the reasonable fees and disbursements of one United
States firm or counsel, one United Kingdom firm or counsel and one Polish firm
or counsel designated in writing by the Majority Holders of the Notes to act as
counsel for the Holders of the Registrable Notes in connection therewith. Each
Holder shall pay all expenses of its counsel other than as set forth in the
preceding sentence, underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable Notes
pursuant to the Shelf Registration Statement.
(d) EFFECTIVE REGISTRATION STATEMENT. (i) The Company will be
deemed not to have used its best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if it voluntarily
takes any action that would result in any such Registration Statement not being
declared effective or in the Holders of Registrable Notes covered thereby not
being able to exchange or offer and sell such Registrable Notes during that
period unless (A) such action is required by applicable law or (B) such action
is taken by the Company in good faith and for valid business reasons (not
including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly complies
with the requirements of Section 3(k) hereof, if applicable.
(ii) The Company may suspend the availability of the Shelf
Registration Statement and the use of the Prospectus for a period not to exceed
an aggregate of 60 days in
<PAGE>
9
any four month period or four periods not to exceed an aggregate of 120 days in
any 12 month period if such suspension is effected in good faith and for valid
business reasons (not including avoidance of the Company's obligations
hereunder), including the acquisition or divestiture of assets, the filing of
public reports with the SEC and during the pendency of material corporate
developments, so long as the Company promptly complies with the requirements of
Section 3(k) hereof (including compliance with the obligation to prepare a
supplement or amendment to a Registration Statement and related Prospectus if
necessary) promptly after the termination of such suspension.
(iii) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; PROVIDED, HOWEVER, that if, after it has been declared
effective, the offering of Registrable Notes pursuant to a Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Notes pursuant to
such Registration Statement may legally resume.
(e) INCREASE IN INTEREST RATE. In the event that (i) the
Exchange Offer Registration Statement is not filed with the SEC on or prior to
the 70th calendar day after the Issue Date, (ii) the Exchange Offer Registration
Statement is not declared effective on or prior to the 130th calendar day after
the Issue Date, (iii) the Exchange Offer is not consummated on or prior to the
160th calendar day after the Issue Date or, as the case may be, a Shelf
Registration Statement with respect to the Registrable Notes is not declared
effective on or prior to the 160th day after the Issue Date or (iv) the Exchange
Offer Registration Statement or the Shelf Registration Statement is declared
effective but thereafter ceases to be effective or usable within the applicable
period as provided in this Agreement except pursuant to Section 2(d)(ii) (each
such event referred to in clauses (i) through (iv) above, a "Registration
Default"), the Company shall be required to pay additional interest in cash on
each Interest Payment Date in an amount equal to one-half of one percent (0.5%)
per annum of the Accreted Value of the Notes, with respect to the first 90-day
period following such Registration Default. The amount of such additional
interest will increase by an additional one-half of one percent (0.5%) per annum
for each subsequent 90-day period until such Registration Default has been
cured, up to a maximum of one and one-half percent (1.5%) per annum. Such
additional interest shall cease to accrue when such Registration Default has
been cured. Upon (x) the filing of the Exchange Offer Registration Statement
after the 70-day period described in clause (i) above, (y) the effectiveness of
the Exchange Offer Registration Statement after the 130-day period described in
clause (ii) above or the period during which it ceases to be effective or usable
as described in clause (iv) above or (z) the consummation of the Exchange Offer
after the 160-day
<PAGE>
10
period or the effectiveness of a Shelf Registration Statement after the 160-day
period, as the case may be, described in clause (iii) above or after the period
during which such Shelf Registration Statement ceases to be effective or usable
as described in clause (iv) above, and provided that none of the conditions set
forth in clauses (i), (ii), (iii) and (iv) above continues to exist, a
Registration Default will be deemed to be cured.
(f) SPECIFIC ENFORCEMENT. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company acknowledges
that any failure by the Company to comply with its obligations under Section
2(a) and Section 2(b) hereof may result in material irreparable injury to the
Initial Purchasers or the Holders for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, the Initial Purchasers or any Holder may
obtain such relief as may be required to specifically enforce the Company's
obligations under Section 2(a) and Section 2(b) hereof.
3. REGISTRATION PROCEDURES. In connection with the obligations
of the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement,
within the time period specified in Section 2, on the appropriate form
under the 1933 Act, which form (i) shall be selected by the Company,
(ii) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Notes by the selling Holders thereof and (iii)
shall comply as to form in all material respects with the non-financial
statement requirements of the applicable form and (except with respect
to the Exchange Offer Registration Statement) include or incorporate by
reference all financial statements required by the SEC to be filed
therewith, and use its best efforts to cause such Registration
Statement to become effective and remain effective in accordance with
Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary under applicable law to keep such Registration Statement
effective for the applicable period; cause each Prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the 1933 Act; and
comply with the provisions of the 1933 Act with respect to the
disposition of all Notes covered by each Registration Statement during
the applicable period in accordance with the intended method or methods
of distribution by the selling Holders thereof;
<PAGE>
11
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Notes, at least five days prior to filing, that a
Shelf Registration Statement with respect to the Registrable Notes is
being filed and advising such Holders that the distribution of
Registrable Notes will be made in accordance with the method elected by
the Majority Holders of Notes that are Registrable Notes; and (ii)
furnish to each Holder of Registrable Notes, to counsel for the Initial
Purchasers, to counsel for the Holders and to each underwriter of an
Underwritten Offering of Registrable Notes, if any, without charge, as
many copies of each Prospectus, including each preliminary Prospectus,
and any amendment or supplement thereto and such other documents as
such Holder or underwriter may reasonably request, including financial
statements and schedules and, if the Holder so requests, all exhibits
(including those incorporated by reference) in order to facilitate the
public sale or other disposition of the Registrable Notes; and (iii)
subject to the last paragraph of this Section 3, hereby consent to the
use of the Prospectus or any amendment or supplement thereto by each of
the selling Holders of Registrable Notes in connection with the
offering and sale of the Registrable Notes covered by the Prospectus or
any amendment or supplement thereto;
(d) use its best efforts to register or qualify the
Registrable Notes under all applicable state securities or "blue sky"
laws of such jurisdictions as any Holder of Registrable Notes covered
by a Registration Statement and each underwriter of an Underwritten
Offering of Registrable Notes shall reasonably request by the time the
applicable Registration Statement is declared effective by the SEC, to
cooperate with the Holders in connection with any filings required to
be made with the NASD, and do any and all other acts and things which
may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in each such jurisdiction of such
Registrable Notes owned by such Holder; PROVIDED, HOWEVER, that the
Company shall not be required to (i) qualify as a foreign corporation
or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d) or (ii) take
any action which would subject it to general service of process or
taxation in any such jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes and U.S. counsel for the Initial Purchasers promptly
and, if requested by such Holder or counsel, confirm such advice in
writing promptly (i) when a Registration Statement has become effective
and when any post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state securities
authority for post-effective amendments and supplements to a
Registration Statement and Prospectus or for additional information
after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the
initiation
<PAGE>
12
of any proceedings for that purpose, (iv) if, between the effective
date of a Registration Statement and the closing of any sale of
Registrable Notes covered thereby, the representations and warranties
of the Company contained in any underwriting agreement, securities
sales agreement or other similar agreement, if any, relating to such
offering cease to be true and correct in all material respects, (v) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Notes for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose, (vi) of the suspension of the availability of the Shelf
Registration Statement and the use of the Prospectus pursuant to
Section 2(d)(ii) hereof or of the happening of any event or the
discovery of any facts during the period a Shelf Registration Statement
is effective which makes any statement made in such Registration
Statement or the related Prospectus untrue in any material respect or
which requires the making of any changes in such Registration Statement
or Prospectus in order to make the statements therein not misleading
and (vii) of any determination by the Company that a post-effective
amendment to a Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by broker-dealers who have exchanged their
Registrable Notes for Exchange Notes for the resale of such Exchange
Notes, (ii) furnish to each broker-dealer who desires to participate in
the Exchange Offer, without charge, as many copies of each Prospectus
included in the Exchange Offer Registration Statement, including any
preliminary prospectus, and any amendment or supplement thereto, as
such broker-dealer may reasonably request, (iii) include in the
Exchange Offer Registration Statement a statement that any
broker-dealer which holds Registrable Notes acquired for its own
account as a result of market-making activities or other trading
activities (a "Participating Broker-Dealer"), and who receives Exchange
Notes for Registrable Notes pursuant to the Exchange Offer, may be a
statutory underwriter and must deliver a Prospectus meeting the
requirements of the 1933 Act in connection with any resale of such
Exchange Notes, (iv) subject to the last paragraph of this Section 3,
hereby consent to the use of the Prospectus forming part of the
Exchange Offer Registration Statement or any amendment or supplement
thereto, by any broker-dealer in connection with the sale or transfer
of the Exchange Notes covered by the Prospectus or any amendment or
supplement thereto, and (v) include in the transmittal letter or
similar documentation to be executed by an exchange offeree in order to
participate in the Exchange Offer (x) the following provision:
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange
<PAGE>
13
Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Registrable
Notes, it represents that the Registrable Notes to be
exchanged for Exchange Notes were acquired by it as a result
of market-making activities or other trading activities and
acknowledges that it will deliver a Prospectus meeting the
requirements of the 1933 Act in connection with any resale of
such Exchange Notes pursuant to the Exchange Offer; however,
by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act.";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in subclause (x) and by delivering a
Prospectus in connection with the exchange of Registrable Notes, the
broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the 1933 Act; and
(B) to the extent any Participating Broker-Dealer participates
in the Exchange Offer, the Company shall use its best efforts to cause
to be delivered at the request of an entity representing the
Participating Broker-Dealers (which entity shall be one of the Initial
Purchasers, unless it elects not to act as such representative) only
one, if any, "cold comfort" letter with respect to the Prospectus in
the form existing on the last date for which exchanges are accepted
pursuant to the Exchange Offer and with respect to each subsequent
amendment or supplement, if any, effected during the period specified
in clause (C) below; and
(C) to the extent any Participating Broker-Dealer participates
in the Exchange Offer, the Company shall use its best efforts to
maintain the effectiveness of the Exchange Offer Registration Statement
for a period of 180 days following the closing of the Exchange Offer or
such shorter period which will terminate when the Participating
Broker-Dealers have completed all resales subject to applicable
prospectus-delivery requirements; and
(D) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement
as would otherwise be contemplated by Section 3(b) hereof, or take any
other action as a result of this Section 3(f), for a period exceeding
180 days after the last date for which exchanges are accepted pursuant
to the Exchange Offer (as such period may be extended by the Company)
and Participating Broker-Dealers shall not be authorized by the Company
to, and shall not, deliver such Prospectus after such period in
connection with resales contemplated by this Section 3;
<PAGE>
14
(g) in the case of an Exchange Offer or a Shelf Registration,
furnish U.S. counsel for the Initial Purchasers copies of any request
by the SEC or any state securities authority for amendments or
supplements to a Registration Statement and Prospectus or for
additional information;
(h) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement as
soon as practicable and provide prompt notice to each Holder of the
withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to each
Holder of Registrable Notes, without charge, at least one conformed
copy of each Registration Statement and any post-effective amendment
thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Notes to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold and not bearing any restrictive legends pertaining to U.S.
securities laws; and cause such Registrable Notes to be in such
denominations (consistent with the provisions of the Indenture) and
registered in such names as the selling Holders or the underwriters, if
any, may reasonably request at least two business days prior to the
closing of any sale of Registrable Notes;
(k) in the case of a Shelf Registration, upon the occurrence
of any event or the discovery of any facts, each as contemplated by
Section 3(e)(vi) hereof, use its best efforts to prepare a supplement
or post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes, such Prospectus will not contain
at the time of such delivery any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading. The Company agrees to notify each Holder to suspend use of
the Prospectus as promptly as practicable after the occurrence of such
an event, and each Holder hereby agrees to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus
to correct such misstatement or omission. At such time as such public
disclosure is otherwise made or the Company determines that such
disclosure is not necessary, in each case to correct any misstatement
of a material fact or to include any omitted material fact, the Company
agrees promptly to notify each Holder of such determination and to
furnish each Holder such numbers of copies of the Prospectus, as
amended or supplemented, as such Holder may reasonably request;
<PAGE>
15
(l) obtain CUSIP numbers for all Exchange Notes, or
Registrable Notes, as the case may be, not later than the effective
date of a Registration Statement, and provide the Trustee with printed
certificates for the Exchange Notes or the Registrable Notes, as the
case may be, in a form eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Notes, or Registrable Notes, as the case
may be, (ii) cooperate with the Trustees and the Holders to effect such
changes to the Indenture as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA and (iii) execute,
and use its best efforts to cause the Trustees 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 the
Indenture to be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions (including those reasonably requested by the
Majority Holders of Registrable Notes, if applicable) in order to
expedite or facilitate the disposition of such Registrable Notes and in
such connection whether or not an underwriting agreement is entered
into and whether or not the registration is an underwritten
registration:
(i) make such representations and warranties to the
Holders of such Registrable Notes and the underwriters, if
any, in form, substance and scope as are customarily made by
issuers to underwriters in similar underwritten offerings as
may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the Holders of a majority
in principal amount at maturity of the Registrable Notes being
sold) addressed to each selling Holder and the underwriters,
if any, covering the matters customarily covered in opinions
requested in sales of securities or underwritten offerings and
such other matters as may be reasonably requested by such
Holders and underwriters;
(iii) obtain "cold comfort" letters and updates
thereof from the Company's independent certified public
accountants addressed to the underwriters, if any, and will
use reasonable best efforts to have such letter addressed to
the selling Holders of Registrable Notes, such letters to be
in customary form and covering matters of the type customarily
covered in "cold
<PAGE>
16
comfort" letters to underwriters in connection with similar
underwritten offerings;
(iv) enter into a securities sales agreement with the
Holders and an agent of the Holders providing for, among other
things, the appointment of such agent for the selling Holders
for the purpose of soliciting purchases of Registrable Notes,
which agreement shall be in form, substance and scope
customary for similar offerings;
(v) if an underwriting agreement is entered into in
the case of an Underwritten Offering, cause the same to set
forth indemnification provisions and procedures substantially
equivalent to the indemnification provisions and procedures
set forth in Section 5 hereof with respect to the underwriters
and all other parties to be indemnified pursuant to said
Section; and
(vi) deliver such documents and certificates as may
be reasonably requested and as are customarily delivered in
similar offerings.
The above shall be done at (i) the effectiveness of such Registration
Statement (and, if appropriate, each post-effective amendment thereto)
and (ii) each closing under any underwriting or similar agreement as
and to the extent required thereunder. In the case of any Underwritten
Offering, the Company shall provide written notice to the Holders of
all Registrable Notes of such Underwritten Offering at least 30 days
prior to the filing of a prospectus supplement for such Underwritten
Offering. Such notice shall (x) offer each such Holder the right to
participate in such Underwritten Offering, (y) specify a date, which
shall be no earlier than 10 days following the date of such notice, by
which such Holder must inform the Company of its intent to participate
in such Underwritten Offering and (z) include the instructions such
Holder must follow in order to participate in such Underwritten
Offering;
(o) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable Notes
and any underwriters participating in any disposition pursuant to a
Shelf Registration Statement and any U.S. counsel or accountant
retained by such Holders or underwriters, all financial and other
records, pertinent corporate documents and properties of the Company
reasonably requested by any such persons, and cause the respective
officers, directors, employees, and any other agents of the Company to
supply all information reasonably requested by any such representative,
underwriter, special counsel or accountant in connection with a
Registration Statement; PROVIDED that any such records, documents,
properties and such information that is designated in writing by the
Company, in good faith, as confidential
<PAGE>
17
at the time of delivery of such records, documents, properties or
information shall be kept confidential by any such representative,
underwriter, special counsel or accountant and shall be used only in
connection with such Registration Statement, unless such information
has become available (not in violation of this agreement) to the public
generally or through a third party without an accompanying obligation
of confidentiality, and except that such representative, underwriter,
special counsel or accountant shall have no liability, and shall not be
in breach of this provision, if disclosure of such confidential
information is made in connection with a court proceeding or required
by law, and the Company shall be entitled to request that such
representative, underwriter, special counsel or accountant sign a
confidentiality agreement to the foregoing effect;
(p) (i) a reasonable time prior to the filing of any Exchange
Offer Registration Statement, any Prospectus forming a part thereof,
any amendment to an Exchange Offer Registration Statement or amendment
or supplement to a Prospectus, provide a copy of such document to the
Initial Purchasers, and make such changes in any such document prior to
the filing thereof as the Initial Purchasers or their U.S. counsel may
reasonably request; (ii) in the case of a Shelf Registration, a
reasonable time prior to filing any Shelf Registration Statement, any
Prospectus forming a part thereof, any amendment to such Shelf
Registration Statement or amendment or supplement to such Prospectus,
provide copies of such document to the Holders of Registrable Notes, to
the Initial Purchasers, to U.S. counsel on behalf of the Holders and to
the underwriter or underwriters of an Underwritten Offering of
Registrable Notes, if any, and make such changes in any such document
prior to the filing thereof as the Holders of Registrable Notes, the
Initial Purchasers on behalf of such Holders, the Initial Purchasers'
counsel and any underwriter may reasonably request; and (iii) cause the
representatives of the Company to be available for discussion of such
document as shall be reasonably requested by the Holders of Registrable
Notes, the Initial Purchasers on behalf of such Holders or any
underwriter and shall not at any time make any filing of any such
document of which such Holders, the Initial Purchasers on behalf of
such Holders, the Initial Purchasers' U.S. counsel or any underwriter
shall not have previously been advised and furnished a copy or to which
such Holders, the Initial Purchasers on behalf of such Holders, the
Initial Purchasers' counsel or any underwriter shall reasonably object;
(q) in the case of a Shelf Registration, use its best efforts
to cause all Registrable Notes to be listed on any securities exchange
on which similar debt securities issued by the Company are then listed
if requested by the Majority Holders of such class of Registrable Notes
or by the underwriter or underwriters of an Underwritten Offering of
such Registrable Notes, if any;
<PAGE>
18
(r) in the case of a Shelf Registration, use its best efforts
to cause the Registrable Notes to be rated with the appropriate rating
agencies, if so requested by the Majority Holders of any class of
Registrable Notes or by the underwriter or underwriters of an
Underwritten Offering of Registrable Notes, if any, unless the
Registrable Notes are already so rated;
(s) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
and
(t) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter and its U.S. counsel.
In the case of a Shelf Registration Statement, the Company may
(as a condition to such Holder's participation in the Shelf Registration)
require each Holder of Registrable Notes to furnish to the Company such
information regarding such Holder and the proposed distribution by such Holder
of such Registrable Notes as the Company may from time to time reasonably
request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event or the discovery of any facts, each of the kind described in Section
3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue disposition of
Registrable Notes pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(k) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at its expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Notes current at the time of receipt of such notice.
If the Company shall give any such notice to suspend the disposition of
Registrable Notes pursuant to a Shelf Registration Statement as a result of the
happening of any event or the discovery of any facts, each of the kind described
in Section 3(e)(vi) hereof, the Company shall be deemed to have used its best
efforts to keep the Shelf Registration Statement effective during such period of
suspension provided that the Company shall use its best efforts to file and have
declared effective (if an amendment) as soon as practicable an amendment or
supplement to the Shelf Registration Statement and shall extend the period
during which the Registration Statement shall be maintained effective pursuant
to this Agreement by the number of days during the period from and including the
date of the giving of such notice to and including the date when the Holders
shall have received copies of the supplemented or amended Prospectus necessary
to resume such dispositions.
<PAGE>
19
4. UNDERWRITTEN REGISTRATIONS. If any of the Registrable Notes
covered by any Shelf Registration 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 Majority Holders of such class of
Registrable Notes included in such offering and shall be reasonably acceptable
to the Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
5. INDEMNIFICATION AND CONTRIBUTION. (a) The Company shall
indemnify and hold harmless the Initial Purchasers, each Holder, including
Participating Broker-Dealers, each underwriter who participates in an offering
of Registrable Notes, their respective affiliates, and the respective directors,
officers, employees, agents and each Person, if any, who controls any of such
parties within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which
Exchange Notes or Registrable Notes were registered under the 1933 Act,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; PROVIDED
that (subject to Section 5(d) below) any such settlement is effected
with the written consent of the Company; and
<PAGE>
20
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of United States and Polish
counsel chosen by any indemnified party), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened in connection with, or any claim whatsoever
based upon, any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is
not paid under subparagraph (i) or (ii) of this Section 5(a);
PROVIDED, HOWEVER, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent (A) arising out of an untrue statement or
omission or alleged untrue statement or omission (i) made in or omitted from a
preliminary Prospectus or registration statement and corrected or cured in a
subsequent Prospectus or registration statement or any amendment or supplement
thereto, (ii) made in reliance upon and in conformity with information furnished
to the Company by the Initial Purchasers, any Holder, including Participating
Broker-Dealers, or any underwriter expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto), or (B) resulting from the use of the Prospectus during a
period when the use of the Prospectus has been suspended in accordance with
Section 2(d)(ii) or Section 3(e)(vi) hereof, PROVIDED, in each case, that
Holders received prior notice of such suspension;
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Initial Purchasers, each
underwriter who participates in an offering of Registrable Notes and the other
selling Holders and each of their respective directors and officers (including
each officer of the Company who signed the Registration Statement) and each
Person, if any, who controls the Company, the Initial Purchasers, any
underwriter or any other selling Holder within the meaning of Section 15 of the
1933 Act, against any and all loss, liability, claim, damage and expense
described in the indemnity contained in Section 5(a) hereof, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with information furnished to the Company by such Holder,
as the case may be, expressly for use in the Registration Statement (or any
amendment thereto), or the Prospectus (or any amendment or supplement thereto);
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
<PAGE>
21
may have otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of any such action;
PROVIDED, HOWEVER, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel, in addition to any local counsel, separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 5 hereof
(whether or not the indemnified parties are actual or potential parties
thereof), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party;
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel for which they are entitled to indemnification hereunder,
such indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 5(a)(ii) hereof effected without its written
consent if (i) such settlement is entered into more than 45 days after receipt
by such indemnifying party of the aforesaid request, (ii) such indemnifying
party shall have received notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such indemnifying
party shall not have reimbursed such indemnified party for such reasonable fees
and expenses of counsel in accordance with such request prior to the date of
such settlement;
(e) If the indemnification provided for in any of the
indemnity provisions set forth in this Section 5 is for any reason unavailable
to or insufficient to hold harmless an indemnified party in respect of any
losses, liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand, the Initial Purchasers on
another hand, and the Holders on another hand, from the offering of the Exchange
Notes or Registrable Notes included in such offering or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand, the
Initial Purchasers on another hand, and the Holders on another hand, in
connection with the statements or omissions
<PAGE>
22
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand, the Initial Purchasers on another hand, and the Holders
on another hand shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company, the Initial Purchasers or the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Initial Purchasers and the Holders of
the Registrable Notes agree that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
(even if the Holders were treated as one entity for such purpose) or by another
method of allocation which does not take account of the equitable considerations
referred to above in Section 5. The aggregate amount of losses, liabilities,
claims, damages and expenses incurred by an indemnified party and referred to
above in this Section 5 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or
defending against any litigation, or any investigation or proceeding by an
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any 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 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 5, each Person, if any, who controls an Initial Purchaser or a
Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as such Initial Purchaser or
Holder, and each director of the Company, each officer of the Company who signed
the Registration Statement, and each Person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as the Company. The parties hereto
agree that any underwriting discount or commission or reimbursement of fees paid
to the Initial Purchasers pursuant to the Purchase Agreement shall not be deemed
to be a benefit received by the Initial Purchasers in connection with the
offering of the Exchange Notes or Registrable Notes included in such offering.
