<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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@ ENTERTAINMENT, INC.
(Exact name of Registrant as Specified in Its Charter)
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<S> <C> <C>
DELAWARE 4841 06-1487156
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code) Identification No.)
</TABLE>
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ONE COMMERCIAL PLAZA
HARTFORD, CT 06103-3585
(860) 549-1674
(Address, including zip code and telephone number, including area
code, or registrant's principal executive offices)
ROBERT E. FOWLER, III
@ ENTERTAINMENT, INC.
ONE COMMERCIAL PLAZA
HARTFORD, CT 06103-3585
(860) 549-1674
(Name, address, including zip code and telephone number, including area code, of
agent for service)
------------------------------
COPIES TO:
MARC R. PAUL, ESQ.
BAKER & MCKENZIE
815 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20006
(202) 452-7034
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If the securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this form are to be offered
this form are to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check following
box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE(5) REGISTRATION FEE
<S> <C> <C> <C> <C>
Note Warrants 1,027,200 N/A(1) N/A(1) N/A(1)
Common Stock, par value $.01 per share(2) 1,813,665(3) $9.125(4) $16,549,693 $4,600(8)
Series A 12% Cumulative Preference Shares, par
value $.01 per share 45,000 $1,120(6) $50,400,000 $14,011(9)
Series B 12% Cumulative Preference Shares, par
value $.01 per share 5,000 $1,120(6) $5,600,000 $1,557(10)
Series A Preference Warrants 45,000 $1,100(7) $49,500,000 $13,761(11)
Series B Preference Warrants 5,000 $1,100(7) $5,550,000 1,529(12)
Total $35,458
</TABLE>
(1) Pursuant to Rule 457(g), no registration fee is required for the Note
Warrants since the shares of common stock underlying such warrants are being
registered hereby.
(2) Represents the shares of common stock issuable upon the exercise of the Note
Warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
(3) In accordance with Rule 416 under the Securities Act of 1933, there are also
being registered hereby such indeterminate number of additional shares of
common stock and other securities as may become issuable from time to time
pursuant to the adjustment provisions of the Note Warrants, common stock,
Series A Preference Warrants and Series B Preference Warrants.
(4) Represents the price at which the Note Warrants may be exercised.
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<PAGE>
(5) Estimated in accordance with Rule 457(g) of the Securities Act of 1933,
solely for the purpose of computing the amount of the registration fee.
(6) Based on Rule 457(a) of the Securities Act of 1933, represents the price
equal to the liquidation preference plus 12%.
(7) Based on Rule 457(a) of the Securities Act of 1933, represents the price at
which the Preference Warrants may be exercised.
(8) The registration fee for the common stock offered hereby, $4,600, is
calculated under Rule 457(g) of the Securities Act of 1933 as follows: the
product of .000278 and $16,549,000, which represents the proposed maximum
offering price, based on the price at which the Note Warrants may be
exercised.
(9) The registration fee for the Series A 12% Cumulative Preference Shares
offered hereby, $14,011, is calculated under Rule 457(g) of the Securities
Act of 1933 as follows: the product of .000278 and $50,400,000, which
represents the proposed maximum offering price, based on the price equal to
the liquidation preference plus 12%.
(10) The registration fee for the Series B 12% Cumulative Preference Shares
offered hereby, $1,557, is calculated under Rule 457(g) of the Securities
Act of 1933 as follows: the product of .000278 and $5,600,000, which
represents the proposed maximum offering price, based on the price equal to
the liquidation preference plus 12%.
(11) The registration fee for the Series A Preference Warrants offered hereby,
$13,761, is calculated under Rule 457(g) of the Securities Act of 1933 as
follows: the product of .000278 and $49,500,000, which represents the
proposed maximum offering price, based on the price at which the Series A
Preference Warrants may be exercised.
(12) The registration fee for the Series B Preference Warrants offered hereby,
$153, is calculated under Rule 457(g) of the Securities Act of 1933 as
follows: the product of .000278 and $550,000, which represents the proposed
maximum offering price, based on the price at which the Series B Preference
Warrants may be exercised.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 30, 1999
@ ENTERTAINMENT, INC.