6. MISCELLANEOUS. (a) RULE 144 AND RULE 144A. For so long as
the Company is subject to the reporting requirements of Section 13 or 15 of the
1934 Act, the Company covenants that it will file or furnish the reports
required to be filed or furnished by it under the 1933 Act and Section 13(a) or
15(d) of the 1934 Act and the rules and regulations adopted by the SEC
thereunder, that if it ceases to be so required to file or furnish such reports,
it will upon the request of any Holder of Registrable Notes (i) make publicly
available such information as is necessary to permit sales pursuant to Rule 144
under the 1933 Act, (ii) deliver such information to a prospective purchaser as
is necessary to permit sales pursuant to Rule 144A under the 1933 Act and it
will take such further action as any Holder of Registrable
<PAGE>
23
Notes may reasonably request, and (iii) take such further action that is
reasonable in the circumstances, in each case, to the extent required from time
to time to enable such Holder to sell its Registrable Notes without registration
under the 1933 Act within the limitation of the exemptions provided by (x) Rule
144 under the 1933 Act, as such Rule may be amended from time to time, (y) Rule
144A under the 1993 Act, as such Rule may be amended from time to time, or (z)
any similar rules or regulations hereafter adopted by the SEC.
(b) NO INCONSISTENT AGREEMENTS. The Company has not entered
into and the Company on or after the date of this Agreement will not enter into
any agreement which is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's other issued and outstanding securities under any such agreements.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount at maturity of the
outstanding Registrable Notes affected by such amendment, modification,
supplement, waiver or departure; PROVIDED, HOWEVER, that no amendment,
modification, supplement or waiver or consent to any departure from the
provisions of Section 5 hereof shall be effective as against any Holder of
Registrable Notes unless consented to in writing by such Holder.
(d) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any air courier (i) if to a Holder, at
the most current address given by such Holder to the Company by means of a
notice given in accordance with the provisions of this Section 6(d), which
address initially is, with respect to the Initial Purchasers, the address set
forth in the Purchase Agreement; and (ii) if to the Company, initially at the
Company's address set forth in the Purchase Agreement and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 6(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; at the
time received, if mailed or sent by air courier; when answered back, if telexed;
and when receipt is acknowledged, by recipient's telecopy operator, if
telecopied.
<PAGE>
24
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustees,
at the addresses specified in the Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; PROVIDED that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Notes in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Notes, such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
(f) THIRD PARTY BENEFICIARY. The Initial Purchasers shall be
third party beneficiaries to the agreements made hereunder between the Company,
on the one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder. Other than the foregoing sentence, nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Initial Purchasers, the Holders, including
Participating Broker-Dealers, each underwriter who participates in an offering
of Registrable Notes, their respective affiliates, and the Company and their
respective successors and the controlling persons and directors, officers,
employees, and agents referred to in Section 5 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole benefit of
the Initial Purchasers, the Holders and the Company and the other persons
referenced by the preceding sentence and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation.
(g) 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.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
<PAGE>
25
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF
AMERICA.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
@ENTERTAINMENT, INC.
By:
----------------------------
By:
----------------------------
Confirmed and accepted as of
the date first above
written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
--------------------------
Name:
Title:
DEUTSCHE BANK SECURITIES
DEUTSCHE BANK SECURITIES INC.
By:
--------------------------
Name:
Title:
<PAGE>
Exhibit 4.8
================================================================================
PREFERENCE WARRANT
REGISTRATION RIGHTS AGREEMENT
Dated as of January 27, 1999
Among
@ENTERTAINMENT, INC.,
and
MORGAN GRENFELL PRIVATE EQUITY LIMITED on behalf of
MORGAN GRENFELL DEVELOPMENT CAPITAL SYNDICATION LIMITED,
ARNOLD CHASE, CHERYL CHASE, RHODA CHASE
and THE DARLAND TRUST
================================================================================
<PAGE>
TABLE OF CONTENTS
SECTION 1. Definitions......................................................1
SECTION 2. Preference Registration Rights...................................5
2.1 (a)(i) Preference Warrant Shelf Registration Statement............5
(ii) Preference Warrant Stock Shelf Registration
Statement..................................................6
(b) Blue Sky ......................................................6
(c) Accuracy of Disclosure ....................................... 6
(d) Liquidated Damages ............................................7
(e) Additional Acts ...............................................7
(f) Listing of Preference Warrant Shares ..........................7
2.2 [Reserved].......................................................7
2.3 Limitations, Conditions and Qualifications to Obligations
Under Registration Covenants.....................................7
2.4 [Reserved].......................................................8
2.5 Rule 144 and Rule 144A...........................................8
2.6 Underwritten Registrations.......................................9
SECTION 3. [Reserved].......................................................9
SECTION 4. Registration Procedures..........................................9
SECTION 5. Indemnification and Contribution................................15
SECTION 6. Miscellaneous...................................................19
(a) Remedies........................................................19
(b) No Inconsistent Agreements......................................19
(c) [Intentionally Omitted].........................................19
(d) Amendments and Waivers..........................................19
(e) Notices.........................................................19
(f) Successors and Assigns..........................................20
(g) Counterparts....................................................20
(h) Governing Law...................................................20
(j) Severability....................................................20
(k) Headings........................................................21
(l) Entire Agreement................................................21
(m) Securities Held by the Company or Its Affiliates................21
2
<PAGE>
EXECUTION COPY
PREFERENCE WARRANT REGISTRATION RIGHTS AGREEMENT
This PREFERENCE WARRANT REGISTRATION RIGHTS AGREEMENT (the
"Agreement") is made and entered into as of January 27, 1999, among
@ENTERTAINMENT, INC., (the "Company") a Delaware corporation, The Darland Trust
("Darland"), Rhoda Chase ("Rhoda Chase"), Arnold Chase ("Arnold Chase") and
Cheryl Chase ("Cheryl Chase", and together with Darland, Rhoda Chase and Arnold
Chase, the "Chase Purchasers") and MORGAN GRENFELL PRIVATE EQUITY LIMITED on
behalf of MORGAN GRENFELL DEVELOPMENT CAPITAL SYNDICATION LIMITED ("MGPE", and
together with the Chase Purchasers, the "Purchasers").
This Agreement is made pursuant to (i) the Purchase Agreement dated
January 22, 1999, between the Company and MGPE (the "MGPE Purchase Agreement")
and (ii) the Purchase Agreement dated as of January 22, 1999 among the Company
and Arnold Chase, Rhoda Chase and Cheryl Chase (the "Chase Purchase Agreement"),
and together with the MGPE Purchase Agreement, the "Purchase Agreements"), in
which the Company has agreed to sell to the Purchasers (i) an aggregate of
50,000 shares of the Company's Series A and Series B 12% Cumulative Preference
Shares (the "Preference Shares"), and (ii) warrants (the "Preference Warrants"),
initially entitling the holders thereof to purchase an aggregate of 5,500,000
shares of Common Stock of the Company, par value $0.01 per share (the "Common
Stock"). The execution of this Agreement is a condition to the obligations of
the Purchasers under the Purchase Agreements.
In consideration of the foregoing, the parties hereto agree as
follows:
SECTION 1. Definitions. As used in this Agreement, the
following defined terms shall have the following meanings:
"Advice" has the meaning ascribed to such term in Section 4
hereof.
"Agreement" shall have the meaning ascribed to such term in the
preamble hereto.
"Business Day" shall mean a day that is not a Legal Holiday.
"Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, partnership interests, participations, rights in or
other equivalents (however designated and whether voting or non-voting) of
such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable
<PAGE>
for or convertible into such capital stock whether outstanding on the
issue date or issued after the issue date.
"Change of Control" shall have the meaning ascribed to such term
in the Indenture.
"Company" shall have the meaning ascribed to such term in the
preamble of this Agreement and shall also include the Company's permitted
successors and assigns.
"Common Stock" shall have the meaning ascribed to such term in the
preamble of this Agreement.
"Convertible Preferred Stock" shall mean any securities convertible
or exercisable or exchangeable into Common Stock of the Company, whether
outstanding on the date hereof or thereafter issued.
"Damage Amount" shall have the meaning ascribed to such term in
Section 2.1(d) hereof.
"DTC" shall have the meaning ascribed to such term in Section 4(i)
hereof.
"Effectiveness Period" shall mean the respective periods for which
the Company is obligated to use its reasonable efforts to keep a
Registration Statement effective pursuant to Sections 2.1(a) and 2.2(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Exercise Date" shall mean the earlier of (i) the date that a shelf
Registration Statement covering the sale of Common Stock underlying the
Preference Warrants is declared effective under the Securities Act and
(ii) January 27, 1999.
"Holder" shall mean each holder (including the Purchasers) of any
Preference Registrable Security and each of their successors, assigns and
direct and indirect transferees who become registered owners of such
Preference Registrable Securities.
"indemnified party" and "indemnifying party" shall have the
respective meanings ascribed to such term in Section 5(c).
"Indenture" shall mean the Indenture, dated as of the date hereof,
between the Company and Bankers Trust Company, as Trustee, pursuant to
which the Company's 14 1/2% Senior Discount Notes due 2009 are issued.
"Inspectors" shall have the meaning ascribed to such term in Section
4(m) hereof.
2
<PAGE>
"Legal Holiday" shall mean a Saturday, a Sunday or a day on which
(i) banking institutions in The City of New York are required or
authorized by law or other government action to be closed and (ii) the
principal U.S. securities exchange or market, if any, on which any Common
Stock is listed or admitted to trading and the principal U.S. securities
exchange or market, if any, on which the Preference Warrants are listed or
admitted to trading are closed for business.
"Liquidated Damages" shall have the meaning ascribed to such term in
Section 2.1(d) hereof.
"MGPE" shall have the meaning ascribed to such term in the
preamble hereto.
"Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof or any other entity, including any
predecessor of any such entity.
"Preference Registrable Securities" shall mean any of (i) the
Preference Warrants, (ii) the Preference Warrant Shares and (iii) any
other securities issued or issuable with respect to the Preference
Warrants or Preference Warrant Shares by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any
particular Preference Registrable Securities, such securities shall cease
to be Preference Registrable Securities when (a) a registration statement
with respect to the offering of such securities by the holder thereof
shall have been declared effective under the Securities Act and such
securities shall have been disposed of by such holder pursuant to such
registration statement, (b) such securities have been sold to the public
pursuant to, or are eligible for sale to the public without volume or
manner of sale restrictions under, Rule 144(k) (or any similar provision
then in force, but not Rule 144A) promulgated under the Securities Act,
(c) such securities shall have been otherwise transferred and new
certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Company or its transfer agent
and subsequent disposition of such securities shall not require
registration or qualification under the Securities Act or any similar
state law then in force, or (d) such securities shall have ceased to be
outstanding.
"Preference Warrant Registration Expenses" shall mean all expenses
incident to the Company's performance of or compliance with this
Agreement, including, without limitation, all SEC and stock exchange or
National Association of Securities Dealers, Inc. registration and filing
fees and expenses, fees and expenses incurred in connection with
compliance with securities or blue sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the
underwriters and the Holders in connection with blue sky qualifications of
the Registrable Securities), printing expenses, messenger, telephone and
delivery expenses, fees and disbursements of counsel for the Company,
counsel for
3
<PAGE>
the underwriters, if any, the Warrant Agent and all independent certified
public accountants, and other reasonable out-of-pocket expenses of Holders
(it being understood that Preference Warrant Registration Expenses shall
not include as to the fees and expenses of counsel, the fees and expenses
of more than one counsel for the Holders and one counsel for the
underwriters and shall not include any underwriting discounts, commissions
or transfer taxes).
"Preference Registration Statement" shall mean any appropriate
registration statement of the Company filed with the SEC pursuant to the
Securities Act which covers any of the Preference Warrants, the Preference
Warrant Shares and any other Preference Registrable Securities pursuant to
the provisions of this Agreement and all amendments and supplements to any
such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein. "Preference Registration
Statement" shall include the Preference Warrant Shelf Registration
Statement and the Preference Warrant Stock Shelf Registration Statement.
"Preference Warrant Agent" shall mean Bankers Trust Company and any
successor warrant agent for the Preference Warrants pursuant to the
Preference Warrant Agreement.
"Preference Warrant Agreement" shall mean the Preference Warrant
Agreement dated as of the date hereof, between the Company and the
Preference Warrant Agent, as amended or supplemented from time to time in
accordance with the terms thereof.
"Preference Warrant Shares" shall mean shares of Common Stock
issuable upon exercise of the Preference Warrants initially at an exercise
price of $10.00 per share.
"Preference Warrant Shelf Registration Statement" shall mean the
Preference Registration Statement filed with the SEC pursuant to Section
2.1(a)(i).
"Preference Warrant Stock Shelf Registration Statement"shall mean
the Preference Registration Statement filed with the SEC pursuant to
Section 2.1(a)(ii).
"Preference Warrants" shall have the meaning ascribed to such term
in the preamble hereto.
"Prospectus" shall mean the prospectus included in any Preference
Registration Statement (including, without limitation, any prospectus
subject to completion and 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,
and all other amendments and supplements to the Prospectus, including
post-effective amendments, and
4
<PAGE>
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"Purchase Agreements" shall have the meaning ascribed to such term
in the preamble hereof.
"Rule 144" shall mean 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" shall mean 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.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
"Selling Holder" shall mean a Holder who is selling Preference
Registrable Securities in accordance with the provisions of Section 2.2.
"Shelf Registration Default" shall have the meaning ascribed to such
term in Section 2.1(d).
"Suspension Period" shall have the meaning ascribed to such term
in Section 2.3(a).
"Units Offering" shall mean the Company's offering, which is
simultaneous with the offering of Preference Shares and Preference
Warrants, of 256,800 units consisting of 14 1/2% Senior Discount Notes due
2009 and 1,027,200 warrants to purchase 1,813,665 shares of common stock.
Capitalized terms used herein but not defined shall have the meaning
ascribed thereto in the Preference Warrant Agreement.
SECTION 2. Preference Registration Rights.
2.1 (a)(i) Preference Warrant Shelf Registration Statement. The
Company shall cause to be filed pursuant to Rule 415 (or any successor
provision) of the Securities Act a shelf registration statement covering the
resale of the Preference Warrants (the "Preference Warrant
5
<PAGE>
Shelf Registration Statement") and shall use its best efforts to cause the
Preference Warrant Shelf Registration Statement to be declared effective under
the Securities Act on or before July 7, 1999. Subject to Section 2.3(a) hereof,
the Company shall use reasonable efforts to maintain the effectiveness of the
Preference Warrant Shelf Registration Statement until such time as all
Preference Warrants have expired or have been exercised or redeemed.
(ii) Preference Warrant Stock Shelf Registration Statement. The
Company shall also caused to be filed pursuant to Rule 415 (or any successor
provision) of the Securities Act, a shelf registration statement covering the
issuance and resale of the Preference Warrant Shares (the "Preference Warrant
Stock Shelf Registration Statement") and shall use its best efforts to cause the
Preference Warrant Stock Shelf Registration Statement to be declared effective
under the Securities Act by January 27, 2000. Subject to Section 2.3(a) hereof,
the Company shall use reasonable efforts to maintain the effectiveness of the
Preference Warrant Stock Shelf Registration Statement until such time as all the
Preference Warrants have expired or have been exercised or redeemed.
(iii) The Company will pay all Preference Warrant Registration
Expenses in connection with the resale of Preference Warrants and the issuance
of the Preference Warrant Shares.
(iv) The Preference Registration Statements may also include
securities issued in the Units Offering and securities issuable upon conversion
of such securities.
(b) Blue Sky. The Company shall use its reasonable efforts to
register or qualify the Preference Warrant Shares under all applicable
securities laws, blue sky laws or similar laws of all jurisdictions in the
United States and Canada in which any Holder may or may be deemed to purchase
Preference Warrant Shares upon the exercise of Preference Warrants and shall use
its reasonable efforts to maintain such registration or qualification through
such time as all Preference Warrants have expired or have been exercised or
redeemed and Preference Warrant Shares have been resold; provided, however, that
the Company shall not be required to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 2.1(b) or to take any action which would subject it to general service
of process or to taxation in any such jurisdiction where it is not then so
subject.
(c) Accuracy of Disclosure. The Company represents and warrants to
each Holder and agrees for the benefit of each Holder that (i) the Preference
Registration Statements and any amendment thereto will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading; and (ii) each of the Prospectuses furnished to such Holder for
delivery in connection with the exercise of Preference Warrants or in connection
with the sale of Preference Warrant Shares, as the case may be, and the
documents incorporated by reference therein will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under
6
<PAGE>
which they were made, not misleading; provided, however, that the Company shall
have no liability under clause (i) or (ii) of this Section 2.1(c) with respect
to any such untrue statement or omission made in a Preference Registration
Statement in reliance upon and in conformity with information furnished to the
Company by or on behalf of the Holders specifically for inclusion therein.
(d) Liquidated Damages. In the event that (i) the Preference Warrant
Shelf Registration Stock Statement is not declared effective by the SEC on or
prior to July 7, 1999 or (ii) the Preference Warrant Stock Shelf Registration
Statement is not declared effective by the SEC on or prior to January 27, 2000,
or following the dates either such Preference Registration Statement is declared
effective but thereafter ceases to be effective or usable without being restored
to effectiveness by amendment or otherwise, except during such time periods
indicated in Section 2.3(a) (each of the events referred to in clauses (i) and
(ii) above, a "Shelf Registration Default"), then the Company shall pay
liquidated damages ("Liquidated Damages") to each Holder of Preference Warrants
or Preference Warrant Shares, as the case may be, an amount (the "Damage
Amount") in an initial amount equal to $.0025 per week per Preference Warrant
for each week that the Shelf Registration Default continues for the first 90-day
period following such Shelf Registration Default. The Damage Amount shall be
increased by an additional $.0025 per week per Preference Warrant with respect
to each subsequent 90-day period until such Shelf Registration Default has been
cured, up to a maximum amount of Liquidated Damages of $0.0125 per week per
Preference Warrant.
(e) Additional Acts. If the issuance or sale of any Preference
Warrant Shares or other securities issuable upon the exercise of the Preference
Warrants requires registration or approval of any governmental authority (other
than the registration requirements under the Securities Act), or the taking of
any other action under the laws of the United States of America or any political
subdivision thereof before such securities may be validly offered or sold in
compliance with such laws, then the Company covenants that it will, in good
faith and as expeditiously as reasonably possible, use all reasonable efforts to
secure and maintain such registration or approval or to take such other action,
as the case may be.
(f) Listing of Preference Warrant Shares. The Company shall use its
best efforts to register the Preference Warrant Shares on the Nasdaq National
Market by the Exercise Date.
2.2 [Reserved]
2.3 Limitations, Conditions and Qualifications to Obligations Under
Registration Covenants. The obligations of the Company set forth in Sections 2.1
and 2.6 hereof are subject to each of the following limitations, conditions and
qualifications:
(a) Subject to the next sentence of this paragraph, the Company
shall be entitled to postpone, for a reasonable period of time, the filing
of, or suspend the effectiveness of,
7
<PAGE>
any registration statement or amendment thereto, or suspend the use of any
prospectus and shall not be required to amend or supplement the
registration statement, any related prospectus or any document
incorporated therein by reference (other than an effective registration
statement being used for an underwritten offering); provided that the
duration of such postponement or suspension (a "Suspension Period") may
not exceed during any 360 day period a period of more than 60 days or two
periods of more than an aggregate of 90 days. Such Suspension Period may
be effected only if (i) the Company's Board determines in its good faith
that there is a valid business purpose for such suspension and (ii)
provides notice that such determination was made by the Company's Board to
the Holders of the Preference Warrants; provided, however, that in no
event shall the Company be required to disclose the business purpose for
such suspension if the Company determines in good faith that such business
purpose must remain confidential; and provided further, however, that the
Effectiveness Period shall be extended by the number of days in any
Suspension Period. The Company may further suspend effectiveness for a
period not in excess of 5 Business Days to allow for the updating of the
financial statements included in a Registration Statement to the extent
required by law, such suspension for updating financial statements not to
exceed 45 calendar days in aggregate in any 12-month period. If the
Company shall so postpone the filing of a Registration Statement it shall,
as promptly as possible, deliver a certificate signed by the chief
executive officer of the Company to the Selling Holders as to such
determination, and the Selling Holders shall in the case of a suspension
of the right to make sales, receive an extension of the registration
period equal to the number of days of the suspension.
(b) The Company's obligations shall be subject to the obligations of
the Selling Holders, which the Selling Holders acknowledge, to furnish all
information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and
regulations to permit the Company to comply with all applicable
requirements of the SEC, if applicable, and to obtain any acceleration of
the effective date of such Registration Statement.
2.4 [Reserved]
2.5 Rule 144 and Rule 144A. The Company 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 the Company is not required to file such reports, it
will, upon the request of any Holder or beneficial owner of Preference
Registrable Securities, make available such information necessary to permit
sales pursuant to Rule 144A under the Securities Act. The Company further
covenants that it will take such further action as any Holder of Preference
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Preference Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act,
as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC.