The following are the securities that security holders of our company and we
are offering under this prospectus:
- 1,027,200 Note Warrants
- 1,813,665 shares of common stock
- 45,000 Series A 12% Cumulative Preference Shares
- 5,000 Series B 12% Cumulative Preference Shares
- 45,000 Series A Preference Warrants
- 5,000 Series B Preference Warrants
We originally issued the Note Warrants to Merrill Lynch & Co. and Deutsche
Bank Securities, the Series A 12% Cumulative Preference Shares and the Series A
Preference Warrants to Morgan Grenfell Private Equity Limited on behalf of
Morgan Grenfell Development Capital Syndication Limited and the Series B 12%
Cumulative Preference Shares and Series B Preference Warrants to Arnold Chase,
Cheryl Chase, Rhoda Chase and The Darland Trust in concurrent private placements
on January 27, 1999.
This prospectus provides you with a description of the securities that
security holders of our company and we are offering. Each time any securities
described in this prospectus are to be sold, we will, if necessary, provide the
specific terms of those securities and the names of the selling security holders
in a supplement to this prospectus. You should read this prospectus and any
relevant supplement before you invest.
Our common stock is quoted on the NASDAQ National Market under the symbol
"ATEN."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED ANY OF THESE SECURITIES OR DETERMINED
THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
ANY INVESTMENT IN THESE SECURITIES INVOLVES RISKS. WE URGE YOU TO READ THE
"RISK FACTORS" SECTION OF THIS PROSPECTUS BEGINNING ON PAGE 10 WHICH DESCRIBES
SPECIFIC RISKS ASSOCIATED WITH AN INVESTMENT IN OUR COMPANY AS WELL AS WITH
THESE PARTICULAR SECURITIES.
The date of this prospectus is June , 1999
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TABLE OF CONTENTS
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Where You Can Find More Information................................................... i
Incorporation of Certain Documents by Reference....................................... i
Prospectus Summary.................................................................... 1
Risk Factors.......................................................................... 10
Ratio of Earnings to Combined Fixed Charges and Preference Dividends.................. 22
Use of Proceeds....................................................................... 22
Address; Exchange Rate and Statistical Data........................................... 22
Selling Security Holders.............................................................. 23
General Description of Securities Being Offered....................................... 25
Book Entry; Delivery and Form......................................................... 36
Plan of Distribution.................................................................. 37
Legal Matters......................................................................... 38
Experts............................................................................... 38
Material Changes...................................................................... 39
Special Note Regarding Forward Looking Statements..................................... 60
</TABLE>
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the Securities and
Exchange Commission under the Securities Act of 1933. The rules and regulations
of the Commission allow us to omit some of the information in the registration
statement from this prospectus. This prospectus is a summary of information and
any statements made in this prospectus as to the contents of any contract,
agreement or other document are not necessarily complete. If we have filed such
contract, agreement or other document as an exhibit to the registration
statement, we urge you to read the exhibit carefully for a more complete
understanding of the document or the matter involved. We qualify all of our
statements by reference to the complete documents. The registration statement
and its exhibits and schedules may be read at no cost to you and copied at the
public reference section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at 7 World Trade
Center, Suite 1300, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may call the
Commission at 1-800-SEC-0330 for further information on its public reference
rooms or visit the Commission's web site at http://www.sec.gov which contains
the registration statement and its schedules and exhibits, as well as reports,
proxy and information statements and other information that we have filed
electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" into this prospectus
the information we file with the Commission. This means that we can disclose
important information to you by referring you to those documents. The
information we incorporate by reference is considered a part of the prospectus,
and later information we file with the Commission will automatically update and
supersede the information in this prospectus. We incorporate by reference the
documents listed below and any future filings we may make with the Commission
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until this offering is completed:
- Our Annual Report on Form 10-K for the year ended December 31,1998, dated
March 30, 1999;
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
- Our Current Reports on Form 8-K filed on June 9, 1999, June 2, 1999, May
12, 1999, May 7, 1999, February 24, 1999, February 1, 1999, January 25,
1999, and January 14, 1999;
- The description of common stock in our Registration Statement on Form 8-A,
which was declared effective by the Commission on July 30, 1997; and
- Our Solicitation/Recommendation Statement on Schedule 14D-9 filed on June
15, 1999 and as amended on June 28, 1999, and from time to time
thereafter.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
IN THIS PROSPECTUS OR DELIVERED WITH THIS PROSPECTUS. WE WILL PROVIDE THESE
DOCUMENTS WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED
UPON THE REQUEST OF SUCH PERSON TO: DONALD MILLER-JONES, @ ENTERTAINMENT, INC.,
ONE COMMERCIAL PLAZA, HARTFORD, CT 06103-3585, (860) 549-1674.
(i)
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS"
SECTION BEGINNING ON PAGE 10.
THE COMPANY
We are the leading provider of pay television services in Poland and are
engaged principally in providing cable television services, providing satellite
television services and developing, packaging and delivering high-quality
Polish-language programming.
CABLE TELEVISION. We are the largest cable television operator in Poland in
terms of the number of subscribers. As of March 31, 1999, we owned and operated
cable networks running outside (referred to in the cable television industry as
"passing") 1,624,100 homes and serving 948,200 total subscribers.
DIGITAL SATELLITE DIRECT-TO-HOME BROADCASTING. We expanded our distribution
capacity when we launched our digital satellite direct-to-home (known in the pay
television business as "D-DTH") broadcasting service on September 18, 1998. This
service is targeted at homes that are not subscribers to our cable television
service. Our multi-channel Polish-language D-DTH service was the first D-DTH
service available in Poland. This service is broadcast from our facilities in
the United Kingdom.
We have entered into an agreement with Philips Business Electronics B.V. for
Philips to supply us with D-DTH reception systems for up to 500,000 subscribers
to our D-DTH service. A reception system includes:
- a satellite dish
- a digital set top box
- all related hardware
Philips has also agreed to distribute, install and service these reception
systems through its authorized retailers in Poland.
As of March 31, 1999, we had sold to Philips' authorized retailers
approximately 137,600 D-DTH packages, which included the rental of the D-DTH
reception system, installation and a one-year subscription to our D-DTH service.
As of March 31, 1999, Philips had sold and installed approximately 130,000 of
these packages to consumers.
PROGRAMMING. We offer a package of 24 channels (22 channels primarily in
the Polish language) under the trade name "Wizja TV." We launched this package
of channels on our cable television networks on June 5, 1998 and on our D-DTH
system on September 18, 1998. We develop and own some of the channels and
programming ourselves, and we license the rest from programming and channel
suppliers.
RISK FACTORS
Our operations, the pay television industry in which we operate and this
offering are subject to risks. Before you invest in our securities, you should
consider the risks set forth in the section entitled "Risk Factors."
1
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OUR STRENGTHS
We believe that we can compete successfully in the Polish pay television
market and take advantage of the significant viewer demand for multi-channel
high-quality Polish-language programming because:
- We have the leading market position as the largest cable television
operator and first Polish-language D-DTH service provider in Poland.
- We have secured exclusive Polish pay television rights to channels and
events we believe will be attractive to Polish consumers.
- Our advanced technology allows our cable networks to be cost-effectively
reconfigured to provide more channels and other services, such as voice
and data transmission.
- We have a strong D-DTH distribution network with Philips, which has agreed
to distribute, install and service D-DTH reception systems to up to
500,000 subscribers through its authorized retailers in Poland.
- Our cable systems currently reach a large number of subscribers as a
percentage of homes passed (known in the cable industry as "penetration"),
and we have had a low rate of termination by subscribers (known in the
cable industry as "churn").
- We have made a substantial investment in infrastructure, by developing our
production and transmission facility in Maidstone, United Kingdom and our
centralized call center in Katowice, Poland.
- We have a strong management team with extensive experience in the
television industry.
BUSINESS STRATEGY
Our principal objective is to enhance our position as the leading provider
of pay television in Poland by capitalizing on favorable opportunities that we
believe exist in Poland in the cable television, D-DTH and programming markets.