8
<PAGE>
Upon the request of any Holder of Preference Registrable Securities, the Company
will in a timely manner deliver to such Holder a written statement as to whether
it has complied with such information requirements.
2.6 Underwritten Registrations. No Holder of Preference Registrable
Securities may participate in any underwritten registration pursuant to a
Preference Registration Statement filed under this Agreement unless such Holder
(a) agrees to (i) sell such Holder's Preference Registrable Securities on the
basis provided in and in compliance with any underwriting arrangements approved
by the Holders of not less than a majority of the Preference Registrable
Securities to be sold thereunder and (ii) comply with Rules 101, 102 and 104 of
Regulation M under the Exchange Act and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
If the Company has complied with all its obligations under this
Agreement all holders of Preference Warrants or Preference Warrant Shares, upon
request of the lead managing underwriter with respect to an underwritten public
offering, will be required to not sell or otherwise dispose of any Preference
Warrants or Preference Warrant Shares owned by them for a period not to exceed
30 days prior to and 180 days after the consummation of such underwritten public
offering.
SECTION 3. [Reserved].
SECTION 4. Registration Procedures. In connection with the
obligations of the Company with respect to any Preference Registration Statement
pursuant to Sections 2.1 and 2.6 hereof, the Company shall, except as otherwise
provided:
(a) At least five days prior to the initial filing of a Preference
Registration Statement or Prospectus and at least two days prior to the
filing of any amendment or supplement thereto (including any document that
would be incorporated or deemed to be incorporated therein by reference),
furnish to the Preference Warrant Agent, the Holders and the managing
underwriters, if any, copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be
incorporated by reference) shall be subject to the review of such Holders,
and such underwriters, if any, and cause the officers and directors of the
Company, counsel to the Company and independent certified public
accountants to the Company to respond to such reasonable inquiries as
shall be necessary, in the opinion of counsel to such underwriters, to
conduct a reasonable investigation within the meaning of the Securities
Act; provided that the foregoing inspection and information gathering
shall be coordinated on behalf of the Holders by MGPE. The Company shall
not file any such Preference Registration Statement or related Prospectus
or any amendments or supplements thereto to which the Holders of a
majority of the Preference Registrable Securities included in such
Preference Registration Statement shall reasonably object on a timely
basis.
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(b) Prepare and file with the SEC such amendments, including
post-effective amendments to each Preference Registration Statement as may
be necessary to keep such Preference Registration Statement continuously
effective for the applicable time period required hereunder; cause the
related Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 (or
any similar provisions then in force) promulgated under the Securities
Act; and comply with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all securities covered by such
Preference Registration Statement during such period in accordance with
the intended methods of disposition by the sellers thereof set forth in
such Preference Registration Statement as so amended or in such Prospectus
as so supplemented.
(c) Notify the Holders of Preference Registrable Securities to be
sold and the managing underwriters, if any, promptly, and (if requested by
any such person) confirm such notice in writing, (i)(A) when a Prospectus
or any Prospectus supplement or post-effective amendment is proposed to be
filed, and (B) with respect to a Preference Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the SEC or any other Federal or state governmental authority
for amendments or supplements to a Preference Registration Statement or
related Prospectus or for additional information, (iii) of the issuance by
the SEC, any state securities commission, any other governmental agency or
any court of any stop order suspending the effectiveness of such
Preference Registration Statement or of any order or injunction suspending
or enjoining the use of a Prospectus or the effectiveness of a Preference
Registration Statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Preference Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, and (v) of the happening of any event, the existence of any
information becoming known that makes any statement made in a Preference
Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect 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 light of the
circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of any order enjoining or suspending the
effectiveness of the Preference Registration Statement or the use of a
Prospectus or the lifting of any suspension of the qualification (or
exemption from qualification) of any of the Preference Registrable
Securities covered thereby for sale in any jurisdiction described in
Section 4(h) at the earliest practicable moment.
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(e) If requested by the managing underwriters, if any, or if none,
by the Holders of a majority of the Preference Registrable Securities
being sold pursuant to such Preference Registration Statement, (i)
promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters, if any, or if
none, such Holders reasonably believe should be included therein, and (ii)
make all required filings of such Prospectus supplement or such
post-effective amendment under the Securities Act as soon as practicable
after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be required to take any
action pursuant to this Section 4(e) that would in the opinion of counsel
for the Company, violate applicable law.
(f) Upon written request to the Company, furnish to each Holder of
Preference Registrable Securities to be sold pursuant to a Registration
Statement and each managing underwriter, if any, without charge, at least
one conformed copy of the Preference Registration Statement and each
amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference,
and all exhibits to the extent requested (including those previously
furnished or incorporated by reference) as soon as practicable after the
filing of such documents with the SEC.
(g) Deliver to each Holder of Preference Registrable Securities to
be sold pursuant to a Preference Registration Statement and each managing
underwriter, if any, without charge, as many copies of each Prospectus
(including each form of prospectus) and each amendment or supplement
thereto as such Persons may reasonably request; and the Company hereby
consents to use of such Prospectus and each amendment or supplement
thereto and each document supplemental thereto by each of the selling
Holders of Preference Registrable Securities and the underwriters or
agents, if any, in connection with the offering and sale of the Preference
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any offering of Preference Registrable Securities, use
its best efforts to register or qualify or cooperate with the Holders of
Preference Registrable Securities to be sold, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Preference Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions as any
such Holder or underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective during
the period such Preference Registration Statement is required to be kept
effective hereunder and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the
Preference Registrable Securities covered by the applicable Preference
Registration Statement; provided, however, that the Company shall not be
required to (i) qualify generally to do business in any
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<PAGE>
jurisdiction where it is not then so qualified or (ii) take any action
that would subject it to general service of process in any such
jurisdiction where it is not then so subject or to taxation in any
jurisdiction where it is not so subject.
(i) In connection with any sale or transfer of Preference
Registrable Securities that will result in such securities no longer being
Preference Registrable Securities, cooperate with the Holders of
Preference Registrable Securities and the managing underwriters, if any,
to facilitate the timely preparation and delivery of certificates
representing Preference Registrable Securities to be sold, which
certificates shall not bear any restrictive legends whatsoever and shall
be in a form eligible for deposit with The Depository Trust Company
("DTC"); and to enable such Preference Registrable Securities to be in
such denominations and registered in such names as the managing
underwriter or underwriters, if any, or such Holders may reasonably
request at least two business days prior to any sale of Preference
Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 4(c)(v)
above, as promptly as practicable prepare a supplement or amendment,
including if appropriate a post-effective amendment to each Preference
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered,
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 light of the circumstances under which
they were made, not misleading.
(k) Prior to the effective date of a Preference Registration
Statement, (i) provide the registrar for the Preference Warrants and
Preference Registrable Securities with certificates for such securities in
a form eligible for deposit with DTC and (ii) provide CUSIP numbers for
such securities.
(l) Enter into such agreement (including an underwriting agreement
in such form, scope and substance as is customary in underwritten
offerings) and take all such other reasonable actions in connection
therewith (including those reasonably requested by the managing
underwriters, if any, or the Holders of a majority of the Preference
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Preference Registrable Securities, and, whether or not
an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (i) make such
representations and warranties to the Holders of such Preference
Registrable Securities and the underwriter or underwriters, if any, with
respect to the business of the Company and the subsidiaries of the Company
(including with respect to businesses or assets acquired or to be acquired
by any of them), and the Preference Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily
made by issuers to underwriters in underwritten offerings, and confirm the
same if any when
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<PAGE>
requested; (ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters, if any, addressed
to each selling Holder of Preference Registrable Securities and each of
the underwriters, if any), covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such underwriters; (iii) use their best efforts
to obtain customary "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Preference Registration Statement), addressed (where
reasonably possible) to each of the underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with underwritten offerings; (iv)
if an underwriting agreement is entered into, the same shall contain
customary indemnification provisions and procedures no less favorable to
the Selling Holders and the underwriters, if any, than those set forth in
Section 5 hereof (or such other provisions and procedures acceptable to
Holders of a majority of Preference Registrable Securities covered by such
Preference Registration Statement and the managing underwriter, if any);
and (v) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Preference Registrable
Securities being sold and the managing underwriters or underwriters to
evidence the continued validity of the representations and warranties made
pursuant to clause (i) above and evidence compliance with any customary
conditions contained in the underwriting agreement or other agreements
entered into by the Company.
(m) Make available for inspection by a representative of the selling
Holders of Preference Registrable Securities, any underwriter
participating in any such disposition of Preference Registrable
Securities, if any, and any attorney, consultant or accountant retained by
such representative of the selling Holders of Preference Registrable
Securities or underwriter (collectively, the "Inspectors"), at the offices
where normally kept, during the reasonable business hours, all financial
and other records, pertinent corporate documents and properties of the
Company and the subsidiaries of the Company (including with respect to
businesses and assets acquired or to be acquired to the extent that such
information is available to the Company), and cause the officers,
directors, agents and employees of the Company and its subsidiaries of the
Company (including with respect to businesses and assets acquired or to be
acquired to the extent that such information is available to the Company)
to supply all information in each case reasonably requested by any such
Inspector in connection with such Preference Registration Statement;
provided, however, that such persons shall first agree in writing with the
Company that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time of
delivery of such information shall be kept confidential by such Persons,
unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of
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<PAGE>
such information is required by law (including any disclosure
requirements pursuant to U.S. securities laws in connection with the
filing of the Preference Registration Statement or the use of any
Prospectus), (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard such
information by such person or (iv) such information becomes available to
such person from a source other than the Company and its subsidiaries and
such source is not bound by a confidentiality agreement; provided, further
that the foregoing investigation shall be coordinated on behalf of the
selling Holders of Preference Registrable Securities by MGPE.
(n) Comply with all applicable rules, regulations and policies of
the SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder no later than 60 days after the end of any
12-month period (or 135 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 Preference Registrable Securities are sold to an underwriter or
to underwriters in a firm commitment or reasonable efforts underwritten
offering and (ii) if not sold to an underwriter or to underwriters in such
an offering, commencing on the first day of the first fiscal quarter of
the Company after the effective date of the relevant Preference
Registration Statement, which statements shall cover said such period,
consistent with the requirements of Rule 158 under the Securities Act.
(o) Use its best efforts to cause all Preference Warrant Shares
relating to such Preference Registration Statement to be listed on each
securities exchange, if any, on which similar securities issued by the
Company are then listed.
(p) Cooperate with each seller of Preference Registrable Securities
to facilitate the timely preparation and delivery of certificates
representing Preference Registrable Securities to be sold and not bearing
any restrictive legends and registered in such names as the Selling
Holders may reasonably request at least two business days prior to the
closing of any sale of Preference Registrable Securities.
(q) Cooperate with each seller of Preference Registrable Securities
covered by any Preference Registration Statement and each underwriter, if
any, participating in the disposition of such Preference Warrants or
Preference Registrable Securities and its respective counsel in connection
with any filings required to be made with the National Association of
Securities Dealers, Inc.
The Company may require a Holder of Preference Registrable
Securities to be included in a Preference Registration Statement to furnish to
the Company such information regarding (i) the intended method of distribution
of such Preference Registrable Securities (ii) such Holder and (iii) the
Preference Registrable Securities held by such Holder as is required by law to
be disclosed in such Preference Registrable Statement and the Company may
exclude from such
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<PAGE>
Registration Statement the Preference Registrable Securities of any Holder who
fails to furnish such information within a reasonable time after receiving such
request.
If any such Preference Registration Statement refers to any Holder
by name or otherwise as the Holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act, the deletion of the reference to such Holder in
such amendment or supplement to the Preference Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
Each Holder of Preference Registrable Securities agrees by
acquisition of such Preference Registrable Securities that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 4(c)(ii), 4(c)(iv) or 4(c)(v) hereof, such Holder will forthwith
discontinue disposition of such Preference Registrable Securities covered by the
Preference Registration Statement or Prospectus until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
4(j) hereof, or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and in either case has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus. If the Company
shall give any such notice, the Effectiveness Period shall be extended by the
number of days during such periods from and including the date of the giving of
such notice to and including the date when each seller of Preference Registrable
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 4(j)
hereof or (y) the Advice, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus.
Holders of the Preference Registrable Securities shall be obligated
to keep confidential the existence of a Suspension Period or any confidential
information communicated by the Company to the Holder with respect thereto.
SECTION 5. Indemnification and Contribution. (a) The Company agrees
to indemnify and hold harmless each Purchaser, each Holder, each underwriter, if
any, who participates in an offering of Preference Registrable Securities, their
respective affiliates, and their respective directors, officers, employees,
agents and each Person, if any, who controls any of such parties within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act as
follows:
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(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Preference
Registration Statement (or any amendment thereto) pursuant to which
Preference Registrable Securities were registered under the 1933 Act,
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of 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 or arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (or any amendment or supplement thereto) or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever, in each case, based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided that
(subject to Section 5(d) below) any such settlement is effected with the
written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including the reasonable fees and disbursements of one counsel chosen by
MGPE), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) of this Section 5(a);
provided, however, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent (i) arising out of an untrue
statement or omission or alleged untrue statement or omission (A) made in or
omitted from a preliminary Prospectus or Preference Registration Statement and
corrected or included in a subsequent Prospectus or Preference Registration
Statement or any amendment or supplement thereto made in reliance upon and in
conformity with written information furnished to the Company by the Selling
Holders of Preference Registrable Securities, any Purchaser, any Holder, or any
underwriter expressly for use in the Preference Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto) or
(B) resulting from the use of the Prospectus during a period when the use of the
Prospectus has been suspended for sales thereunder in accordance with Sections
2.1(b), 2.1(c), 2.3, 2.4 or 2.6 hereof, provided, in each case, that Holders
received prior notice of such suspension or other unavailability.
(b) In the case of any registration of Preference Registrable
Securities, each Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company, each
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<PAGE>
Purchaser, each underwriter, if any, who participates in an offering of
Preference Registrable Securities and the other Selling Holders and each of
their respective directors and officers (including each officer of the Company
who signed the Preference Registration Statement) and each Person, if any, who
controls the Company, any Purchaser, any underwriter or any other Selling Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any and all loss, liability, claim, damage and expense
described in the indemnity contained in Section 5(a) hereof, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to the Company by such
Holder expressly for use in the Preference Registration Statement (or any
amendment thereto), or the Prospectus (or any amendment or supplement thereto);
provided, however, that no such Holder shall be liable for any claims hereunder
in excess of the amount of net proceeds received by such Holder from the sale of
Preference Warrants and Preference Registrable Securities pursuant to such
Preference Registration Statement.
(c) In case any action shall be commenced involving any Person in
respect of which indemnity may be sought pursuant to either paragraph (a) or (b)
above, such Person (the "indemnified party") shall give notice as promptly as
reasonably practicable to each Person against whom such indemnity may be sought
(the "indemnifying party"), but failure to so notify an indemnifying party shall
not relieve such indemnifying party from any liability hereunder to the extent
it is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. An indemnifying party may participate at its own
expense in the defense of such action; provided, however, that counsel to the
indemnifying party shall not (except with the consent of the indemnified party)
also be counsel to the indemnified party. In no event shall the indemnifying
party or parties be liable for the fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 5 (whether or not the indemnified parties are
actual or potential parties thereof), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 5(a)(ii) hereof effected
without its written consent if (i) such settlement is entered into more than 45
days after
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receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) If the indemnification provided for in any of the indemnity
provisions set forth in this Section 5 is for any reason unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, in such proportion as is appropriate to reflect the relative fault of
such indemnifying party or parties on the one hand, and such indemnified party
or parties on the other hand, in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party or parties on the one hand, and such indemnified party or
parties on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by such indemnifying party or parties or such indemnified party or
parties and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Purchaser and the Holders of the Preference Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation (even if the Selling Holders of Preference
Registrable Securities were treated as one entity, and the Holders were treated
as one entity, for such purpose) or by another method of allocation which does
not take account of the equitable considerations referred to above in Section 5.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 5 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by an governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any 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. For purposes of this Section 5,
each Person, if any, who controls a Purchaser or Holder within the meaning of
this Section 15 of the Securities Act or Section 20 of the Exchange Act shall
have the same rights to contribution as such Purchaser or Holder, and each
director of the Company, each officer of the Company who signed the Preference
Registration Statement, and each Person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act shall have the same rights to contribution as the Company.
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SECTION 6. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights provided herein, in the Preference Purchase Agreement or
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company 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.
(b) No Inconsistent Agreements. The Company will not enter into any
agreement which is inconsistent with the rights granted to the Holders of
Preference Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities, if any, under
any such agreements.
(c) [Intentionally Omitted].
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, 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 the Holders
of not less than a majority of the then outstanding Preference Warrants and each
class and series of Preference Registrable Securities; provided, however, that,
for the purposes of this Agreement, Preference Warrants and Preference
Registrable Securities that are owned, directly or indirectly, by the Company or
any of its affiliates (other than MGPE, the Chase Purchasers and their
affiliates) are not deemed outstanding. 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 one or more Holders and that does not
directly or indirectly affect the rights of other Holders may be given by a
majority of the Holders so affected; provided, however, that the provisions of
this sentence may not be amended, modified or supplemented except in accordance
with the provisions of the immediately preceding sentence. Notwithstanding the
foregoing, no amendment, modification, supplement, waiver or consent with
respect to Section 5 shall be made or given otherwise than the prior written
consent of each Person affected thereby.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, facsimile, or any courier guaranteeing delivery by a specific
date (i) if to a Holder, at the most current address of such Holder as set forth
in the register for the Preference Registrable Securities, which address
initially is, with respect to each Purchaser, the address set forth with respect
to such Purchaser in the relevant Preference Purchase Agreement and, in the case
of Darland, to The Darland Trust, c/o Chase Enterprises, Inc., One Commercial
Plaza, Hartford, Connecticut
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06103-3585 Attention: John Redding with a copy to Rothschild Trust Guernsey
Limited, P.O. Box 472, St. Peter's House, Le Bordage, St. Peter's Port,
Guernsey, Channel Islands GY1 6AX, attention D.N. Allison; and (ii) if to the
Company, initially at One Commercial Plaza, Hartford, Connecticut 06103-3585,
Attention: Robert E. Fowler III, and thereafter at such other address, notice of
which is given in accordance with the provisions of this Section 6(e), with a
copy to Baker & McKenzie, 815 Connecticut, N.W., Washington, D.C. 20006-4078,
Attention: Marc R. Paul, Esq., facsimile no.: (202) 452-7074, and thereafter at
such other address notice of which is given in accordance with the provisions of
this Section 6(e).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the Business Day scheduled for delivery, if timely delivered to an air
courier guaranteeing delivery by a specific date.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. If any transferee of
any Holder shall acquire Preference Registrable Securities, in any manner,
whether by operation of law or otherwise, such Preference Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Preference Registrable Securities such Person shall be conclusively
deemed to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement and such Person shall be entitled to receive the
benefits hereof. The Company may not assign any of its rights or obligations
hereunder without the prior written consent of each Holder of Preference
Registrable Securities. Notwithstanding the foregoing, no successor or assignee
of the Company shall have any rights granted under the Agreement until such
person shall acknowledge its rights and obligations hereunder by a signed
written statement of such person's acceptance of such rights and obligations.
(g) 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.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) 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 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 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.
20
<PAGE>
(k) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(l) Entire Agreement. This Agreement, together with the Purchase
Agreements and the Preference Warrant Agreement and the Preference Registration
Rights 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. This Agreement, the Preference Purchase
Agreement and the Preference Warrant Agreement supersede all prior agreements
and understandings between the parties with respect to such subject matter.
(m) Securities Held by the Company or Its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Preference
Registrable Securities is required hereunder, Preference Registrable Securities
held by the Company or by any of its affiliates (as such term is defined in Rule
405 under the Securities Act) (other than MGPE, the Chase Purchasers and their
affiliates) shall not be counted (in either the numerator or the denominator) in
determining whether such consent or approval was given by the Holders of such
required percentage.
[Signature Page Follows]
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
@ ENTERTAINMENT, INC.
By: /s/ ROBERT E. FOWLER, III
------------------------
TITLE: CHIEF EXECUTIVE OFFICER
By: /s/ DONALD MILLER JONES
------------------------
TITLE: CHIEF FINANCIAL OFFICER
Confirmed and accepted as of the date first above written:
MORGAN GRENFELL PRIVATE EQUITY LIMITED
By: /s/
------------------------
Name:
Title:
/s/
------------------------
Arnold Chase
/s/
------------------------
Cheryl Chase
/s/
------------------------
Rhoda Chase
THE DARLAND TRUST
By: /s/
------------------------
Name:
Title:
<PAGE>
Exhibit 10.3
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
@ENTERTAINMENT, INC.
(a Delaware corporation)
5,000 Shares of Series B Cumulative Preference Stock and
5,000 Warrants to Purchase an Aggregate of
550,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated: January 22, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
PURCHASE AGREEMENT 5
SECTION 1. Representations and Warranties 7
(a) Representations and Warranties by the Company 7
(i) Similar Offerings 7
(ii) Preference Offering Memorandum 7
(iii) Independent Accountants 7
(iv) Financial Statements 8
(v) No Material Adverse Change in Business 8
(vi) Good Standing of the Company 8
(vii) Corporate Standing of Designated Subsidiaries 8
(viii) Restrictions on Payments of Dividends 9
(ix) Capitalization 9
(x) Authorization of Agreement 10
(xi) Authorization of the Preference Registration Rights Agreement 10
(xii) Authorization of the Certificate of Designation and the
Preference Shares 10
(xiii) Authorization of the Preference Warrant Agreement 10
(xiv) Authorization of the Preference Warrants 11
(xv) Authorization of the Preference Warrant Shares 11
(xvi) Authorization of the Preference Warrant Registration Rights
Agreement 11
(xvii) Authorization of the Indenture 12
(xviii) Authorization of the Notes 12
(xix) Authorization of the Note Registration Rights Agreement 12
(xx) Authorization of the Note Warrant Agreement 12
(xxi) Authorization of the Note Warrant Registration Rights Agreement 13
(xxii) Description of the Preference Registration Rights Agreement,
the Preference Warrant Registration Rights Agreement, the Preference
Shares, the Preference Warrants, the Common Stock, the Preference
Warrant Agreement, the MG Securities, the Note Securities, and the
Note Agreements 13
(xxiii) Absence of Defaults and Conflicts 13
(xxiv) Absence of Labor Dispute 14
(xxv) Absence of Proceedings 14
(xxvi) Possession of Intellectual Property 15
(xxvii) Absence of Further Requirements 15
(xxviii) Possession of Licenses and Permits 16
(xxix) No Additional Documents 16
(xxx) Management Agreements 16
(xxxi) Title to Property 17
(xxxii) Tax Returns 17
(xxxiii) Environmental Laws 17
(xxxiv) Investment Company Act 18
(xxxv) Internal Controls 18
(xxxvi) Taxes on Subsidiary Indebtedness 18
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(xxxvii) Insurance 19
(xxxviii) Rule 144A Eligibility 19
(xxxix) No General Solicitation 19
(xl) No Registration Required 19
(xli) Reporting Company 19
(xlii) Funds 19
(xliii) Subscribers 20
(b) Officers' Certificates 20
SECTION 2. Sale and Delivery to the Purchaser; Closing 20
(a) Preference Securities 20
(b) Payment 20
(c) Qualified Institutional Buyer 20
(d) Denominations; Registration 20
SECTION 3. Covenants of the Company 21
(a) Preference Offering Memorandum 21
(b) Notice and Effect of Material Events 21
(c) Reserved. 21
(d) Reserved. 21
(e) Reserved. 21
(f) DTC 21
(g) Use of Proceeds 21
(h) Reserved. 21
SECTION 4. Payment of Expenses 21
(a) Expenses 21
(b) Termination of Agreement 22
SECTION 5. Conditions of the Chase Purchasers' Obligations 22
(a) Reserved 22
(b) Reserved 22
(c) Reserved 22
(d) Officers' Certificate 22
(e) Reserved 22
(f) Reserved 23
(g) Consummation of Sale of MG Securities and Note Securities 23
(h) Reserved 23
(i) Additional Documents 23
(j) Execution of Agreements 23
(k) Termination of Agreement 23
SECTION 6. Resales of the Preference Securities 23
(a) Representation and Warranty of the 23
(c) Covenants of the Company 24
(i) Due Diligence 24
(ii) Integration 24
(iii) Rule 144A Information 24
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(d) Resales 25
(e) Offers and Sales in Poland and The Netherlands 25
(f) Offers and Sales in the United Kingdom 25
(g) Darland 26
SECTION 7. Indemnification 26
(a) Indemnification of the Chase Purchasers 26
(b) Indemnification of the Company, Directors and Officers 27
(c) Actions Against Parties; Notification 27
(d) Settlement Without Consent if Failure to Reimburse 27
SECTION 8. Contribution 28
SECTION 9. Representations, Warranties and Agreements to Survive Delivery 29
SECTION 10. Termination of Agreement 29
(a) Termination; General 29
(b) Liabilities 30
SECTION 11. Notices 30
SECTION 12. Parties 30
SECTION 13. GOVERNING LAW AND TIME 30
SECTION 14. Effect of Headings 30
SECTION 15. Counterparts 30
EXHIBITS
Exhibit A - Form of Certificate of Designation ............................A-1
Exhibit B - Form of Preference Warrant Agreement ..........................B-1
Exhibit C - Form of Preference Registration Rights Agreement ..............C-1
Exhibit D - Form of Preference Warrant Registration Rights Agreement ......D-1
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<PAGE>
@ENTERTAINMENT, INC.
(a Delaware corporation)
5,000 Shares of Series B Cumulative Preference Stock and
5,000 Warrants to Purchase an Aggregate of
4,950,000 Shares of Common Stock
PURCHASE AGREEMENT
January 22, 1999
Mr. Arnold Chase
Ms. Cheryl Chase
Ms. Rhoda Chase
c/o Chase Enterprises
One Commercial Plaza
Hartford, Connecticut 06103-3585
Ladies and Gentlemen:
@Entertainment, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Mr. Arnold Chase, Ms. Cheryl Chase and Ms. Rhoda Chase (the
"Chase Purchasers") with respect to the issue and sale by the Company and the
purchase by the Chase Purchasers, severally and not jointly, of an aggregate of
5,000 of the Company's Series B Cumulative Preference Shares (the "Preference
Shares") and 5,000 warrants (each a "Preference Warrant" and collectively, the
"Preference Warrants" and, together with the Preference Shares, the "Preference
Securities"). The Preference Warrants entitling the holders thereof to purchase
an aggregate of 550,000 shares of common stock, par value $0.01 per share (the
"Common Stock"), of the Company. The number of Preference Shares and Preference
Warrants to be purchased, severally and not jointly, by each of the Chase
Purchasers is set forth on Schedule A. The Preference Shares and Preference
Warrants are more fully described in Schedule B hereto. The Preference Shares
are to be issued pursuant to the Certificate of Designation of the Company in
substantially the form attached hereto as Exhibit A and the Preference Warrants
are to be issued pursuant to a warrant agreement dated as of January 27, 1999
(the "Preference Warrant Agreement"), between the Company and Bankers Trust
Company, as warrant agent (the "Preference Warrant Agent") in substantially the
form attached hereto as Exhibit A. Under the Preference Warrant Agreement, the
Chase Purchasers will have certain preemptive rights in relation to the
Company's Common Stock. Preference Securities issued in book-entry form will be
issued to Cede & Co. as nominee of The Depository Trust Company ("DTC") pursuant
to a letter agreement, to be dated as of the Closing Time (as defined in Section
2(b)) (the "DTC Agreement"), among the Company, the Trustee and DTC.
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<PAGE>
Concurrently, the Company has entered into a separate purchase agreement
(the "MG Purchase Agreement") for the sale of an aggregate of 45,000 of the
Company's Series A Cumulative Preference Shares (the "Series A Preference
Shares") and 45,000 Warrants (the MG Warrants") to purchase and aggregate of
4,950,000 shares of Common Stock to Morgan Grenfell Private Equity Limited (the
"MG Purchaser"). The MG Warrants will be issued pursuant to the Preference
Warrant Agreement. The Series A Preference Shares and the MG Warrants being sold
to the MG Purchaser are sometimes hereinafter referred to as the "MG
Securities."
The holders of Preference Shares and the Series A Preference Shares will
be entitled to the benefits of a Registration Rights Agreement, in substantially
the form attached hereto as Exhibit C with such changes as shall be agreed to by
the parties hereto and the MG Purchaser (the "Preference Registration Rights
Agreement"), pursuant to which the Company will file a registration statement
(the "Preference Registration Statement") with the Securities and Exchange
Commission (the "Commission") registering the Preference Shares and the Series A
Preference Shares under the Securities Act of 1933, as amended (the "1933 Act").
The holders of Preference Warrants and the MG Warrants will be entitled to
the benefits of a Preference Warrant Registration Rights Agreement in
substantially the form attached hereto as Exhibit D, with such changes as shall
be agreed to by the parties hereto and the MG Purchaser (the "Preference Warrant
Registration Rights Agreement") which provides for the registration of the
Preference Warrants and the MG Warrants under the 1933 Act under certain
circumstances set forth therein.
Pursuant to the terms of the Preference Securities, investors that acquire
Preference Securities may only resell or otherwise transfer such Preference
Securities if such Preference Securities are hereafter registered under the 1933
Act or if an exemption from the registration requirements of the 1933 Act is
available (including the exemption afforded by Rule 144A ("Rule 144A") of the
rules and regulations promulgated under the 1933 Act by the Commission).
The Company has prepared and will deliver to the Chase Purchasers, on the
date hereof or the next succeeding day, copies of an offering memorandum dated
January 22, 1999 which was prepared by the Company in connection with the sale
of the MG Securities. "Preference Offering Memorandum" means with respect to any
date or time referred to in this Agreement, the final Preference Offering
Memorandum (including any amendment or supplement thereto) including exhibits
thereto and any documents incorporated by reference, which has been prepared and
delivered by the Company to the Chase Purchasers in connection with the sale of
the MG Securities.
Simultaneously with the execution of this Agreement , the Company is
entering into a separate purchase agreement (the "Note Purchase Agreement") for
the sale of 256,800 the Company's units (the "Note Units"), each Note Unit
consisting of $1,000 aggregate principal amount at maturity of the Company's 14
1/2 Senior Discount Notes due 2009 (the "Notes") and four warrants (each a "Note
Warrant" and collectively, the "Note Warrants" and, together with
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<PAGE>
the Note Units and the Notes, the "Note Securities"). The Note Warrants entitle
the holders thereof to purchase an aggregate of 1,813,665 shares of Common
Stock. The Notes are to be issued pursuant to an indenture dated as of January
27, 1999 (the "Indenture") between the Company and Bankers Trust Company, as
trustee (the "Trustee") and the Note Warrants are to be issued pursuant to a
warrant agreement dated as of January 27,1999 (the "Note Warrant Agreement")
between the Company and Bankers Trust Company, as warrant agent (the "Note
Warrant Agent"). The holders of the Note and the Note Warrants will be entitled
to the benefits of two Registration Rights Agreements (the "Note Registration
Rights Agreement" and the "Note Warrant Registration Rights Agreement",
respectively) which provide for the registration of the Notes and the Note
Warrants under the 1933 Act under certain circumstances set forth therein. The
Indenture, the Note Warrant Agreement, the Note Registration Rights Agreement
and the Note Warrant Registration Rights Agreement are sometimes referred to
herein as the "Note Agreements."
All references in this Agreement to financial statements and schedules and
other information which are "contained," "included" or "stated" in the
Preference Offering Memorandum (or other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information, if any, which are incorporated by reference in the Preference
Offering Memorandum.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents
and warrants to the Chase Purchasers as of the date hereof and as of the Closing
Time referred to in Section 2(b) hereof, and agrees with the Chase Purchasers as
follows:
(i) Similar Offerings. The Company and its Affiliates (as defined in
Section 1(a)(xxxv)) have not, directly or indirectly, solicited any offer
to buy or offered to sell, and will not, directly or indirectly, solicit
any offer to buy or offer to sell, in the United States or to any United
States citizen or resident, any security which is or would be integrated
with the sale of the Preference Securities in a manner that would require
the Preference Securities to be registered under the 1933 Act.
(ii) Preference Offering Memorandum. Neither of its date nor as of
the Closing Time the Preference Offering Memorandum, including any
amendment or supplement thereto, includes or will include an untrue
statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(iii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Preference
Offering Memorandum are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of
Regulation S-X under the 1933 Act.
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<PAGE>
(iv) Financial Statements. The financial statements, together with
the related schedules and notes, of the Company included in the Preference
Offering Memorandum present fairly the financial position of the Company
and its consolidated subsidiaries at the dates indicated and the statement
of operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules, if any,
included in the Preference Offering Memorandum present fairly in
accordance with GAAP the information required to be stated therein. The
selected financial data and the summary financial information included in
the Preference Offering Memorandum present fairly the information shown
therein and have been compiled on a basis consistent with that of the
audited financial statements included in the Preference Offering
Memorandum.
(v) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Preference Offering
Memorandum, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise (a "Material Adverse
Effect"), whether or not arising in the ordinary course of business, (B)
there have been no transactions entered into by the Company or any of its
subsidiaries, other than transactions entered into in the ordinary course
of business, which are material with respect to the Company and its
subsidiaries considered as one enterprise, and (C) there has been no
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Preference Offering Memorandum and to enter into and
perform its obligations under this Agreement, the Preference Warrant
Agreement, the Preference Registration Rights Agreement, the Preference
Warrant Registration Rights Agreement, the Certificate of Designation, the
Note Securities, the Note Agreements, and the Preference Securities; and
the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where the failure so to
qualify or to be in good standing would not result in a Material Adverse
Effect.
(vii) Corporate Standing of Designated Subsidiaries. Each subsidiary
of the Company that (i) is a "significant subsidiary" (as that term is
defined in Regulation S-X under the 1933 Act) or (ii) that holds any valid
permits or licenses to operate the cable television business in Poland or
a digital direct-to-home business uplinking from the
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<PAGE>
United Kingdom is listed on Schedule C hereto (each subsidiary listed on
Schedule C hereto is hereinafter referred to as a "Designated Subsidiary"
and, collectively, the "Designated Subsidiaries"), and has been duly
organized and is validly existing as a corporation under the laws of the
jurisdiction of its incorporation, has corporate power and corporate
authority to own, lease and operate its properties and to conduct its
business as described in the Preference Offering Memorandum and is not
required to be qualified as a foreign corporation to transact business or
to own or lease property in any jurisdiction where it owns or leases
property or transacts business; except as otherwise disclosed in the
Preference Offering Memorandum or in Schedule C, all of the issued and
outstanding capital stock of each Designated Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity, except for (i) in the case of any Polish limited liability
company, any statutory liability for taxes, (ii) the pledge of 3,583,457
shares of Polska Telewizja Kablowa Warszawa S.A. and of 2,514,291 shares
of Polska Telewizja Kablowa Krakow S.A. held by Poland Cablevision
(Netherlands) B.V. ("PCBV") and 2,400 shares of Polska Telewizja Kablowa
Lublin S.A. held by Poltelkab Sp. z o.o. as security for the loan of $6.5
million granted on August 28, 1996 by the American Bank in Poland to
Poland Communications, Inc. ("PCI"), and (iii) the pledge of 1,818 shares
of Szczecinska Telewizja Kablowa Sp. z o.o. ("SzTK") for the security of
certain obligations undertaken by PTK Szczecin Sp. z o.o. ("PTK Szczecin")
with respect to the sellers of those shares (collectively, the "Share
Pledges"); none of the outstanding shares of capital stock of the
Designated Subsidiaries was issued in violation of any preemptive or
similar rights arising by operation of law, or under the statute or
by-laws (or other similar organizational documents) of any Designated
Subsidiary or under any agreement to which the Company or any Designated
Subsidiary is a party. The subsidiaries of the Company other than the
Designated Subsidiaries, considered in the aggregate as a single
subsidiary, do not constitute a "significant subsidiary" as defined in
Rule 1-02 of Regulation S-X.
(viii) Restrictions on Payments of Dividends. There are no
restrictions (legal, contractual or otherwise) on the ability of the
Designated Subsidiaries to declare and pay dividends or make any payment
or transfer of property or assets to their shareholders other than those
referred to in the Preference Offering Memorandum and except for (i)
restrictions relating to the Share Pledges, (ii) encumbrances on certain
assets of Telewizja Kablowa GOSAT Sp. z o.o. ("GOSAT") consisting of the
transfer of title to such assets as security for the loan of $0.5 million
granted on October 7, 1996 by Polski Bank Rozwoju (which was bought by
Bank Rozucju Eksportu S.A. in July of 1998) to GOSAT, and (iii) the
restrictions discussed in Schedule D to the Indenture (collectively, the
"Asset Encumbrances").
(ix) Capitalization. The authorized, issued and outstanding capital
stock of the Company at September 30, 1998 was as set forth under the
caption "Capitalization"
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<PAGE>
under the heading "Actual" in the Preference Offering Memorandum and, as
of the date hereof, there has been no material change in the authorized,
issued and outstanding capital stock since the date of the Preference
Offering Memorandum other than (i) issuances of shares of Common Stock
upon the exercise of options disclosed to be outstanding in the Preference
Offering Memorandum and (ii) the authorization and issuance of the
Preference Shares, the Warrants, the Series A Preference Shares, the MG
Warrants and the Note Securities as described in the Preference Offering
Memorandum. The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid
and non-assessable; none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights
of any securityholder of the Company.
(x) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(xi) Authorization of the Preference Registration Rights Agreement.
The Preference Registration Rights Agreement has been duly authorized by
the Company, and, at the Closing Time, will have been duly executed and
delivered by the Company and, when executed and delivered by the MG
Purchaser and the Chase Purchasers, will constitute a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally, (y)
the enforceability thereof may be limited by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law) and (z) any rights to indemnity and contribution may be limited
by federal and state securities laws and public policy considerations.
(xii) Authorization of the Certificate of Designation and the
Preference Shares. The Certificate of Designation has been duly authorized
by the Board of Directors of the Company and, at the Closing Time, will
have been duly filed with the Secretary of State of Delaware. The
Preference Shares have been duly authorized by the Company for issuance
and sale to the Chase Purchasers pursuant to this Agreement and the
Preference Shares when issued and delivered against payment therefor in
accordance with the terms hereof, will be validly issued, fully paid and
non-assessable and the Chase Purchasers will receive title to the
Preference Shares free and clear of all liens and encumbrances. The
security holders of the Company have no preemptive rights with respect to
the Preference Shares.
(xiii) Authorization of the Preference Warrant Agreement. The
Preference Warrant Agreement has been duly authorized by the Company and,
at the Closing Time, will have been duly executed and delivered by the
Company and, when duly executed and delivered by the Preference Warrant
Agent, will constitute a valid and binding
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<PAGE>
agreement of the Company, enforceable against the Company in accordance
with its terms, except as enforceability thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xiv) Authorization of the Preference Warrants. The Preference
Warrants have been duly authorized by the Company and, at the Closing
Time, will have been duly executed by the Company and, when executed and
issued in the manner provided for in the Preference Warrant Agreement and
delivered against payment of the purchase price therefor as provided in
this Agreement, (A) will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and (B)
will be in the form contemplated by, and entitled to the benefits of, the
Preference Warrant Agreement and the Preference Warrant Registration
Rights Agreement.
(xv) Authorization of the Preference Warrant Shares. The shares of
Common Stock issuable upon exercise of the Preference Warrants (the
"Preference Warrant Shares") have been duly authorized and reserved by the
Company and, when executed by the Company and countersigned by the
Preference Warrant Agent and issued and delivered upon exercise of the
Preference Warrants in accordance with the terms of the Preference
Warrants and the Preference Warrant Agreement, will be validly issued,
fully paid and non-assessable and will not be subject to any preemptive or
similar rights.
(xvi) Authorization of the Preference Warrant Registration Rights
Agreement. The Preference Warrant Registration Rights Agreement has been
duly authorized by the Company and, at the Closing Time, will have been
duly executed and delivered by the Company and, when executed and
delivered by the MG Purchaser and the Chase Purchasers, will constitute a
valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditor's rights generally, (y) the enforceability thereof may be limited
by general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and (z) any rights to
indemnity and contribution may be limited by federal and state securities
laws and public policy considerations.
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<PAGE>
(xvii) Authorization of the Indenture. The Indenture has been duly
authorized by the Company and, at the Closing Time, will have been duly
executed and delivered by the Company and, when executed and delivered by
the Trustee, will constitute a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and the waiver contained in Section 514
thereof may be unenforceable due to interests of public policy.
(xviii) Authorization of the Notes. The Notes have been duly
authorized and, at the Closing Time, will have been duly executed by the
Company and, when authenticated in the manner provided for in the
Indenture and delivered against payment of the purchase price therefor
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), and will be in the form contemplated by,
and entitled to the benefits of, the Indenture and the Note Registration
Rights Agreement.
(xix) Authorization of the Note Registration Rights Agreement. The
Note Registration Rights Agreement has been duly authorized by the
Company, and, at the Closing Time, will have been duly executed and
delivered by the Company and will, when executed and delivered by the
Initial Purchasers, constitute a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms
except as (x) the enforceability thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally, (y) the
enforceability thereof may be limited by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law) and (z) any rights to indemnity and contribution may be limited
by federal and state securities laws and public policy considerations.
(xx) Authorization of the Note Warrant Agreement. The Note Warrant
Agreement has been duly authorized by the Company and, at the Closing
Time, will have been duly executed and delivered by the Company and, when
duly executed and delivered by the Note Warrant Agent, will constitute a
valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as enforceability thereof may
be limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or
other
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similar laws relating to or affecting enforcement of creditors' rights
generally or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(xxi) Authorization of the Note Warrant Registration Rights
Agreement. The Note Warrant Registration Rights Agreement has been duly
authorized by the Company and, at the Closing Time, will have been duly
executed and delivered by the Company and, when executed and delivered by
the Initial Purchasers, will constitute a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms
except as (x) the enforceability thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditor's rights generally, (y) the
enforceability thereof may be limited by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law) and (z) any rights to indemnity and contribution may be limited
by federal and state securities laws and public policy considerations.
(xxii) Description of the Preference Registration Rights Agreement,
the Preference Warrant Registration Rights Agreement, the Preference
Shares, the Preference Warrants, the Common Stock, the Preference Warrant
Agreement, the MG Securities, the Note Securities, and the Note
Agreements. The Preference Registration Rights Agreement, the Preference
Warrant Registration Rights Agreement, the Preference Shares, the
Preference Warrants, the Common Stock, the Preference Warrant Agreement,
the MG Securities, the Note Securities and the Note Agreements will
conform in all material respects to the respective statements relating
thereto contained in the Preference Offering Memorandum and will be in
substantially the respective forms previously delivered to the Chase
Purchasers.
(xxiii) Absence of Defaults and Conflicts. Neither the Company nor
any of its subsidiaries is (1) in violation of its charter or statute, as
applicable, or by-laws (or other similar organizational documents), (2) in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which or any of them may be bound, or to which any of the property or
assets of the Company or any of its subsidiaries is subject (collectively,
"Agreements and Instruments"), except as described in the Preference
Offering Memorandum and except for such defaults that would not result in
a Material Adverse Effect or (3) in violation of any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any of its subsidiaries or any of
their assets or properties, except as described in the Preference Offering
Memorandum; and the execution, delivery and performance of this Agreement,
the Preference Warrant Agreement, the Preference Registration Rights
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Agreement, the Preference Warrant Registration Rights Agreement, the
Certificate of Designation, the Preference Securities, the Note
Securities, the Note Agreements, and any other agreement or instrument
entered into or issued or to be entered into or issued by the Company or
any Designated Subsidiary in connection with the transactions contemplated
hereby or thereby or in the Preference Offering Memorandum and the
consummation of the transactions contemplated herein and in the Note
Purchase Agreement and the Preference Offering Memorandum (including the
issuance and sale of the Preference Securities and the Note Securities and
the use of the proceeds from the sale of the Preference Securities and the
Note Securities as described in the Preference Offering Memorandum under
the caption "Use of Proceeds") and compliance by the Company with its
obligations hereunder have been duly authorized by all necessary corporate
action and do not and will not, whethe r with or without the giving of
notice or passage of time or both, conflict with or constitute a breach
of, or default or Repayment Event (as defined below) under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant to,
the Agreements and Instruments except for such conflicts, breaches,
Repayment Events or defaults or liens, charges or encumbrances that,
singly or in the aggregate, would not result in a Material Adverse Effect,
nor will such action result in any violation of the provisions of the
charter or statute, as applicable, or by-laws (or other similar
organizational documents) of the Company or any of its subsidiaries or any
applicable law, statute, rule, regulation, judgment, order, writ or decree
of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries
or any of their assets or properties, assuming that the Chase Purchasers
comply with all of its obligations under Section 6 hereof. As used herein,
a "Repayment Event" means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any of its subsidiaries.