Our business strategy is designed to increase our market share and
subscriber base and to maximize revenue per subscriber. To accomplish our goals,
we intend to do the following:
- Develop and control the content of our programming;
- Increase our distribution capabilities through internal growth and through
acquisitions;
- Control our management of subscribers by using advanced information
systems; and
- Establish Wizja TV as the leading brand name in the Polish pay television
industry.
FINANCING PLAN
The development of our businesses will require significant capital to fund
capital expenditures, working capital, debt service and operating losses,
including contractual commitments in connection with our D-DTH and programming
businesses.
- On January 20, 1999, we received approximately $9.5 million in net
proceeds from the sale of our Series C Senior Discount Notes due 2008.
- On January 27, 1999, we received approximately $96.0 million in net
proceeds from the sale of the 14 1/2% Senior Discount Notes due 2009 and
Note Warrants, as well as approximately $48.2 million in net proceeds from
the sale of our Series A 12% Cumulative Preference Shares, Series B 12%
Cumulative Preference Shares and Preference Warrants.
2
<PAGE>
- As of March 31, 1999, we had approximately $128.0 million in cash and cash
equivalents on hand.
We believe that the net proceeds of these three sales and cash on hand will
provide us with sufficient capital to fulfill our current business plan and to
fund our commitments until we achieve positive cash flow from operations.
However, for a description of situations when we may need additional financing,
see "Risk Factors--We May Need to Obtain Additional Financing if Our Plans or
Assumptions Change and the Terms of the Additional Financing May Restrict Our
Operations or Reduce Our Cash Flow." In addition, if the tender offer described
in the section of this prospectus entitled "Material Changes" is completed and
United Pan-Europe Communications N.V. takes control of our company, our
financing plans may change.
RECENT DEVELOPMENTS
You should read the "Recent Developments" section in the "Business" section
of our Annual Report on Form 10-K, our Current Report on Form 8-K filed on June
2, 1999 and our Solicitation/ Recommendation Statement on Schedule 14D-9 for
more details on the following recent developments related to our company:
- Our April 17, 1998 letter of intent with a Polish pay television provider
regarding a potential joint venture and the arbitration proceedings that
resulted;
- Our June 2, 1999 Agreement and Plan of Merger with United Pan-Europe
Communications N.V. whereby United Pan-Europe Communications N.V. and its
wholly-owned subsidiary, Bison Acquisition Corp., have initiated a tender
offer to purchase all of the outstanding shares of our company in an all
cash transaction valuing our company's shares of common stock at $19.00
per share. Upon the successful completion of the tender offer or the
related merger, the Note Warrants and the Preference Warrants will be
redeemed for a price per share of common stock, equal to the difference
between $19.00 and the exercise price per share. In addition, the owners
of all of the Preference Shares and the Preference Warrants have entered
into agreements with UPC and Bison granting Bison an option to purchase
all of the Preference Shares and the Preference Warrants. For more
information on how the securities we are offering will be treated and your
rights as security holders in the event the tender offer by United
Pan-Europe Communications N.V. is completed, you should read the section
of this prospectus entitled, "Material Changes;" and
- We recently completed an offer to exchange our 14 1/2% Series B Senior
Discount Notes Due 2009, which we registered under the Securities Act of
1933, for any and all of our outstanding 14 1/2% Senior Discount Notes Due
2009. We originally issued these notes in a private placement on January
27, 1999. The exchange offer expired on June 24, 1999.
3
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SUMMARY OF THE OFFERING
<TABLE>
<S> <C>
Securities Offered............ 1,027,200 Note Warrants and 1,813,665 shares of our common
stock, par value $.01 per share, issuable upon the exercise
of the Note Warrants.
We issued and sold these Note Warrants in a private
placement to Merrill Lynch & Co. and Deutsche Bank
Securities on January 27, 1999, along with our 14 1/2%
Senior Discount Notes due 2009.
45,000 Series A 12% Cumulative Preference Shares.
5,000 Series B 12% Cumulative Preference Shares.