(xxiv) Absence of Labor Dispute. No labor dispute with the employees
of the Company or any of its subsidiaries exists or, to the knowledge of
the Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any of its
subsidiaries' principal suppliers, customers or contractors, which, in
either case, may reasonably be expected to result in a Material Adverse
Effect.
(xxv) Absence of Proceedings. Except as disclosed in the Preference
Offering Memorandum, there is no action, suit, proceeding, inquiry or
investigation before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any subsidiary thereof,
which would be required to be disclosed in the Preference Offering
Memorandum (other than as disclosed therein) if it were a prospectus filed
as part of a
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<PAGE>
registration statement on Form S-1 under the 1933 Act, or which might
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to adversely affect the properties or assets
of the Company or any of its subsidiaries in a manner that is material and
adverse to the Company and its subsidiaries considered as one enterprise
or the consummation of the transactions contemplated by this Agreement,
the Preference Warrant Agreement, the Preference Registration Rights
Agreement, the Preference Warrant Registration Rights Agreement, the
Certificate of Designation, the Preference Securities, the Note Securities
or the Note Agreements, or the performance by the Company of its
obligations hereunder or thereunder. The aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary thereof is
a party or of which any of their respective property or assets is the
subject which are not described in the Preference Offering Memorandum,
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Effect.
(xxvi) Possession of Intellectual Property. Except as disclosed in
the Preference Offering Memorandum, the Company and its subsidiaries own
or possess, or can acquire on reasonable terms, adequate patents, patent
rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks, trade names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business now operated
by them. Except as disclosed in the Preference Offering Memorandum,
neither the Company nor any of its subsidiaries has received any notice or
is otherwise aware of any infringement of or conflict with asserted rights
of others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the subject
of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material Adverse
Effect.
(xxvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
(other than (A) under the 1933 Act and the rules and regulations
thereunder with respect to the Preference Registration Rights Agreement,
the Preference Warrant Registration Rights Agreement, the Note
Registration Rights
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<PAGE>
Agreement, the Note Warrant Registration Rights Agreement, and the
transactions contemplated thereunder, (B) under the securities or "blue
sky" laws of the various states and (C) the Polish Anti-Monopoly Act) is
necessary or required (x) for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale
of the Preference Securities hereunder or the consummation of the
transactions contemplated by this Agreement, the Preference Warrant
Agreement, the Preference Registration Rights Agreement, the Preference
Warrant Registration Rights Agreement, the Note Registration Rights
Agreement, the Note Warrant Registration Rights Agreement, or the
Preference Offering Memorandum or (y) to permit the Company to (1) effect
payments of dividends on or redemption of the Preference Shares, or (2)
perform its other obligations under the Certificate of Designation, the
Preference Warrant Agreement, the Preference Warrant Registration Rights
Agreement, the Note Registration Rights Agreement, and the Note Warrant
Registration Rights Agreement.
(xxviii) Possession of Licenses and Permits. Except as disclosed in
the Preference Offering Memorandum, the Company and its subsidiaries
possess such permits, licenses, approvals, concessions, consents and other
authorizations (including, without limitation, all permits required for
the operation of the business of the Company and its subsidiaries by the
Republic of Poland and the United Kingdom) (collectively, "Governmental
Licenses") issued by the appropriate domestic or foreign regulatory
agencies or bodies, other governmental authorities or self regulatory
organizations necessary to conduct the business now operated by them or
any business currently proposed to be conducted by them as described in
the Preference Offering Memorandum; the Company and its subsidiaries,
except as disclosed in the Preference Offering Memorandum and except where
the failure to so comply would not, singly or in the aggregate, have a
Material Adverse Effect, are in compliance with the terms and conditions
of all such Governmental Licenses; all of the Governmental Licenses are
valid and in full force and effect, except as disclosed in the Preference
Offering Memorandum and except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force
and effect would not have a Material Adverse Effect; and except as
disclosed in the Preference Offering Memorandum, neither the Company nor
any of its subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect. To the
knowledge of the Company, except as described in the Preference Offering
Memorandum, there exists no reason or cause that could justify the
variation, suspension, cancellation or termination of any such
Governmental Licenses held by the Company or any of its subsidiaries with
respect to the construction or operation of their respective businesses,
which variation, suspension, cancellation or termination could reasonably
be expected to have a Material Adverse Effect.
(xxix) No Additional Documents. There are no contracts or documents
of a character that would be required to be described in the Preference
Offering Memorandum, if it were a prospectus filed as part of a
registration statement on Form S-3 under the 1933 Act, that are not
described as would be so required. All such contracts to which the Company
is party have been duly authorized, executed and delivered by the Company
and constitute valid and binding agreements of the Company.
(xxx) Management Agreements. Each of the Management Agreements (as
such term is defined in the Indenture) to which any subsidiary of the
Company is a party has
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<PAGE>
been duly authorized, executed and delivered by each of the parties
thereto and constitutes a valid and binding agreement of each of the
parties thereto.
(xxxi) Title to Property. The Company and its subsidiaries own no
real property, except as described in the Preference Offering Memorandum
and except for approximately 3,200 square meters of real property owned by
a Designated Subsidiary, and have good title to all other properties owned
by them, in each case, free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind
except such as (a) are described in the Preference Offering Memorandum or
(b) do not, singly or in the aggregate, materially affect the value of
such property and do not interfere with the use made and proposed to be
made of such property by the Company or any of its subsidiaries; and all
of the leases and subleases material to the business of the Company and
its subsidiaries, considered as one enterprise, and under which the
Company or any of its subsidiaries holds properties described in the
Preference Offering Memorandum, are in full force and effect, and neither
the Company nor any of its subsidiaries has any notice of any claim of any
sort that has been asserted by anyone adverse to the rights of the Company
or any of its subsidiaries under any of the leases or subleases mentioned
above, or affecting or questioning the rights of the Company or any
subsidiary thereof to the continued possession of the leased or subleased
premises under any such lease or sublease, except for such claims as could
not reasonably be expected to result in a Material Adverse Effect.
(xxxii) Tax Returns. Except as disclosed in the Preference Offering
Memorandum, the Company and its subsidiaries have filed all domestic and
foreign tax returns that are required to be filed or have duly requested
extensions thereof and have paid all taxes required to be paid by any of
them and any related assessments, fines or penalties, except for any such
tax, assessment, fine or penalty that is being contested in good faith and
by appropriate proceedings, and except for such claims as could not result
in a Material Adverse Effect; and adequate charges, accruals and reserves
have been provided for in the financial statements referred to in Section
1(a)(iv) above in respect of all domestic and foreign taxes for all
periods as to which the tax liability of the Company or any of its
subsidiaries has not been finally determined or remains open to
examination by applicable taxing authorities.
(xxxiii) Environmental Laws. Except as described in the Preference
Offering Memorandum and except such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any domestic or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or administrative interpretation thereof including any
judicial or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of
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chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials
(collectively, "Environmental Laws"), (B) the Company and its subsidiaries
have all permits, authorizations and approvals required under any
applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of its
subsidiaries and (D) there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of
its subsidiaries relating to Hazardous Materials or Environmental Laws.
(xxxiv) Investment Company Act. The Company is not, and upon the
issuance and sale of the Preference Securities, the MG Securities and the
Note Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Preference Offering Memorandum will
not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(xxxv) Internal Controls. The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance
with management's general or specific authorization; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and (D)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company and its subsidiaries have not
made, and, to the knowledge of the Company, no employee or agent of the
Company or any subsidiary has made, any payment of the Company's funds or
any subsidiary's funds or received or retained any funds (A) in violation
of the Foreign Corrupt Practices Act, as amended, or (B) in violation of
any other applicable law, regulation or rule (except, in the case of this
clause (B), for such violations as could not reasonably be expected to
result in a Material Adverse Effect) or that would be required to be
disclosed in the Preference Offering Memorandum if it were a prospectus
filed as part of a registration statement on Form S-1 under the 1933 Act.
(xxxvi) Taxes on Subsidiary Indebtedness. Except as described in the
Preference Offering Memorandum, as of the date hereof, no material income,
stamp or other taxes or levies, imposts, deductions, charges, compulsory
loans or withholdings
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whatsoever are or will be, under applicable law in the Republic of Poland,
imposed, assessed, levied or collected by the Republic of Poland or any
political subdivision or taxing authority thereof or therein or on or in
respect of principal, interest, premiums, penalties or other amounts
payable under any indebtedness of any of the Company's subsidiaries held
by the Company.
(xxxvii) Insurance. Except as otherwise disclosed in the Preference
Offering Memorandum, the Company and each of its subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and the value of
their respective properties and as is customary for companies engaged in
similar businesses or similar industries in similar locations.
(xxxviii) Rule 144A Eligibility. The Preference Securities are
eligible for resale pursuant to Rule 144A and will not be, at the Closing
Time, of the same class as securities listed on a national securities
exchange registered under Section 6 of the Securities Exchange Act of
1934, as amended (the "1934 Act"), or quoted in a U.S. automated
interdealer quotation system.
(xxxix) No General Solicitation. None of the Company, its
affiliates, as such term is defined in Rule 501(b) under the 1933 Act
("Affiliates"), or any person acting on its or any of their behalf (other
than Chase Purchasers, the MG Purchaser and the Initial Purchasers, as to
whom the Company makes no representation) has engaged or will engage, in
connection with the offering of the Preference Securities, in any form of
general solicitation or general advertising within the meaning of Rule
502(c) under the 1933 Act.
(xl) No Registration Required. Subject to compliance by the Chase
Purchasers with the representations and warranties set forth in Section 2
and the procedures set forth in Section 6 hereof, it is not necessary in
connection with the offer, sale and delivery of the Preference Securities
to the Chase Purchasers in the manner contemplated by this Agreement, the
Preference Warrant Agreement and the Preference Offering Memorandum to
register the Preference Securities under the 1933 Act.
(xli) Reporting Company. The Company is subject to, and has complied
with all applicable reporting requirements of Section 13 or Section 15(d)
of the 1934 Act.
(xlii) Funds. With the net proceeds of the sale of the Preference
Securities and the MG Securities pursuant to this Agreement and the MG
Purchase Agreement, respectively, the sales of the Note Securities
pursuant to the Note Purchase Agreement and the sale of the Company's
Series C Senior Discount Notes which was consummated on January 20, 1999,
together with cash on hand, the Company has sufficient capital to fulfill
its current business plan and to fund its commitments until the Company
achieves
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positive cash flow from operations, subject to the matters disclosed in
the Preference Offering Memorandum.
(xliii) Subscribers. As of December 31, 1998, the Company had at
least 675,000 basic cable subscribers and had sold approximately 125,000
Wizja TV packages to authorized retailers in Poland (as described in the
Preference Offering Memorandum).
(b) Officers' Certificates. Any certificate titled "Officers'
Certificate" or "Secretary's Certificate" signed by any officer of the Company
or any of its subsidiaries which is delivered to the Chase Purchasers or to
counsel for the Chase Purchasers shall be deemed a representation and warranty
by the Company to the Chase Purchasers as to the matters covered thereby.
SECTION 2. Sale and Delivery to the Purchaser; Closing.
(a) Preference Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to the Chase Purchasers and the Chase
Purchasers, severally and not jointly, agree to purchase from the Company, at an
aggregate purchase price of $5,000,000 (less a commission of $150,000), the
aggregate number of Preference Shares and Preference Warrants set forth in
Schedule A opposite its name.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Preference Securities shall be made at the office of
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or at such
other place as shall be agreed upon by the Chase Purchasers and the Company, at
9:00 A.M. on the third business day after the date hereof (unless postponed in
accordance with the provisions of Section 11), or such other time not later than
ten business days after such date as shall be agreed upon by the Chase
Purchasers and the Company (such time and date of payment and delivery being
herein called the "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
each of the Chase Purchasers for the account of such Chase Purchasers of
certificates for the Preference Securities to be purchased by it.
(c) Qualified Institutional Buyer. Each Chase Purchaser represents
and warrants to, and agrees with, the Company that it is an "accredited
investor" within the meaning of Rule 501(a) under the 1933 Act (an "Accredited
Investor").
(d) Denominations; Registration. Certificates for the Preference
Securities shall be in such denominations and registered in such names as the
Chase Purchasers may request in writing at least one full business day before
the Closing Time. The certificates representing the Preference Shares and the
Preference Warrants shall be registered in the name of Cede & Co. pursuant to
the DTC Agreement and shall be made available for examination and packaging by
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the Chase Purchasers in the City of New York not later than 10:00 A.M. on the
last business day prior to the Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with the Chase
Purchasers as follows:
(a) Preference Offering Memorandum. The Company, as promptly as possible,
will furnish to each Chase Purchaser, without charge, such number of copies of
the Preference Offering Memorandum and any amendments and supplements thereto
and documents incorporated by reference therein as the Chase Purchaser may
reasonably request.
(b) Notice and Effect of Material Events. The Company will immediately
notify the Chase Purchasers, and confirm such notice in writing, of any filing
made by the Company of information relating to the offering of the Preference
Securities with any securities exchange or any other regulatory body in the
United States or any other jurisdiction.
(c) Reserved.
(d) Reserved.
(e) Reserved.
(f) DTC. The Company will cooperate with the Chase Purchasers and use its
best efforts (i) to permit the Preference Securities to be eligible for
clearance and settlement through the facilities of DTC.
(g) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Preference Securities in the manner specified in the
Preference Offering Memorandum under "Use of Proceeds."
(h) Reserved.
(i) Notification of Current Accumulated Earnings and Profits. The Company
will disclose its current and accumulated earnings and profits, if any, for each
fiscal year in its annual report on Form 10-K so long as it is required to file
such a report. Thereafter, the Company will provide such information to any
holder of Preference Securities upon receipt of a written request from such
holder.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and any filing of the Preference Offering Memorandum
(including financial statements and any schedules or exhibits and any document
incorporated therein by reference) and of each amendment or supplement
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thereto, (ii) the preparation, printing and delivery to the Chase Purchasers of
this Agreement, the Preference Warrant Agreement, the Preference Registration
Rights Agreement, the Preference Warrant Registration Rights Agreement, the
Certificate of Designation and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Preference Securities, (iii) the preparation, issuance and delivery of the
certificates for the Preference Securities to the Chase Purchasers, including
any charges of DTC in connection therewith, (iv) the fees and disbursements of
the Company's counsel, accountants and other advisors, (v) any filing for review
of the offering with the National Association of Securities Dealers (the
"NASD"), and (vi) any fees payable to the NASD.
(b) Termination of Agreement. If this Agreement is terminated by the Chase
Purchasers in accordance with the provisions of Section 5 or Section 10(a)(i)
hereof, the Company shall reimburse the Chase Purchasers for all of its
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Chase Purchasers incurred through the date of termination.
SECTION 5. Conditions of the Chase Purchasers' Obligations. The
obligations of the Chase Purchasers hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any of its subsidiaries
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Reserved
(b) Reserved
(c) Reserved
(d) Officers' Certificate. At the Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Preference Offering Memorandum, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Chase Purchasers shall have received a certificate of the chief executive
officer of the Company and of the chief financial or chief accounting officer of
the Company, dated as of the Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties in
Section 1 hereof are true and correct with the same force and effect as though
expressly made at and as of the Closing Time, and (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Time.
(e) Reserved
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(f) Reserved
(g) Consummation of Sale of MG Securities and Note Securities. The sale of
the Note Securities and the sale of MG Securities to the MG Purchasers pursuant
to the MG Purchase Agreement shall have been consummated at the Closing Time.
(h) Reserved
(i) Additional Documents. At the Closing Time, counsel for the Chase
Purchasers shall have been furnished with such documents and opinions as it may
require for the purpose of enabling it to pass upon the issuance and sale of the
Preference Securities as herein contemplated, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Preference Securities as herein
contemplated shall be satisfactory in form and substance to the Chase Purchasers
and counsel for the Chase Purchasers.
(j) Execution of Agreements. At the Closing Time, the Preference Warrant
Agreement, the Preference Registration Rights Agreement, the Preference Warrant
Registration Rights Agreement and the Certificate of Designation, each in form
and substance reasonably satisfactory to the Chase Purchasers, shall have been
duly executed and delivered and shall be in full force and effect.
(k) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Chase Purchasers by notice to the Company at
any time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 7, 8 and 9 shall survive any such termination and remain
in full force and effect.
SECTION 6. Resales of the Preference Securities.
(a) Representation and Warranty of the Chase Purchasers. Each Chase
Purchaser represents and agrees that (i) it has not entered and will not enter
into any contractual arrangements with respect to the distribution of the
Preference Securities, except with its affiliates or with the prior written
consent of the Company; (ii) it has received and carefully reviewed the
Preference Offering Memorandum prior to the execution of this Agreement; (iii)
it has been furnished by the Company during the course of this transaction with
all information regarding the Company which it had requested or desired to know,
all documents which could be reasonably provided have been made available for
its inspection and review and it has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of the
offering and any additional information which it had requested; (iv) except as
set forth herein, no representations or warranties have been made to it by the
Company or any agent, employee or
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affiliate of the Company and in entering into this transaction, it is not
relying on any information, other than that contained herein or in the
Preference Offering Memorandum and the results of its independent investigation;
(v) no person other than the Company has made any representations to the Chase
Purchaser concerning this Offering and the Chase Purchaser has relied on no
representations or documentation other than that supplied by the Company and in
particular, for avoidance of doubt, the Chase Purchaser is not relying on
information supplied in connection with (X) the concurrent sale of the Note
Securities by the Initial Purchasers or (Y) the sale of the Company's Series C
Senior Discount Notes which was consummated on January 20, 1999; (vi) it is
purchasing the Preference Securities for investment purposes only for its
account and not with any view toward a distribution thereof; and (vii) it has
evaluated the risks of investing in the Preference Securities and has determined
that the Preference Securities are a suitable investment, and that it can bear
the economic risk of this investment and can afford a complete loss of its
investment.
(b) Restrictions on Transfer. The transfer restrictions and the other
provisions set forth in the Preference Offering Memorandum under the heading
"Notice to Investors", including the legend required thereby, shall apply to the
Preference Securities except as otherwise agreed by the Company and the Chase
Purchasers.
(c) Covenants of the Company. The Company covenants with the Chase
Purchasers as follows:
(i) Due Diligence. In connection with the original purchase of the
Preference Securities, the Company agrees that, prior to any offer or
resale of the Preference Securities by the Chase Purchasers, the Chase
Purchasers and counsel for the Chase Purchasers shall have the right to
make reasonable inquiries into the business of the Company and its
subsidiaries.
(ii) Integration. The Company agrees that it will not and will cause
its Affiliates not to solicit any offer to buy or make any offer or sale
of, or otherwise negotiate in respect of, securities of the Company of any
class if, as a result of the doctrine of "integration" referred to in Rule
502 under the 1933 Act, such offer or sale would render invalid (for the
purpose of the sale of the Preference Securities by the Company to the
Chase Purchasers the exemption from the registration requirements of the
1933 Act provided by Section 4(2) thereof or otherwise.
(iii) Rule 144A Information. The Company agrees that, in order to
render the Preference Securities eligible for resale pursuant to Rule 144A
under the 1933 Act, while any of the Preference Securities remain
outstanding, it will make available, upon request, to any holder of
Preference Securities or prospective purchasers of Preference Securities
the information specified in Rule 144A(d)(4), unless the Company furnishes
information to the Commission pursuant to Section 13 or 15(d) of the 1934
Act (such information,
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whether made available to holders or prospective purchasers or furnished
to the Commission, is herein referred to as "Additional Information").
(d) Resales. The Chase Purchasers understand that the Preference
Securities have not been and will not be registered under the 1933 Act and may
not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except pursuant to an exemption from the registration
requirements of the 1933 Act. Each Chase Purchaser represents and agrees, that
it will offer and sell Preference Securities at any time only in accordance with
an applicable exemption from the registration provisions of the 1933 Act. Each
Chase Purchaser agrees that, at or prior to confirmation of a sale of Preference
Securities it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Preference
Securities from it or through it during the restricted period a confirmation or
notice to substantially the following effect:
"The securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and may
not be offered or sold within the United States or to or for the
account or benefit of U.S. persons as part of their distribution at
any time except in accordance with an exemption from the
registration requirements of the Securities Act."
(e) Offers and Sales in Poland and The Netherlands. Each Chase Purchaser
has advised the Company and hereby represents and warrants to and agrees with
the Company that it will not offer or sell the Preference Securities in Poland
except in accordance with Polish foreign exchange regulations under
circumstances which do not constitute a public offering or distribution of
securities under Polish laws and regulations. Each Chase Purchaser further
agrees it will not offer or sell the Preference Securities in The Netherlands
except under circumstances which do not constitute a public offering or
distribution (aanbod buiten besloten kring) of securities under the laws and
regulations of The Netherlands.
(f) Offers and Sales in the United Kingdom. Each Chase Purchaser hereby
represents, warrants and agrees that (i) it has not offered or sold and prior to
the expiration of the period six months after the date of issue of the
Preference Securities will not offer to sell by means of any document any
Preference Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Preference Securities in, from or
otherwise involving the United Kingdom and (iii) it has only issued or passed
on, and will only issue or pass on in the United Kingdom any document received
by it in connection with the issue of the Preference Securities to a person who
is of a kind described in Article 11(3) of the Financial
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Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom such document may otherwise lawfully be issued or passed on.
(g) Darland. Cheryl Chase may assign any or all of her right to purchase
Preference Securities to The Darland Trust and the Company hereby consents to
such assignment.
SECTION 7. Indemnification.
(a) Indemnification of the Chase Purchasers. The Company agrees to
indemnify and hold harmless each of the Chase Purchasers and each person, if
any, who controls the Chase Purchasers within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Preference Offering
Memorandum (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
7(d) below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Purchaser), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Chase Purchasers or the Initial Purchasers expressly for use in the Preference
Offering Memorandum (or any amendment thereto) and provided further that this
indemnity agreement shall not apply to any loss, liability, claim, damage or
expense to the extent arising out of any untrue statement or omission or alleged
untrue statement or omission which
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<PAGE>
was, at any time prior to the sales of the Preference Securities by the Chase
Purchaser, known or believed to be untrue or omitted by the Chase Purchaser
seeking indemnification.
(b) Indemnification of the Company, Directors and Officers. Each Chase
Purchaser agrees to indemnify and hold harmless the Company and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Preference Offering
Memorandum in reliance upon and in conformity with written information furnished
to the Company by the Chase Purchasers expressly for use in the Preference
Offering Memorandum.
(c) Actions Against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 7(a) above,
counsel to the indemnified parties shall be selected by Arnold Chase, and, in
the case of parties indemnified pursuant to Section 7(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7 or Section
8 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement Without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for reasonable fees and expenses of counsel, such indemnifying
party agrees that it shall be liable for any settlement of the nature
contemplated by Section 7(a)(ii) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
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<PAGE>
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
SECTION 8. Contribution. If the indemnification provided for in Section 7
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Chase Purchasers on the other hand from the offering of the
Preference Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Chase Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Chase Purchasers on the other hand in connection with the offering of the
Preference Securities pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Preference Securities pursuant to this Agreement (before deducting expenses)
received by the Company and the total commission received by the Chase
Purchasers, bear to the aggregate initial offering price of the Preference
Securities.
The relative fault of the Company on the one hand and the Chase Purchasers
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Chase Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Chase Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 8. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 8 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
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Notwithstanding the provisions of this Section 8, the Chase Purchasers
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Preference Securities purchased by it and
distributed to the subsequent purchasers were offered to the subsequent
purchasers exceeds the amount of any damages which the Chase Purchasers 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 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person, if any, who controls the
Chase Purchasers within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as the Chase
Purchasers, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company.
SECTION 9. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its subsidiaries submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Chase Purchasers or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Preference Securities to the Chase Purchasers.
SECTION 10. Termination of Agreement.
(a) Termination; General. The Chase Purchasers may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Preference Offering
Memorandum, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States, the
Republic of Poland or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, or in Polish taxation affecting the
Company or any subsidiary thereof or the transactions contemplated by the
Preference Offering Memorandum, or currency exchange rates for the U.S. dollar
into the Polish Zloty or exchange controls applicable to the U.S. dollar or the
Polish Zloty, in each case the effect of which is such as to make it, in the
judgment of the Chase Purchasers, impracticable to market the Preference
Securities or to enforce contracts for the sale of the Preference Securities, or
(iii) if trading in any securities of the Company has been suspended or
materially limited by the Commission, or if trading generally on the American
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Stock Exchange, the New York Stock Exchange or in the Nasdaq National Market has
been suspended or materially limited, or minimum or maximum prices for trading
have been fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority, or
(iv) if a banking moratorium has been declared by Polish, United States Federal
or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 7,
8 and 9 shall survive such termination and remain in full force and effect.
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed, sent by
courier or express delivery company or transmitted by any standard form of
telecommunication. Notices to the Chase Purchasers shall be directed to the
Chase Purchasers c/o Chase Enterprises, Inc., One Commercial Plaza, Hartford,
Connecticut 06103-3585, attention of John Redding. Notices to the Company shall
be directed to it at One Commercial Plaza, Hartford, Connecticut 06103-3585,
attention of Robert E. Fowler, III.
SECTION 12. Parties. This Agreement shall inure to the benefit of and be
binding upon the Chase Purchasers and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the Chase
Purchasers and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 7 and 8 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Chase Purchasers and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Preference Securities from the
Chase Purchasers shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
SECTION 15. Counterparts. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Chase Purchasers and the Company in accordance with its terms.
Very truly yours,
@ENTERTAINMENT, INC.
By
Title:
By
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
ARNOLD CHASE CHERYL CHASE
- ---------------- ----------------
Arnold Chase Cheryl Chase
RHODA CHASE
- ----------------
Rhoda Chase
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SCHEDULE A
Name Number of Number of Price
---- Preference Preference -----
Shares Warrants
------ --------
$2,000,000 (less a
Arnold Chase 2,000 2,000 commission of $60,000)
$2,000,000 (less a
Cheryl Chase* 2,000 2,000 commission of $60,000)
$1,000,000 (less a
Rhoda Chase 1,000 1,000 commission of $30,000)
$5,000,000 (less
=====================================================
Total ........... 5,000 5,000 commissions of $150,000)
===== =====
* Cheryl Chase has assigned her right to purchase 1,000 Preference Shares and
1,000 Preference Warrants for a price of $1,000,000 (less a commission of
$30,000) to The Darland Trust.
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SCHEDULE B
@ENTERTAINMENT, INC.
[Separately Attached]
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<PAGE>
SCHEDULE C
LIST OF DESIGNATED SUBSIDIARIES
1. ETV Sp. z o.o.
2. Telewizja Kablowa GOSAT Sp. z o.o.
3. Ground Zero Media Sp. z o.o.
4. Otwocka Telewizja Kablowa Sp. z o.o.
5. Polska Telewizja Kablowa S.A.
6. Polska Telewizja Kablowa Krakow S.A.
7. Polska Telewizja Kablowa Lublin S.A.
8. Polska Telewizja Kablowa Operator Sp. z o.o.
9. Polska Telewizja Kablowa Szczecin Sp. z o.o.
10. Polska Telewizja Kablowa Warszawa S.A.
11. Poltelkab Sp. z o.o.
12. Szczecinska Telewizja Kablowa Sp. z o.o.
13. TV Kabel Sp. z o.o.
14. At Entertainment Limited
15. Poland Communications, Inc.
16. Poland Cablevision (Netherlands) B.V.
17. Sereke Holding B.V.
18. Wizja TV Sp. z o.o.
19. WPTS Sp. z o.o.
20. @Entertainment Programming, Inc.
21. ProCable Sp. z o.o.
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Exhibit A
FORM OF CERTIFICATE OF DESIGNATION
[Separately Attached]
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Exhibit B
FORM OF PREFERENCE WARRANT AGREEMENT
[Separately Attached]
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Exhibit C
FORM OF PREFERENCE REGISTRATION RIGHTS AGREEMENT
[Separately Attached]
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Exhibit D
FORM OF PREFERENCE WARRANT REGISTRATION RIGHTS AGREEMENT
[Separately Attached]
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Exhibit 10.4
==============================================================================
EXECUTION COPY
@ENTERTAINMENT, INC.
(a Delaware corporation)
45,000 Shares of Series A Cumulative Preference Stock and
45,000 Warrants to Purchase an Aggregate of
4,950,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated: January 22, 1999
================================================================================
<PAGE>
Table of Contents
PURCHASE AGREEMENT 6
SECTION 1. Representations and Warranties 8
(a) Representations and Warranties by the Company 8
(i) Similar Offerings 8
(ii) Preference Offering Memorandum 8
(iii) Independent Accountants 8
(iv) Financial Statements 9
(v) No Material Adverse Change in Business 9
(vi) Good Standing of the Company 9
(vii) Corporate Standing of Designated Subsidiaries 9
(viii) Restrictions on Payments of Dividends 10
(ix) Capitalization 10
(x) Authorization of Agreement 11
(xi) Authorization of the Preference Registration Rights
Agreement 11
(xii) Authorization of the Certificate of
Designation and the Preference Shares 11
(xiii) Authorization of the Preference Warrant
Agreement 11
(xiv) Authorization of the Preference Warrants 12
(xv) Authorization of the Preference Warrant Shares 12
(xvi) Authorization of the Preference Warrant
Registration Rights Agreement 12
(xvii) Authorization of the Indenture 12
(xviii) Authorization of the Notes 13
(xix) Authorization of the Note Registration Rights
Agreement 13
(xx) Authorization of the Note Warrant Agreement 13
(xxi) Authorization of the Note Warrant Registration
Rights Agreement 14
(xxii) Description of the Preference Registration
Rights Agreement, the Preference Warrant
Registration Rights Agreement, the Preference
Shares, the Preference Warrants, the Common Stock,
the Preference Warrant Agreement, the Chase
Securities, the Note Securities, and the Note
Agreements 14
(xxiii) Absence of Defaults and Conflicts 14
(xxiv) Absence of Labor Dispute 15
(xxv) Absence of Proceedings 15
(xxvi) Possession of Intellectual Property 16
(xxvii) Absence of Further Requirements 16
(xxviii) Possession of Licenses and Permits 17
(xxix) No Additional Documents 17
(xxx) Management Agreements 17
(xxxi) Title to Property 18
(xxxii) Tax Returns 18
(xxxiii) Environmental Laws 18
(xxxiv) Investment Company Act 19
(xxxv) Internal Controls 19
(xxxvi) Taxes on Subsidiary Indebtedness 19
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(xxxvii) Insurance 20
(xxxviii) Rule 144A Eligibility 20
(xxxix) No General Solicitation 20
(xl) No Registration Required 20
(xli) Reporting Company 20
(xlii) Funds 20
(xliii) Subscribers 21
(b) Officers' Certificates 21
SECTION 2. Sale and Delivery to the Purchaser; Closing 21
(a) Preference Securities 21
(b) Payment 21
(c) Qualified Institutional Buyer 21
(d) Denominations; Registration 21
SECTION 3. Covenants of the Company 21
(a) Preference Offering Memorandum 22
(b) Notice and Effect of Material Events 22
(c) Reserved. 22
(d) Reserved. 22
(e) Reserved. 22
(f) DTC and PORTAL 22
(g) Use of Proceeds 22
(h) Reserved. 22
SECTION 4. Payment of Expenses 22
(a) Expenses 22
(b) Termination of Agreement 23
SECTION 5. Conditions of the Purchaser's Obligations 23
(a) Opinions of Counsel for the Company 23
(b) Opinion of United States Counsel for the Purchaser 23
(c) Opinion of Polish Counsel for the Purchaser 23
(d) Officers' Certificate 24
(e) Accountants' Comfort Letter 24
(f) Bring-down Comfort Letter 24
(g) Consummation of Sale of Chase Securities and Note Securities 24
(h) PORTAL 24
(i) Additional Documents 24
(j) Execution of Agreements 25
(k) Termination of Agreement 25
SECTION 6. Subsequent Offers and Resales of the Preference Securities 25
(a) Offer and Sale Procedures 25
(i) Offers and Sales only to Qualified Institutional Buyers 25
(ii) No General Solicitation 25
(iii) Purchases by Non-Bank Fiduciaries 25
(iv) Subsequent Purchaser Notification 25
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(v) Restrictions on Transfer 26
(b) Covenants of the Company 26
(i) Due Diligence 26
(ii) Integration 26
(iii) Rule 144A Information 27
(iv) Restriction on Repurchases 27
(c) Resale Pursuant to Rule 144A 27
(d) Offers and Sales in Poland and The Netherlands 27
(e) Offers and Sales in the United Kingdom 28
(f) Representation and Warranty of the Purchaser 28
SECTION 7. Indemnification 29
(a) Indemnification of the Purchaser 29
(b) Indemnification of the Company, Directors and Officers 29
(c) Actions Against Parties; Notification 30
(d) Settlement Without Consent if Failure to Reimburse 30
SECTION 8. Contribution 30
SECTION 9. Representations, Warranties and Agreements to Survive Delivery 32
SECTION 10. Termination of Agreement 32
(a) Termination; General 32
(b) Liabilities 32
SECTION 11. Notices 33
SECTION 12. Parties 33
SECTION 13. GOVERNING LAW AND TIME 33
SECTION 14. Effect of Headings 33
SECTION 15. Counterparts 33
EXHIBITS
Exhibit A - Form of Certificate of Designation ....................... A-1
Exhibit B - Form of Preference Warrant Agreement ..................... B-1
Exhibit C - Form of Preference Registration Rights Agreement ......... C-1
Exhibit D - Form of Preference Warrant Registration Rights Agreement . D-1
Exhibit E - Form of United States Law Opinion of Company's Counsel ... E-1
Exhibit F - Form of Polish Law Opinion of Company's Counsel .......... F-1
Exhibit G - Form of Opinion of Company's Dutch Counsel ............... G-1
Exhibit H - Form of Opinion of Company's English Counsel ............. H-1
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@ENTERTAINMENT, INC.
(a Delaware corporation)
45,000 Shares of Series A Cumulative Preference Stock and
45,000 Warrants to Purchase an Aggregate of
4,950,000 Shares of Common Stock
PURCHASE AGREEMENT
January 22, 1999
Morgan Grenfell Private Equity Limited,
on behalf of
Morgan Grenfell Development Capital Syndication Limited
23 Great Winchester Street
London EC2P 2AX
Great Britain
Ladies and Gentlemen:
@Entertainment, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Morgan Grenfell Private Equity Limited ("Morgan Grenfell" or the
"Purchaser"), with respect to the issue and sale by the Company and the purchase
by the Purchaser of 45,000 of the Company's Series A Cumulative Preference
Shares (the "Preference Shares") and 45,000 warrants (each a "Preference
Warrant" and collectively, the "Preference Warrants" and, together with the
Preference Shares, the "Preference Securities"); the Preference Warrants
entitling the holder thereof to purchase an aggregate of 4,950,000 shares of
common stock, par value $0.01 per share (the "Common Stock"), of the Company.
The Preference Shares and Preference Warrants are more fully described in
Schedule B hereto. The Preference Shares are to be issued pursuant to the
Certificate of Designation of the Company in substantially the form attached
hereto as Exhibit A and the Preference Warrants are to be issued pursuant to a
warrant agreement dated as of January 27, 1999 (the "Preference Warrant
Agreement"), between the Company and Bankers Trust Company, as warrant agent
(the "Preference Warrant Agent") in substantially the form attached hereto as
Exhibit A. Under the Preference Warrant Agreement, the Purchaser will have
certain preemptive rights in relation to the Company's Common Stock. Preference
Securities issued in book-entry form will be issued to Cede & Co. as nominee of
The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated
as of the Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among
the Company, the Trustee and DTC.
Concurrently, the Company has entered into a separate purchase agreement
(the "Chase Purchase Agreement") for the sale of an aggregate of 5,000 of the
Company's Series B Cumulative Preference Shares (the "Series B Preference
Shares") and 5,000 Warrants (the Chase
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Warrants") to purchase and aggregate of 550,000 shares of Common Stock to Mr.
Arnold Chase, Ms. Cheryl A. Chase and Ms. Rhoda Chase (collectively, the "Chase
Purchasers"). The Chase Warrants will be issued pursuant to the Preference
Warrant Agreement. The Series B Preference Shares and the Chase Warrants being
sold to the Chase Purchasers are sometimes hereinafter referred to as the "Chase
Securities."
The holders of Preference Shares and the Series B Preference Shares will
be entitled to the benefits of a Registration Rights Agreement, in substantially
the form attached hereto as Exhibit C with such changes as shall be agreed to by
the parties hereto and the Chase Purchasers (the "Preference Registration Rights
Agreement"), pursuant to which the Company will file a registration statement
(the "Preference Registration Statement") with the Securities and Exchange
Commission (the "Commission") registering the Preference Shares and the Series B
Preference Shares under the Securities Act of 1933, as amended (the "1933 Act").
The holders of Preference Warrants and the Chase Warrants will be entitled
to the benefits of a Preference Warrant Registration Rights Agreement in
substantially the form attached hereto as Exhibit D, with such changes as shall
be agreed to by the parties hereto and the Chase Purchasers (the "Preference
Warrant Registration Rights Agreement") which provides for the registration of
the Preference Warrants and the Chase Warrants under the 1933 Act under certain
circumstances set forth therein.
Pursuant to the terms of the Preference Securities, investors that acquire
Preference Securities may only resell or otherwise transfer such Preference
Securities if such Preference Securities are hereafter registered under the 1933
Act or if an exemption from the registration requirements of the 1933 Act is
available (including the exemption afforded by Rule 144A ("Rule 144A") of the
rules and regulations promulgated under the 1933 Act by the Commission).
The Company has prepared and will deliver to the Purchaser, on the date
hereof or the next succeeding day, copies of an offering memorandum dated
January 22, 1999 which was prepared by the Company in connection with the sale
of Preference Securities. "Preference Offering Memorandum" means with respect to
any date or time referred to in this Agreement, the final Preference Offering
Memorandum (including any amendment or supplement thereto) including exhibits
thereto and any documents incorporated by reference, which has been prepared and
delivered by the Company to the Purchaser in connection with the sale of
Preference Securities.
Simultaneously with the execution of this Agreement , the Company is
entering into a separate purchase agreement (the "Note Purchase Agreement") for
the sale of 256,800 the Company's units (the "Note Units"), each Note Unit
consisting of $1,000 aggregate principal amount at maturity of the Company's
14 1/2 Senior Discount Notes due 2009 (the "Notes") and four warrants (each a
"Note Warrant" and collectively, the "Note Warrants" and, together with the Note
Units and the Notes, the "Note Securities"). The Note Warrant entitle the
holders thereof to purchase an aggregate of 1,813,665 shares of Common Stock.
The Notes are to be
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issued pursuant to an indenture dated as of January 27, 1999 (the "Indenture")
between the Company and Bankers Trust Company, as trustee (the "Trustee") and
the Note Warrants are to be issued pursuant to a warrant agreement dated as of
January 27,1999 (the "Note Warrant Agreement") between the Company and Bankers
Trust Company, as warrant agent (the "Note Warrant Agent"). The holders of the
Note and the Note Warrants will be entitled to the benefits of two Registration
Rights Agreements (the "Note Registration Rights Agreement" and the "Note
Warrant Registration Rights Agreement", respectively) which provide for the
registration of the Notes and the Note Warrants under the 1933 Act under certain
circumstances set forth therein. The Indenture, the Note Warrant Agreement, the
Note Registration Rights Agreement and the Note Warrant Registration Rights
Agreement are sometimes referred to herein as the "Note Agreements."
All references in this Agreement to financial statements and schedules and
other information which are "contained," "included" or "stated" in the
Preference Offering Memorandum (or other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information, if any, which are incorporated by reference in the Preference
Offering Memorandum.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents
and warrants to the Purchaser as of the date hereof and as of the Closing Time
referred to in Section 2(b) hereof, and agrees with the Purchaser as follows:
(i) Similar Offerings. The Company and its Affiliates (as defined in
Section 1(a)(xxxv)) have not, directly or indirectly, solicited any offer
to buy or offered to sell, and will not, directly or indirectly, solicit
any offer to buy or offer to sell, in the United States or to any United
States citizen or resident, any security which is or would be integrated
with the sale of the Preference Securities in a manner that would require
the Preference Securities to be registered under the 1933 Act.
(ii) Preference Offering Memorandum. Neither of its date nor as of
the Closing Time the Preference Offering Memorandum, including any
amendment or supplement thereto, includes or will include an untrue
statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(iii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Preference
Offering Memorandum are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of
Regulation S-X under the 1933 Act.
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(iv) Financial Statements. The financial statements, together with
the related schedules and notes, of the Company included in the Preference
Offering Memorandum present fairly the financial position of the Company
and its consolidated subsidiaries at the dates indicated and the statement
of operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules, if any,
included in the Preference Offering Memorandum present fairly in
accordance with GAAP the information required to be stated therein. The
selected financial data and the summary financial information included in
the Preference Offering Memorandum present fairly the information shown
therein and have been compiled on a basis consistent with that of the
audited financial statements included in the Preference Offering
Memorandum.
(v) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Preference Offering
Memorandum, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise (a "Material Adverse
Effect"), whether or not arising in the ordinary course of business, (B)
there have been no transactions entered into by the Company or any of its
subsidiaries, other than transactions entered into in the ordinary course
of business, which are material with respect to the Company and its
subsidiaries considered as one enterprise, and (C) there has been no
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Preference Offering Memorandum and to enter into and
perform its obligations under this Agreement, the Preference Warrant
Agreement, the Preference Registration Rights Agreement, the Preference
Warrant Registration Rights Agreement, the Certificate of Designation, the
Note Securities, the Note Agreements, and the Preference Securities; and
the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where the failure so to
qualify or to be in good standing would not result in a Material Adverse
Effect.
(vii) Corporate Standing of Designated Subsidiaries. Each subsidiary
of the Company that (i) is a "significant subsidiary" (as that term is
defined in Regulation S-X under the 1933 Act) or (ii) that holds any valid
permits or licenses to operate the cable television business in Poland or
a digital direct-to-home business uplinking from the
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United Kingdom is listed on Schedule C hereto (each subsidiary listed on
Schedule C hereto is hereinafter referred to as a "Designated Subsidiary"
and, collectively, the "Designated Subsidiaries"), and has been duly
organized and is validly existing as a corporation under the laws of the
jurisdiction of its incorporation, has corporate power and corporate
authority to own, lease and operate its properties and to conduct its
business as described in the Preference Offering Memorandum and is not
required to be qualified as a foreign corporation to transact business or
to own or lease property in any jurisdiction where it owns or leases
property or transacts business; except as otherwise disclosed in the
Preference Offering Memorandum or in Schedule C, all of the issued and
outstanding capital stock of each Designated Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity, except for (i) in the case of any Polish limited liability
company, any statutory liability for taxes, (ii) the pledge of 3,583,457
shares of Polska Telewizja Kablowa Warszawa S.A. and of 2,514,291 shares
of Polska Telewizja Kablowa Krakow S.A. held by Poland Cablevision
(Netherlands) B.V. ("PCBV") and 2,400 shares of Polska Telewizja Kablowa
Lublin S.A. held by Poltelkab Sp. z o.o. as security for the loan of $6.5
million granted on August 28, 1996 by the American Bank in Poland to
Poland Communications, Inc. ("PCI"), and (iii) the pledge of 1,818 shares
of Szczecinska Telewizja Kablowa Sp. z o.o. ("SzTK") for the security of
certain obligations undertaken by PTK Szczecin Sp. z o.o. ("PTK Szczecin")
with respect to the sellers of those shares (collectively, the "Share
Pledges"); none of the outstanding shares of capital stock of the
Designated Subsidiaries was issued in violation of any preemptive or
similar rights arising by operation of law, or under the statute or
by-laws (or other similar organizational documents) of any Designated
Subsidiary or under any agreement to which the Company or any Designated
Subsidiary is a party. The subsidiaries of the Company other than the
Designated Subsidiaries, considered in the aggregate as a single
subsidiary, do not constitute a "significant subsidiary" as defined in
Rule 1-02 of Regulation S-X.