(In this prospectus, we refer to the Series A 12% Cumulative
Preference Shares and the Series B 12% Cumulative Preference
Shares together as the "Preference Shares.")
45,000 Series A Preference Warrants
5,000 Series B Preference Warrants
(In this prospectus, we refer to the Series A Preference
Warrants and the Series B Preference Warrants together as
the "Preference Warrants.")
We issued the Series A 12% Cumulative Preference Shares and
Series A Preference Warrants to Morgan Grenfell Private
Equity Limited, and the Series B 12% Cumulative Preference
Shares and Series B Preference Warrants to Arnold Chase,
Cheryl Chase, Rhoda Chase and The Darland Trust, in private
placements on January 27, 1999.
The private placement relating to the Note Warrants and the
private placements relating to the Preference Shares and
Preference Warrants were effected pursuant to purchase
agreements filed as exhibits to the registration statement
of which this prospectus is a part.
TERMS OF THE NOTE WARRANTS
Expiration Date............... The Note Warrants will expire on February 1, 2009.
Exercise...................... Each Note Warrant entitles you as a holder of the Note
Warrant to acquire, until February 1, 2009, 1.7656 shares of
common stock at an exercise price of $9.125 per share.
Rights as Stockholders........ You will not, by virtue of being Note Warrant holders, have
any rights as stockholders of our company.
Adjustments................... In certain circumstances, to protect against dilution, the
Note Warrants provide for adjustments to the exercise price
and the number of shares of common stock that may be
purchased upon exercise. For more information on these
adjustments, see "General Description of Securities Being
Offered--Description of the Note Warrants--Adjustments."
Warrant Agent................. Bankers Trust Company.
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Registration Rights........... We are registering the Note Warrants and the shares of
common stock issuable upon exercise of the Note Warrants as
required by the Warrant Registration Rights Agreement
between us and Merrill Lynch and Deutsche Bank. Under the
terms of the Warrant Registration Rights Agreement, we are
required to use our reasonable efforts to maintain the
effectiveness of the registration statement, of which this
prospectus forms a part, until such time as all Note
Warrants have been exercised and the underlying shares of
common stock have been resold. In addition, you, as the
holders of the Note Warrants, will be entitled to
"piggy-back" registration rights for the shares of common
stock underlying the Note Warrants in connection with
certain public offerings of our common stock that may be
undertaken in the future. The registration statement
generally is intended to permit you, as the Note Warrant
holders, and certain transferees to resell the Note Warrants
and the common stock underlying the Note Warrants. For more
information on these registration rights, you should read
the section entitled, "General Description of Securities
Being Offered--Description of the Note
Warrants--Registration Rights."
TERMS OF THE PREFERENCE SHARES
Initial Liquidation $1,000 per Preference Share; $50,000,000 in the aggregate.
Preference..................
Ranking....................... With respect to the right to receive dividends and payments
upon the liquidation, dissolution or winding up of our
company, the Preference Shares rank:
- senior to our common stock and to all other classes
and series of capital stock that we issue in the future
and designate as junior to the Preference Shares;
- equal to each other class or series of capital stock
that we issue and designate as equal to the Preference
Shares; and
- junior to each other class or series of capital stock
that we issue and designate as junior to the Preference
Shares.
Dividends..................... As a holder of the Preference Shares, you are entitled to
receive dividends semi-annually (on September 30 and March
31 of each year) at a rate of 12% per annum. The right to
dividends is cumulative and accumulated unpaid dividends
compound semi-annually.
Mandatory Redemption.......... On January 30, 2010 we will be required to redeem all
outstanding Preference Shares at a price equal to $1,000 per
Preference Share plus any accumulated and unpaid dividends
up to the date of redemption.
As a holder of the Preference Shares, you will not be able
to require us to redeem the Preference Shares before January
30, 2010 unless all our outstanding senior indebtedness
under the indentures we are currently a party to has been
redeemed.
</TABLE>
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Optional Redemption........... We may decide to redeem 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 $1,000 per Preference
Share plus any accumulated and unpaid dividends to the date
of redemption.
Liquidation Preference........ Upon liquidation, dissolution or winding up of our company,
you as a holder of the Preference Shares will be entitled to
receive $1,000 per Preference Share plus any accumulated,
declared and unpaid dividends on such Preference Shares,
before any payment is made on our common stock and on
securities that rank junior to the Preference Shares.
If the assets or proceeds from the liquidation, dissolution
or winding up of our company are insufficient to make these
payments, then the assets or proceeds will be distributed
ratably among you as the holders of the Preference Shares
and any securities that have the same ranking as the
Preference Shares.
Voting Rights................. As a holder of the Preference Shares, you do not have voting
rights with respect to general corporate matters. However,
the holders of at least 66 2/3% of the then outstanding
Preference Shares must approve any resolution which:
- authorizes, creates, or designates any class of
securities ranking senior or equal to the Preference
Shares;
- waives compliance with the Certificate of Designation,
which sets forth the terms of the Preference Shares
(although waiver of some provisions of the Certificate
of Designation will require approval of all holders of
the Preference Shares); or
- proposes to repurchase, redeem or set aside funds for
payment with respect to any securities ranking greater
or equal to the Preference Shares, at any time, if any
Preference Shares are outstanding.
In certain circumstances, if you hold the Series A 12%
Cumulative Preference Shares, you have the right to appoint
two directors to our Board.
If we fail to fulfill any mandatory or optional redemption
obligation with respect to the Preference Shares, the number
of directors on our Board will be increased by two, and the
holders of the Preference Shares will be able to elect both
of these additional directors.
For more information on these voting rights, you should
refer to "Item 5--Market for Company's Equity and Related
Stockholder Matters" in our Annual Report on Form 10-K.
</TABLE>
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<TABLE>
<S> <C>
Registration Rights........... We are registering the Preference Shares as required by the
Preference Registration Rights Agreement between us and
Morgan Grenfell Private Equity Limited, Arnold Chase, Cheryl
A. Chase, Rhoda Chase and The Darland Trust. Under this
agreement we are required to use reasonable efforts to
maintain the effectiveness of the registration statement of
which this prospectus forms a part, until January 26, 2001.
Transfer Agent................ Continental Stock Transfer & Trust Co.
TERMS OF THE PREFERENCE
WARRANTS
Expiration Date............... The Preference Warrants will expire on February 1, 2010.
Exercise...................... Each Preference Warrant entitles you as the holder of the
Preference Warrant to acquire 110 shares of our common stock
at an exercise price of $10 per share of common stock.
Holders of the common stock issued upon exercise of the
Preference Warrants will not be allowed to sell these shares
of common stock prior to January 27, 2000.
Rights as Stockholders........ You will not, by virtue of being Preference Warrant holders,
have any rights as stockholders of our company.
Adjustments................... In certain circumstances, to protect against dilution, the
Preference Warrants provide for adjustments to the exercise
price and the number of shares of common stock that may be
purchased upon exercise. For more information on these
adjustments, see "General Description of Securities Being
Offered--Description of the Preference
Warrants--Adjustments."
Pre-Emptive Rights............ In certain circumstances, you as the holder of the
Preference Warrants will have the right of first refusal to
purchase certain new securities that we may issue in the
future. For more information on the pre-emptive rights, see
"General Description of Securities Being
Offered--Description of the Preference Warrants--Pre-Emptive
Rights."
Registration Rights........... We are registering the Preference Warrants as required by
the Preference Warrant Registration Rights Agreement between
us and Morgan Grenfell Private Equity Limited, Arnold Chase,
Cheryl Chase, Rhoda Chase and The Darland Trust. Under the
terms of this agreement, we are required to use our
reasonable efforts to maintain the effectiveness of the
registration statement, of which this prospectus forms a
part, until such time as all the Preference Warrants have
expired or have been exercised or redeemed.
Preference Warrant Agent...... Bankers Trust Company.
OTHER
Listing or Quotation of Common
Stock....................... Our common stock is traded on the NASDAQ National Market
under the symbol "ATEN."