(viii) Restrictions on Payments of Dividends. There are no
restrictions (legal, contractual or otherwise) on the ability of the
Designated Subsidiaries to declare and pay dividends or make any payment
or transfer of property or assets to their shareholders other than those
referred to in the Preference Offering Memorandum and except for (i)
restrictions relating to the Share Pledges, (ii) encumbrances on certain
assets of Telewizja Kablowa GOSAT Sp. z o.o. ("GOSAT") consisting of the
transfer of title to such assets as security for the loan of $0.5 million
granted on October 7, 1996 by Polski Bank Rozwoju (which was bought by
Bank Rozucju Eksportu S.A. in July of 1998) to GOSAT, and (iii) the
restrictions discussed in Schedule D to the Indenture (collectively, the
"Asset Encumbrances").
(ix) Capitalization. The authorized, issued and outstanding capital
stock of the Company at September 30, 1998 was as set forth under the
caption "Capitalization"
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under the heading "Actual" in the Preference Offering Memorandum and, as
of the date hereof, there has been no material change in the authorized,
issued and outstanding capital stock since the date of the Preference
Offering Memorandum other than (i) issuances of shares of Common Stock
upon the exercise of options disclosed to be outstanding in the Preference
Offering Memorandum and (ii) the authorization and issuance of the
Preference Securities, the Series B Preference Shares, the Chase Warrants
and the Note Securities as described in the Preference Offering
Memorandum. The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid
and non-assessable; none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights
of any securityholder of the Company.
(x) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(xi) Authorization of the Preference Registration Rights Agreement.
The Preference Registration Rights Agreement has been duly authorized by
the Company, and, at the Closing Time, will have been duly executed and
delivered by the Company and, when executed and delivered by the Purchaser
and the Chase Purchasers, will constitute a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms
except as (x) the enforceability thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally, (y) the
enforceability thereof may be limited by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law) and (z) any rights to indemnity and contribution may be limited
by federal and state securities laws and public policy considerations.
(xii) Authorization of the Certificate of Designation and the
Preference Shares. The Certificate of Designation has been duly authorized
by the Board of Directors of the Company and, at the Closing Time, will
have been duly filed with the Secretary of State of Delaware. The
Preference Shares have been duly authorized by the Company for issuance
and sale to the Purchaser pursuant to this Agreement and the Preference
Shares when issued and delivered against payment therefor in accordance
with the terms hereof, will be validly issued, fully paid and
non-assessable and the Purchaser will receive title to the Preference
Shares free and clear of all liens and encumbrances. The security holders
of the Company have no preemptive rights with respect to the Preference
Shares.
(xiii) Authorization of the Preference Warrant Agreement. The
Preference Warrant Agreement has been duly authorized by the Company and,
at the Closing Time, will have been duly executed and delivered by the
Company and, when duly executed and delivered by the Preference Warrant
Agent, will constitute a valid and binding agreement of the Company,
enforceable against the Company in accordance with its
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terms, except as enforceability thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(xiv) Authorization of the Preference Warrants. The Preference
Warrants have been duly authorized by the Company and, at the Closing
Time, will have been duly executed by the Company and, when executed and
issued in the manner provided for in the Preference Warrant Agreement and
delivered against payment of the purchase price therefor as provided in
this Agreement, (A) will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and (B)
will be in the form contemplated by, and entitled to the benefits of, the
Preference Warrant Agreement and the Preference Warrant Registration
Rights Agreement.
(xv) Authorization of the Preference Warrant Shares. The shares of
Common Stock issuable upon exercise of the Preference Warrants (the
"Preference Warrant Shares") have been duly authorized and reserved by the
Company and, when executed by the Company and countersigned by the
Preference Warrant Agent and issued and delivered upon exercise of the
Preference Warrants in accordance with the terms of the Preference
Warrants and the Preference Warrant Agreement, will be validly issued,
fully paid and non-assessable and will not be subject to any preemptive or
similar rights.
(xvi) Authorization of the Preference Warrant Registration Rights
Agreement. The Preference Warrant Registration Rights Agreement has been
duly authorized by the Company and, at the Closing Time, will have been
duly executed and delivered by the Company and, when executed and
delivered by the Purchaser and the Chase Purchasers, will constitute a
valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditor's rights generally, (y) the enforceability thereof may be limited
by general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and (z) any rights to
indemnity and contribution may be limited by federal and state securities
laws and public policy considerations.
(xvii) Authorization of the Indenture. The Indenture has been duly
authorized by the Company and, at the Closing Time, will have been duly
executed and delivered by
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the Company and, when executed and delivered by the Trustee, will
constitute a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and the waiver contained in Section 514
thereof may be unenforceable due to interests of public policy.
(xviii) Authorization of the Notes. The Notes have been duly
authorized and, at the Closing Time, will have been duly executed by the
Company and, when authenticated in the manner provided for in the
Indenture and delivered against payment of the purchase price therefor
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), and will be in the form contemplated by,
and entitled to the benefits of, the Indenture and the Note Registration
Rights Agreement.
(xix) Authorization of the Note Registration Rights Agreement. The
Note Registration Rights Agreement has been duly authorized by the
Company, and, at the Closing Time, will have been duly executed and
delivered by the Company and will, when executed and delivered by the
Initial Purchasers, constitute a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms
except as (x) the enforceability thereof may be limited by bankruptcy,
insolvency .(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally, (y)
the enforceability thereof may be limited by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law) and (z) any rights to indemnity and contribution may be limited
by federal and state securities laws and public policy considerations.
(xx) Authorization of the Note Warrant Agreement. The Note Warrant
Agreement has been duly authorized by the Company and, at the Closing
Time, will have been duly executed and delivered by the Company and, when
duly executed and delivered by the Note Warrant Agent, will constitute a
valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as enforceability thereof may
be limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or
other similar laws relating to or affecting enforcement of creditors'
rights generally or by
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general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xxi) Authorization of the Note Warrant Registration Rights
Agreement. The Note Warrant Registration Rights Agreement has been duly
authorized by the Company and, at the Closing Time, will have been duly
executed and delivered by the Company and, when executed and delivered by
the Initial Purchasers, will constitute a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms
except as (x) the enforceability thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditor's rights generally, (y) the
enforceability thereof may be limited by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law) and (z) any rights to indemnity and contribution may be limited
by .federal and state securities laws and public policy considerations.
(xxii) Description of the Preference Registration Rights Agreement,
the Preference Warrant Registration Rights Agreement, the Preference
Shares, the Preference Warrants, the Common Stock, the Preference Warrant
Agreement, the Chase Securities, the Note Securities, and the Note
Agreements. The Preference Registration Rights Agreement, the Preference
Warrant Registration Rights Agreement, the Preference Shares, the
Preference Warrants, the Common Stock, the Preference Warrant Agreement,
the Chase Securities, the Note Securities and the Note Agreements will
conform in all material respects to the respective statements relating
thereto contained in the Preference Offering Memorandum and will be in
substantially the respective forms previously delivered to the Purchaser.
(xxiii) Absence of Defaults and Conflicts. Neither the Company nor
any of its subsidiaries is (1) in violation of its charter or statute, as
applicable, or by-laws (or other similar organizational documents), (2) in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which or any of them may be bound, or to which any of the property or
assets of the Company or any of its subsidiaries is subject (collectively,
"Agreements and Instruments"), except as described in the Preference
Offering Memorandum and except for such defaults that would not result in
a Material Adverse Effect or (3) in violation of any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any of its subsidiaries or any of
their assets or properties, except as described in the Preference Offering
Memorandum; and the execution, delivery and performance of this Agreement,
the DTC Agreement, the Preference Warrant Agreement, the Preference
Registration Rights Agreement, the Preference Warrant Registration Rights
Agreement,
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the Certificate of Designation, the Preference Securities, the Note
Securities, the Note Agreements, and any other agreement or instrument
entered into or issued or to be entered into or issued by the Company or
any Designated Subsidiary in connection with the transactions contemplated
hereby or thereby or in the Preference Offering Memorandum and the
consummation of the transactions contemplated herein and in the Note
Purchase Agreement and the Preference Offering Memorandum (including the
issuance and sale of the Preference Securities and the Note Securities and
the use of the proceeds from the sale of the Preference Securities and the
Note Securities as described in the Preference Offering Memorandum under
the caption "Use of Proceeds") and compliance by the Company with its
obligations hereunder have been duly authorized by all necessary corporate
action and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach
of, or default or Repayment Event (as defined below) under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant to,
the Agreements and Instruments except for such conflicts, breaches,
Repayment Events or defaults or liens, charges or encumbrances that,
singly or in the aggregate, would not result in a Material Adverse Effect,
nor will such action result in any violation of the provisions of the
charter or statute, as applicable, or by-laws (or other similar
organizational documents) of the Company or any of its subsidiaries or any
applicable law, statute, rule, regulation, judgment, order, writ or decree
of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries
or any of their assets or properties, assuming that the Purchaser complies
with all of its obligations under Section 6 hereof. As used herein, a
"Repayment Event" means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any of its subsidiaries.
(xxiv) Absence of Labor Dispute. No labor dispute with the employees
of the Company or any of its subsidiaries exists or, to the knowledge of
the Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any of its
subsidiaries' principal suppliers, customers or contractors, which, in
either case, may reasonably be expected to result in a Material Adverse
Effect.
(xxv) Absence of Proceedings. Except as disclosed in the Preference
Offering Memorandum, there is no action, suit, proceeding, inquiry or
investigation before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any subsidiary thereof,
which would be required to be disclosed in the Preference Offering
Memorandum (other than as disclosed therein) if it were a prospectus filed
as part of a registration statement on Form S-1 under the 1933 Act, or
which might reasonably be
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expected to result in a Material Adverse Effect, or which might reasonably
be expected to adversely affect the properties or assets of the Company or
any of its subsidiaries in a manner that is material and adverse to the
Company and its subsidiaries considered as one enterprise or the
consummation of the transactions contemplated by this Agreement, the
Preference Warrant Agreement, the Preference Registration Rights
Agreement, the Preference Warrant Registration Rights Agreement, the
Certificate of Designation, the Preference Securities, the Note Securities
or the Note Agreements, or the performance by the Company of its
obligations hereunder or thereunder. The aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary thereof is
a party or of which any of their respective property or assets is the
subject which are not described in the Preference Offering Memorandum,
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Effect.
(xxvi) Possession of Intellectual Property. Except as disclosed in
the Preference Offering Memorandum, the Company and its subsidiaries own
or possess, or can acquire on reasonable terms, adequate patents, patent
rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks, trade names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business now operated
by them. Except as disclosed in the Preference Offering Memorandum,
neither the Company nor any of its subsidiaries has received any notice or
is otherwise aware of any infringement of or conflict with asserted rights
of others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the subject
of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material Adverse
Effect.
(xxvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
(other than (A) under the 1933 Act and the rules and regulations
thereunder with respect to the Preference Registration Rights Agreement,
the Preference Warrant Registration Rights Agreement, the Note
Registration Rights Agreement, the Note Warrant Registration Rights
Agreement, and the transactions contemplated thereunder, (B) under the
securities or "blue sky" laws of the various states and (C) the Polish
Anti-Monopoly Act) is necessary or required (x) for the performance by the
Company of its obligations hereunder, in connection with the offering,
issuance or sale of the Preference Securities hereunder or the
consummation of the transactions contemplated by this Agreement, the
Preference Warrant Agreement, the Preference Registration Rights
Agreement, the Preference Warrant Registration Rights Agreement, the Note
Registration Rights Agreement, the Note Warrant Registration Rights
Agreement, or the Preference Offering Memorandum or (y) to permit the
Company to (1)
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effect payments of dividends on or redemption of the Preference Shares, or
(2) perform its other obligations under the Certificate of Designation,
the Preference Warrant Agreement, the Preference Warrant Registration
Rights Agreement, the Note Registration Rights Agreement, and the Note
Warrant Registration Rights Agreement.
(xxviii) Possession of Licenses and Permits. Except as disclosed in
the Preference Offering Memorandum, the Company and its subsidiaries
possess such permits, licenses, approvals, concessions, consents and other
authorizations (including, without limitation, all permits required for
the operation of the business of the Company and its subsidiaries by the
Republic of Poland and the United Kingdom) (collectively, "Governmental
Licenses") issued by the appropriate domestic or foreign regulatory
agencies or bodies, other governmental authorities or self regulatory
organizations necessary to conduct the business now operated by them or
any business currently proposed to be conducted by them as described in
the Preference Offering Memorandum; the Company and its subsidiaries,
except as disclosed in the Preference Offering Memorandum and except where
the failure to so comply would not, singly or in the aggregate, have a
Material Adverse Effect, are in compliance with the terms and conditions
of all such Governmental Licenses; all of the Governmental Licenses are
valid and in full force and effect, except as disclosed in the Preference
Offering Memorandum and except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force
and effect would not have a Material Adverse Effect; and except as
disclosed in the Preference Offering Memorandum, neither the Company nor
any of its subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect. To the
knowledge of the Company, except as described in the Preference Offering
Memorandum, there exists no reason or cause that could justify the
variation, suspension, cancellation or termination of any such
Governmental Licenses held by the Company or any of its subsidiaries with
respect to the construction or operation of their respective businesses,
which variation, suspension, cancellation or termination could reasonably
be expected to have a Material Adverse Effect.
(xxix) No Additional Documents. There are no contracts or documents
of a character that would be required to be described in the Preference
Offering Memorandum, if it were a prospectus filed as part of a
registration statement on Form S-3 under the 1933 Act, that are not
described as would be so required. All such contracts to which the Company
is party have been duly authorized, executed and delivered by the Company
and constitute valid and binding agreements of the Company.
(xxx) Management Agreements. Each of the Management Agreements (as
such term is defined in the Indenture) to which any subsidiary of the
Company is a party has been duly authorized, executed and delivered by
each of the parties thereto and constitutes a valid and binding agreement
of each of the parties thereto.
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(xxxi) Title to Property. The Company and its subsidiaries own no
real property, except as described in the Preference Offering Memorandum
and except for approximately 3,200 square meters of real property owned by
a Designated Subsidiary, and have good title to all other properties owned
by them, in each case, free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind
except such as (a) are described in the Preference Offering Memorandum or
(b) do not, singly or in the aggregate, materially affect the value of
such property and do not interfere with the use made and proposed to be
made of such property by the Company or any of its subsidiaries; and all
of the leases and subleases material to the business of the Company and
its subsidiaries, considered as one enterprise, and under which the
Company or any of its subsidiaries holds properties described in the
Preference Offering Memorandum, are in full force and effect, and neither
the Company nor any of its subsidiaries has any notice of any claim of any
sort that has been asserted by anyone adverse to the rights of the Company
or any of its subsidiaries under any of the leases or subleases mentioned
above, or affecting or questioning the rights of the Company or any
subsidiary thereof to the continued possession of the leased or subleased
premises under any such lease or sublease, except for such claims as could
not reasonably be expected to result in a Material Adverse Effect.
(xxxii) Tax Returns. Except as disclosed in the Preference Offering
Memorandum, the Company and its subsidiaries have filed all domestic and
foreign tax returns that are required to be filed or have duly requested
extensions thereof and have paid all taxes required to be paid by any of
them and any related assessments, fines or penalties, except for any such
tax, assessment, fine or penalty that is being contested in good faith and
by appropriate proceedings, and except for such claims as could not result
in a Material Adverse Effect; and adequate charges, accruals and reserves
have been provided for in the financial statements referred to in Section
1(a)(iv) above in respect of all domestic and foreign taxes for all
periods as to which the tax liability of the Company or any of its
subsidiaries has not been finally determined or remains open to
examination by applicable taxing authorities.
(xxxiii) Environmental Laws. Except as described in the Preference
Offering Memorandum and except such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any domestic or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or administrative interpretation thereof including any
judicial or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials") or
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or
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handling of Hazardous Materials (collectively, "Environmental Laws"), (B)
the Company and its subsidiaries have all permits, authorizations and
approvals required under any applicable Environmental Laws and are each in
compliance with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or any of its subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or
Environmental Laws.
(xxxiv) Investment Company Act. The Company is not, and upon the
issuance and sale of the Preference Securities, the Chase Securities and
the Note Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Preference Offering Memorandum will
not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(xxxv) Internal Controls. The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance
with management's general or specific authorization; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and (D)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company and its subsidiaries have not
made, and, to the knowledge of the Company, no employee or agent of the
Company or any subsidiary has made, any payment of the Company's funds or
any subsidiary's funds or received or retained any funds (A) in violation
of the Foreign Corrupt Practices Act, as amended, or (B) in violation of
any other applicable law, regulation or rule (except, in the case of this
clause (B), for such violations as could not reasonably be expected to
result in a Material Adverse Effect) or that would be required to be
disclosed in the Preference Offering Memorandum if it were a prospectus
filed as part of a registration statement on Form S-1 under the 1933 Act.
(xxxvi) Taxes on Subsidiary Indebtedness. Except as described in the
Preference Offering Memorandum, as of the date hereof, no material income,
stamp or other taxes or levies, imposts, deductions, charges, compulsory
loans or withholdings whatsoever are or will be, under applicable law in
the Republic of Poland, imposed, assessed, levied or collected by the
Republic of Poland or any political subdivision or taxing authority
thereof or therein or on or in respect of principal, interest, premiums,
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penalties or other amounts payable under any indebtedness of any of the
Company's subsidiaries held by the Company.
(xxxvii) Insurance. Except as otherwise disclosed in the Preference
Offering Memorandum, the Company and each of its subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and the value of
their respective properties and as is customary for companies engaged in
similar businesses or similar industries in similar locations.
(xxxviii) Rule 144A Eligibility. The Preference Securities are
eligible for resale pursuant to Rule 144A and will not be, at the Closing
Time, of the same class as securities listed on a national securities
exchange registered under Section 6 of the Securities Exchange Act of
1934, as amended (the "1934 Act"), or quoted in a U.S. automated
interdealer quotation system.
(xxxix) No General Solicitation. None of the Company, its
affiliates, as such term is defined in Rule 501(b) under the 1933 Act
("Affiliates"), or any person acting on its or any of their behalf (other
than the Purchaser and the Initial Purchasers, as to whom the Company
makes no representation) has engaged or will engage, in connection with
the offering of the Preference Securities, in any form of general
solicitation or general advertising within the meaning of Rule 502(c)
under the 1933 Act.
(xl) No Registration Required. Subject to compliance by the
Purchaser with the representations and warranties set forth in Section 2
and the procedures set forth in Section 6 hereof, it is not necessary in
connection with the offer, sale and delivery of the Preference Securities
to the Purchaser in the manner contemplated by this Agreement, the
Preference Warrant Agreement and the Preference Offering Memorandum to
register the Preference Securities under the 1933 Act.
(xli) Reporting Company. The Company is subject to, and has complied
with all applicable reporting requirements of Section 13 or Section 15(d)
of the 1934 Act.
(xlii) Funds. With the net proceeds of the sale of the Preference
Securities and the Chase Securities pursuant to this Agreement and the
Chase Purchase Agreement, respectively, the sales of the Note Securities
pursuant to the Note Purchase Agreement and the sale of the Company's
Series C Senior Discount Notes which was consummated on January 20, 1999,
together with cash on hand, the Company has sufficient capital to fulfill
its current business plan and to fund its commitments until the Company
achieves positive cash flow from operations, subject to the matters
disclosed in the Preference Offering Memorandum.
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(xliii) Subscribers. As of December 31, 1998, the Company had at
least 675,000 basic cable subscribers and had sold approximately 125,000
Wizja TV packages to authorized retailers in Poland (as described in the
Preference Offering Memorandum).
(b Officers' Certificates. Any certificate titled "Officers' Certificate"
or "Secretary's Certificate" signed by any officer of the Company or any of its
subsidiaries which is delivered to the Purchaser or to counsel for the Purchaser
shall be deemed a representation and warranty by the Company to the Purchaser as
to the matters covered thereby.
SECTION 2. Sale and Delivery to the Purchaser; Closing.
(a) Preference Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to the Purchaser and the Purchaser agrees to
purchase from the Company, at an aggregate purchase price of $45,000,000 (less a
commission of $1,350,000), the aggregate number of Preference Shares and
Preference Warrants set forth in Schedule A opposite its name.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Preference Securities shall be made at the office of
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or at such
other place as shall be agreed upon by the Purchaser and the Company, at 9:00
A.M. on the third business day after the date hereof (unless postponed in
accordance with the provisions of Section 11), or such other time not later than
ten business days after such date as shall be agreed upon by the Purchaser and
the Company (such time and date of payment and delivery being herein called the
"Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Purchaser for the account of the Purchaser of certificates for the
Preference Securities to be purchased by it.
(c) Qualified Institutional Buyer. The Purchaser represents and warrants
to, and agrees with, the Company that it is a "qualified institutional buyer"
within the meaning of Rule 144A under the 1933 Act (a "Qualified Institutional
Buyer") and an "accredited investor" within the meaning of Rule 501(a) under the
1933 Act (an "Accredited Investor").
(d) Denominations; Registration. Certificates for the Preference
Securities shall be in such denominations and registered in such names as the
Purchaser may request in writing at least one full business day before the
Closing Time. The certificates representing the Preference Shares and the
Preference Warrants shall be registered in the name of Cede & Co. pursuant to
the DTC Agreement and shall be made available for examination and packaging by
the Purchaser in the City of New York not later than 10:00 A.M. on the last
business day prior to the Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with the
Purchaser as follows:
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(a) Preference Offering Memorandum. The Company, as promptly as possible,
will furnish to the Purchaser, without charge, such number of copies of the
Preference Offering Memorandum and any amendments and supplements thereto and
documents incorporated by reference therein as the Purchaser may reasonably
request.
(b) Notice and Effect of Material Events. The Company will immediately
notify the Purchaser, and confirm such notice in writing, of any filing made by
the Company of information relating to the offering of the Preference Securities
with any securities exchange or any other regulatory body in the United States
or any other jurisdiction.
(c) Reserved.
(d) Reserved.
(e) Reserved.
(f) DTC and PORTAL. The Company will cooperate with the Purchaser and use
its best efforts (i) to permit the Preference Securities to be eligible for
clearance and settlement through the facilities of DTC and (ii) include
quotation of the Preference Securities on PORTAL.
(g) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Preference Securities in the manner specified in the
Preference Offering Memorandum under "Use of Proceeds."
(h) Reserved.
(i) Notification of Current Accumulated Earnings and Profits. The Company
will disclose its current and accumulated earnings and profits, if any, for each
fiscal year in its annual report on Form 10-K so long as it is required to file
such a report. Thereafter, the Company will provide such information to any
holder of Preference Securities upon receipt of a written request from such
holder.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and any filing of the Preference Offering Memorandum
(including financial statements and any schedules or exhibits and any document
incorporated therein by reference) and of each amendment or supplement thereto,
(ii) the preparation, printing and delivery to the Purchaser of this Agreement,
the Preference Warrant Agreement, the Preference Registration Rights Agreement,
the Preference Warrant Registration Rights Agreement, the Certificate of
Designation and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Preference Securities,
(iii) the preparation, issuance and delivery of the certificates for the
Preference Securities to the Purchaser, including any charges of DTC in
connection therewith,
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(iv) the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) any filing for review of the offering with the National
Association of Securities Dealers (the "NASD"), and (vi) any fees payable to the
NASD and any fees and expenses payable in connection with the initial and
continued designation of the Preference Securities as PORTAL securities under
the PORTAL Market Rules pursuant to NASD Rule 5322.
(b) Termination of Agreement. If this Agreement is terminated by the
Purchaser in accordance with the provisions of Section 5 or Section 10(a)(i)
hereof, the Company shall reimburse the Purchaser for all of its out-of-pocket
expenses, including the reasonable fees and disbursements of counsel for the
Purchaser incurred through the date of termination.
SECTION 5. Conditions of the Purchaser's Obligations. The obligations of
the Purchaser hereunder are subject to the accuracy of the representations and
warranties of the Company contained in Section 1 hereof or in certificates of
any officer of the Company or any of its subsidiaries delivered pursuant to the
provisions hereof, to the performance by the Company of its covenants and other
obligations hereunder, and to the following further conditions:
(a) Opinions of Counsel for the Company. (i) At the Closing Time, the
Purchaser shall have received two favorable opinions, each dated as of the
Closing Time, of Baker & McKenzie, counsel for the Company, each in form and
substance satisfactory to counsel for the Purchaser, one to the effect as set
forth in Exhibit E hereto and one to the effect set forth in Exhibit F hereto
and each to such further effect as counsel to the Purchaser may reasonably
request.
(ii) At the Closing Time, the Purchaser shall have received the
favorable opinion, dated as of the Closing Time, of Baker & McKenzie,
Amsterdam, special Dutch counsel to the Company, in form and substance
satisfactory to counsel to the Purchaser, to the effect set forth in
Exhibit G hereto and to such other effect as counsel to the Purchaser may
reasonably request.
(iii) At the Closing Time, the Purchaser shall have received the
favorable opinion, dated as of the Closing Time, of Ashurst Morris Crisp,
special English counsel to the Company, in form and substance satisfactory
to counsel to the Purchaser, to the effect set forth in Exhibit H hereto
and to such other effect as counsel to the Purchaser may reasonably
request.
(b) Opinion of United States Counsel for the Purchaser. At the Closing
Time, the Purchaser shall have received the favorable opinion, dated as of the
Closing Time, of Shearman & Sterling, counsel for the Purchaser, with respect to
certain of the matters set forth in Exhibit E hereto and to such other effect as
the Purchaser and such counsel may reasonably agree.
(c) Opinion of Polish Counsel for the Purchaser. At the Closing Time, the
Purchaser shall have received the favorable opinion, dated as of the Closing
Time, of Salans Hertzfeld & Heilbronn Sp. z o.o., special Polish counsel to the
Purchaser, in form satisfactory to the
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Purchaser with respect to certain of the matters set forth in paragraphs (i)
through (vii), inclusive, of Exhibit F hereto.
(d) Officers' Certificate. At the Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Preference Offering Memorandum, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Purchaser shall have received a certificate of the chief executive officer of
the Company and of the chief financial or chief accounting officer of the
Company, dated as of the Closing Time, to the effect that (i) there has been no
such material adverse change, (ii) the representations and warranties in Section
1 hereof are true and correct with the same force and effect as though expressly
made at and as of the Closing Time, and (iii) the Company has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Time.
(e) Accountants' Comfort Letter. At the time of the execution of this
Agreement and upon delivery of an underwriters' request for comfort letter (the
"Request Letter") in form and substance satisfactory to KPMG Polska Sp. z o.o.,
the Purchaser shall have received from KPMG Polska Sp. z o.o. a letter dated
such date, in form and substance satisfactory to the Purchaser, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to the Purchaser with respect to the financial statements and
certain financial information contained in the Preference Offering Memorandum.
If the Purchaser is unable or unwilling to provider the Request Letter, at the
time of the execution of this Agreement, the Purchaser shall have received from
KPMG Polska Sp. z o.o. a letter dated such date, in form and substance
satisfactory to the Purchaser, containing statements and information of the type
ordinarily included in accountants' "agreed procedures letter" to the Purchaser
with respect to the financial statements and certain financial information
contained in the Preference Offering Memorandum.
(f) Bring-down Comfort Letter. At the Closing Time, the Purchaser shall
have received from KPMG Polska Sp. z o.o. a letter, dated as of the Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to the
Closing Time.
(g) Consummation of Sale of Chase Securities and Note Securities. The sale
of the Note Securities and the sale of Chase Securities to the Chase Purchasers
pursuant to the Chase Purchase Agreement shall have been consummated at the
Closing Time.
(h) PORTAL. At the Closing Time, the Preference Securities shall have been
designated for trading on PORTAL.
(i) Additional Documents. At the Closing Time, counsel for the Purchaser
shall have been furnished with such documents and opinions as it may require for
the purpose of enabling it
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to pass upon the issuance and sale of the Preference Securities as herein
contemplated, or in order to evidence the accuracy of any of the representations
or warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company in connection with the issuance and
sale of the Preference Securities as herein contemplated shall be satisfactory
in form and substance to the Purchaser and counsel for the Purchaser.
(j) Execution of Agreements. At the Closing Time, the Preference Warrant
Agreement, the Preference Registration Rights Agreement, the Preference Warrant
Registration Rights Agreement and the Certificate of Designation, each in form
and substance reasonably satisfactory to the Purchaser, shall have been duly
executed and delivered and shall be in full force and effect.
(k) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Purchaser by notice to the Company at any
time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 7, 8 and 9 shall survive any such termination and remain
in full force and effect.
SECTION 6. Subsequent Offers and Resales of the Preference Securities.
(a) Offer and Sale Procedures. The Purchaser and the Company hereby
establish and agree to observe the following procedures in connection with the
offer and sale of the Preference Securities:
(i) Offers and Sales only to Qualified Institutional Buyers. Offers
and sales of the Preference Securities shall only be made to persons whom
the offeror or seller reasonably believes to be qualified institutional
buyers (as defined in Rule 144A under the 1933 Act). The Purchaser agrees
that it will not offer, sell or deliver any of the Preference Securities
in any jurisdiction except under circumstances that will result in
compliance with the applicable laws thereof, and that it will take at its
own expense whatever action is required to permit its purchase and resale
of the Preference Securities in such jurisdictions.
(ii) No General Solicitation. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the 1933 Act) will be
used in the United States in connection with the offering or sale of the
Preference Securities.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
subsequent purchaser of a Preference Security acting as a fiduciary for
one or more third parties, each third party shall, in the judgment of the
Purchaser, be a Qualified Institutional Buyer.
(iv) Subsequent Purchaser Notification. The Purchaser will take
reasonable steps to inform, and cause each of its U.S. Affiliates to take
reasonable steps to inform,
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persons acquiring Preference Securities from the Purchaser or affiliate,
as the case may be, in the United States that the Preference Securities
(A) have not been and will not be registered under the 1933 Act, (B) are
being sold to them without registration under the 1933 Act in reliance on
Rule 144A or in accordance with another exemption from registration under
the 1933 Act, as the case may be, and (C) may not be offered, sold or
otherwise transferred prior to (x) the date which is two years (or such
shorter period of time as permitted by Rule 144(k) under the 1933 Act or
any successor provision thereunder) after the later of the date of
original issue of the Preference Securities and (y) such later date, if
any, as may be required under applicable laws except (1) to the Company or
any of its subsidiaries, (2) inside the United States in accordance with
(x) Rule 144A to a person whom the seller reasonably believes is a
Qualified Institutional Buyer that is purchasing such Preference
Securities for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the offer, sale or
transfer is being made in reliance on Rule 144A or (y) pursuant to another
available exemption from registration under the 1933 Act, or (3) pursuant
to an effective registration statement.
(v) Restrictions on Transfer. The transfer restrictions and the
other provisions set forth in the Preference Offering Memorandum under the
heading "Notice to Investors", including the legend required thereby,
shall apply to the Preference Securities except as otherwise agreed by the
Company and the Purchaser. Following the sale of the Preference Securities
by the Purchaser to subsequent purchasers pursuant to the terms hereof,
the Purchaser shall not be liable or responsible to the Company for any
losses, damages or liabilities suffered or incurred by the Company,
including any losses, damages or liabilities under the 1933 Act, arising
from or relating to any resale or transfer of any Security.
(b) Covenants of the Company. The Company covenants with the Purchaser as
follows:
(i) Due Diligence. In connection with the original purchase of the
Preference Securities, the Company agrees that, prior to any offer or
resale of the Preference Securities by the Purchaser, the Purchaser and
counsel for the Purchaser shall have the right to make reasonable
inquiries into the business of the Company and its subsidiaries.
(ii) Integration. The Company agrees that it will not and will cause
its Affiliates not to solicit any offer to buy or make any offer or sale
of, or otherwise negotiate in respect of, securities of the Company of any
class if, as a result of the doctrine of "integration" referred to in Rule
502 under the 1933 Act, such offer or sale would render invalid (for the
purpose of (i) the sale of the Preference Securities by the Company to the
Purchaser, (ii) the resale of the Preference Securities by the Purchaser
to subsequent purchasers or (iii) the resale of the Preference Securities
by such subsequent purchasers to others) the exemption from the
registration requirements of the 1933 Act provided by Section 4(2) thereof
or by Rule 144A or otherwise.
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(iii) Rule 144A Information. The Company agrees that, in order to
render the Preference Securities eligible for resale pursuant to Rule 144A
under the 1933 Act, while any of the Preference Securities remain
outstanding, it will make available, upon request, to any holder of
Preference Securities or prospective purchasers of Preference Securities
the information specified in Rule 144A(d)(4), unless the Company furnishes
information to the Commission pursuant to Section 13 or 15(d) of the 1934
Act (such information, whether made available to holders or prospective
purchasers or furnished to the Commission, is herein referred to as
"Additional Information").
(iv) Restriction on Repurchases. Until the expiration of two years
after the original issuance of the Preference Securities, the Company will
not, and will cause its Affiliates not to, purchase or agree to purchase
or otherwise acquire any Preference Securities which are "restricted
securities" (as such term is defined under Rule 144(a)(3) under the 1933
Act), whether as beneficial owner or otherwise (except as agent acting as
a securities broker on behalf of and for the account of customers in the
ordinary course of business in unsolicited broker's transactions) unless,
immediately upon any such purchase, the Company or any Affiliate shall
cancel such Preference Securities.
(c) Resale Pursuant to Rule 144A. The Purchaser understands that the
Preference Securities have not been and will not be registered under the 1933
Act and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except pursuant to an exemption from the
registration requirements of the 1933 Act. The Purchaser represents and agrees,
that, except as permitted by Section 6(a) above, it has offered and sold
Preference Securities and will offer and sell Preference Securities as part of
their distribution at any time only in accordance with Rule 144A under the 1933
Act or another applicable exemption from the registration provisions of the 1933
Act. The Purchaser agrees that, at or prior to confirmation of a sale of
Preference Securities (other than a sale of Preference Securities pursuant to
Rule 144A) it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Preference
Securities from it or through it during the restricted period a confirmation or
notice to substantially the following effect:
"The securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and may
not be offered or sold within the United States or to or for the
account or benefit of U.S. persons as part of their distribution at
any time except in accordance with Rule 144A under the Securities
Act or another exemption from the registration requirements of the
Securities Act."
(d) Offers and Sales in Poland and The Netherlands. The Purchaser has
advised the Company and hereby represents and warrants to and agrees with the
Company that it will not offer or sell the Preference Securities in Poland
except in accordance with Polish foreign exchange regulations under
circumstances which do not constitute a public offering or
-27-
<PAGE>
distribution of securities under Polish laws and regulations. The Purchaser
further agrees it will not offer or sell the Preference Securities in The
Netherlands except under circumstances which do not constitute a public offering
or distribution (aanbod buiten besloten kring) of securities under the laws and
regulations of The Netherlands.
(e) Offers and Sales in the United Kingdom. The Purchaser hereby
represents, warrants and agrees that (i) it has not offered or sold and prior to
the expiration of the period six months after the date of issue of the
Preference Securities will not offer to sell by means of any document any
Preference Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Preference Securities in, from or
otherwise involving the United Kingdom and (iii) it has only issued or passed
on, and will only issue or pass on in the United Kingdom any document received
by it in connection with the issue of the Preference Securities to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such
document may otherwise lawfully be issued or passed on.
(f) Representation and Warranty of the Purchaser. The Purchaser represents
and agrees that (i) it has not entered and will not enter into any contractual
arrangements with respect to the distribution of the Preference Securities,
except with its affiliates or with the prior written consent of the Company;
(ii) it has received and carefully reviewed the Preference Offering Memorandum
prior to the execution of this Agreement; (iii) it has been furnished by the
Company during the course of this transaction with all information regarding the
Company which it had requested or desired to know, all documents which could be
reasonably provided have been made available for its inspection and review and
it has been afforded the opportunity to ask questions of and receive answers
from duly authorized officers or other representatives of the Company concerning
the terms and conditions of the offering and any additional information which it
had requested; (iv) except as set forth herein, no representations or warranties
have been made to it by the Company or any agent, employee or affiliate of the
Company and in entering into this transaction, it is not relying on any
information, other than that contained herein or in the Preference Offering
Memorandum and the results of its independent investigation; (v) no person other
than the Company has made any representations to the Purchaser concerning this
Offering and the Purchaser has relied on no representations or documentation
other than that supplied by the Company and in particular, for avoidance of
doubt, the Purchaser is not relying on information supplied in connection with
(X) the concurrent sale of the Note Securities by the Initial Purchasers or (Y)
the sale of the Company's Series C Senior Discount Notes which was consummated
on January 20, 1999; (vi) it is purchasing the Preference Securities for
investment purposes only for its account and not with any view toward a
distribution thereof; and (vii) it has evaluated the risks of investing in the
Preference Securities and has determined that the
-28-
<PAGE>
Preference Securities are a suitable investment, and that it can bear the
economic risk of this investment and can afford a complete loss of its
investment.
SECTION 7. Indemnification.
(a) Indemnification of the Purchaser. The Company agrees to indemnify and
hold harmless the Purchaser and each person, if any, who controls the Purchaser
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Preference Offering
Memorandum (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
7(d) below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Purchaser), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Purchaser expressly for use in the Preference Offering Memorandum (or any
amendment thereto).
(b) Indemnification of the Company, Directors and Officers. The Purchaser
agrees to indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Preference Offering
-29-
<PAGE>
Memorandum in reliance upon and in conformity with written information furnished
to the Company by the Purchaser expressly for use in the Preference Offering
Memorandum.
(c) Actions Against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 7(a) above,
counsel to the indemnified parties shall be selected by the Purchaser, and, in
the case of parties indemnified pursuant to Section 7(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7 or Section
8 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement Without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for reasonable fees and expenses of counsel, such indemnifying
party agrees that it shall be liable for any settlement of the nature
contemplated by Section 7(a)(ii) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
SECTION 8. Contribution. If the indemnification provided for in Section 7
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
-30-
<PAGE>
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Purchaser on the other hand from the offering of the Preference
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
Purchaser on the other hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Purchaser on the other hand in connection with the offering of the Preference
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Preference Securities pursuant to this Agreement (before deducting expenses)
received by the Company and the total underwriting discount received by the
Purchaser, bear to the aggregate initial offering price of the Preference
Securities.
The relative fault of the Company on the one hand and the Purchaser on the
other hand shall be determined by reference to, among other things, whether any
such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Purchaser and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Purchaser agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 8. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 8 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, the Purchaser shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Preference Securities underwritten by it and distributed to
the subsequent purchasers were offered to the subsequent purchasers exceeds the
amount of any damages which the Purchaser 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 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
-31-
<PAGE>
For purposes of this Section 8, each person, if any, who controls the
Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Purchaser, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company.
SECTION 9. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its subsidiaries submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Purchaser or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Preference Securities to the Purchaser.
SECTION 10. Termination of Agreement.
(a) Termination; General. The Purchaser may terminate this Agreement, by
notice to the Company, at any time at or prior to the Closing Time (i) if there
has been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Preference Offering Memorandum,
any material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States, the Republic of Poland or
the international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, or in Polish taxation affecting the Company or any subsidiary
thereof or the transactions contemplated by the Preference Offering Memorandum,
or currency exchange rates for the U.S. dollar into the Polish Zloty or exchange
controls applicable to the U.S. dollar or the Polish Zloty, in each case the
effect of which is such as to make it, in the judgment of the Purchaser,
impracticable to market the Preference Securities or to enforce contracts for
the sale of the Preference Securities, or (iii) if trading in any securities of
the Company has been suspended or materially limited by the Commission, or if
trading generally on the American Stock Exchange, the New York Stock Exchange or
in the Nasdaq National Market has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (iv) if a banking moratorium has been
declared by Polish, United States Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 7,
8 and 9 shall survive such termination and remain in full force and effect.
-32-
<PAGE>
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed, sent by
courier or express delivery company or transmitted by any standard form of
telecommunication. Notices to the Purchaser shall be directed to the Purchaser
at 23 Great Winchester Street, London EC2P 2AX
Great Britain, attention of Scott Lanphere. Notices to the Company shall be
directed to it at One Commercial Plaza, Hartford, Connecticut 06103-3585,
attention of Robert E. Fowler, III.
SECTION 12. Parties. This Agreement shall inure to the benefit of and be
binding upon the Purchaser and the Company and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the Purchaser and
the Company and their respective successors and the controlling persons and
officers and directors referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Purchaser and the Company and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Preference Securities from the Purchaser shall be
deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
SECTION 15. Counterparts. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
-33-
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Purchaser and the Company in accordance with its terms.
Very truly yours,
@ENTERTAINMENT, INC.
By
----------------------------------
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MORGAN GRENFELL
PRIVATE EQUITY LIMITED,
on behalf of
MORGAN GRENFELL DEVELOPMENT
CAPITAL SYNDICATION LIMITED
By
------------------------
Authorized Signatory
-34-
<PAGE>
SCHEDULE A
Number of Number of
Preference Preference
Name Shares Warrants
---- ------ --------
Morgan Grenfell Private Equity Limited
on behalf of
Morgan Grenfell Development
Capital Syndication Limited.................. 45,000 45,000
------ ------
Total........................................ 45,000 45,000
====== ======
-35-
<PAGE>
SCHEDULE B
@ENTERTAINMENT, INC.
[Separately attached]
-36-
<PAGE>
SCHEDULE C
LIST OF DESIGNATED SUBSIDIARIES
1. ETV Sp. z o.o.
2. Telewizja Kablowa GOSAT Sp. z o.o.
3. Ground Zero Media Sp. z o.o.
4. Otwocka Telewizja Kablowa Sp. z o.o.
5. Polska Telewizja Kablowa S.A.
6. Polska Telewizja Kablowa Krakow S.A.
7. Polska Telewizja Kablowa Lublin S.A.
8. Polska Telewizja Kablowa Operator Sp. z o.o.
9. Polska Telewizja Kablowa Szczecin Sp. z o.o.
10. Polska Telewizja Kablowa Warszawa S.A.
11. Poltelkab Sp. z o.o.
12. Szczecinska Telewizja Kablowa Sp. z o.o.
13. TV Kabel Sp. z o.o.
14. At Entertainment Limited
15. Poland Communications, Inc.
16. Poland Cablevision (Netherlands) B.V.
17. Sereke Holding B.V.
18. Wizja TV Sp. z o.o.
19. WPTS Sp. z o.o.
20. @Entertainment Programming, Inc.
21. ProCable Sp. z o.o.
-37-
<PAGE>
Exhibit A
FORM OF CERTIFICATE OF DESIGNATION
[Separately Attached]
-38-
<PAGE>
Exhibit B
FORM OF PREFERENCE WARRANT AGREEMENT
[Separately Attached]
-39-
<PAGE>
Exhibit C
FORM OF PREFERENCE REGISTRATION RIGHTS AGREEMENT
[Separately Attached]
-40-
<PAGE>
Exhibit D
FORM OF PREFERENCE WARRANT REGISTRATION RIGHTS AGREEMENT
[Separately Attached]
-41-
<PAGE>
Exhibit E
FORM OF UNITED STATES LAW OPINION OF COMPANY'S
COUNSEL TO BE DELIVERED PURSUANT TO
SECTION 5(a)(i)
[Separately Attached]
-42-
<PAGE>
Exhibit F
FORM OF POLISH LAW OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)(i)
[Separately Attached]
-43-
<PAGE>
Exhibit G
FORM OF OPINION OF COMPANY'S DUTCH COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)(ii)
[Separately Attached]
-44-
<PAGE>
Exhibit H
FORM OF OPINION OF COMPANY'S ENGLISH COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(a)(iii)
[Separately Attached]
-45-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This scheudle contains summary financial information extrated from financial
statements included in the Company's Quarterly Report on Form 10-Q for the three
months ended March 31, 1999 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 128,002
<SECURITIES> 0
<RECEIVABLES> 7,589
<ALLOWANCES> 1,193
<INVENTORY> 7,906
<CURRENT-ASSETS> 168,743
<PP&E> 195,783
<DEPRECIATION> 9,405
<TOTAL-ASSETS> 447,540
<CURRENT-LIABILITIES> 54,579
<BONDS> 367,169
0
0
<COMMON> 334
<OTHER-SE> (3,477)
<TOTAL-LIABILITY-AND-EQUITY> 447,540
<SALES> 0
<TOTAL-REVENUES> 18,799
<CGS> 0
<TOTAL-COSTS> 43,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (1,193)
<INTEREST-EXPENSE> 11,845
<INCOME-PRETAX> (34,607)
<INCOME-TAX> 19
<INCOME-CONTINUING> (34,626)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,626)
<EPS-PRIMARY> (1.06)
<EPS-DILUTED> (1.06)
</TABLE>