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Use of Proceeds............... We will not receive any proceeds from the sale of the Note
Warrants, the Preference Shares, or the Preference Warrants
by any of the holders of these securities. The proceeds, if
any, that we receive from the exercise of the Note Warrants
will be used for general corporate purposes.
</TABLE>
ABSENCE OF PUBLIC MARKETS
There is no public market for the Preference Shares or the Preference
Warrants. The Note Warrants have been designated for trading on the Private
Offerings Resale and Trading through Automated Linkages ("PORTAL") market of the
National Association of Securities Dealers, Inc. No assurance can be given as to
the liquidity of or trading market for the Note Warrants, the Preference Shares
or the Preference Warrants.
We have been advised that Merrill Lynch and Deutsche Bank intend to make a
market in the Note Warrants, but they are not obligated to do so and any
market-making may be discontinued at any time. Also, these market-making
activities may be limited during the pendency of this registration statement.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors which should be
considered when evaluating this offering and the securities described in this
prospectus.
8
<PAGE>
SUMMARY OPERATING DATA
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------- ---------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ---------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Homes passed by cable(1).......... 1,624,119 1,591,981 1,408,099 1,088,540 711,545 298,316
Basic cable subscribers(2)........ 706,179 698,342 636,283 460,625(5) 262,077 112,534
Basic cable penetration(3)........ 43.5% 43.9% 45.2% 42.3% 36.8% 37.7%
Annual cable churn rates(4)....... N/A 15.25% 12.2% 7.8% 9.2% 9.1%
</TABLE>
- ------------------------
(1) We count as homes passed only those homes for which we have an active signal
and, in the case of a building or other residence consisting of multiple
apartment units, only those homes for which we have an agreement with the
cooperative authority that manages the building or residence.
(2) Includes only subscribers to our package with the largest number of
non-premium channels (referred to as the "basic package") and our package
with more limited programming offerings of 17 to 24 channels (referred to as
the "intermediate package"). For a description of these packages, see
"Business--Cable Operations--Services and Fees" in our Annual Report on Form
10-K.
(3) Basic cable subscribers as a percentage of homes passed by cable at period
end.
(4) Calculated by dividing the number of disconnected basic cable subscribers
during a period by the number of basic cable subscribers (including basic
cable subscribers in cable networks we have acquired) at the end of that
period.
(5) Includes approximately 15,000 subscribers served by a cable system we
acquired on January 1, 1997.
9
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AND THE OTHER
INFORMATION IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN THE SECURITIES.
THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THE RISKS WE FACE DESCRIBED BELOW AND ELSEWHERE IN THE PROSPECTUS.
A TENDER OFFER HAS BEEN MADE FOR ALL OF OUR OUTSTANDING COMMON STOCK. IF THE
TENDER OFFER IS UNSUCCESSFUL, THE PRICE OF OUR COMMON STOCK AND WARRANTS WILL
FALL.
United Pan-Europe Communications N.V. and its wholly-owned subsidiary, Bison
Acquisition Corp., have initiated a tender offer to purchase all of the
outstanding shares of our company in an all cash transaction valuing our
company's shares of common stock at $19.00 per share. The offer price of $19.00
per share of common stock in the tender offer represents a premium of
approximately 134% over the $8 1/8 closing price for the common stock on the
NASDAQ National Market on May 10, 1999, the last trading day prior to our
announcement that we had retained Goldman Sachs to explore strategic
alternatives, including the sale of our company, and a premium of approximately
52% over the $12 1/2 closing price for our common stock on the NASDAQ National
Market on June 1, 1999, the last trading day prior to the announcement of the
tender offer. Upon the successful completion of the tender offer or the related
merger, the Note Warrants and the Preference Warrants will be redeemed for a
price per share of common stock equal to the difference between $19.00 and the
exercise price per share. In addition, the owners of all of the Preference
Shares and the Preference Warrants have entered into agreements with UPC and
Bison granting Bison an option to purchase all of the Preference Share and the
Preference Warrants. The tender offer and related merger is more fully described
in the section of this prospectus called "Material Changes."
If United Pan-European Communications withdraws or terminates the tender
offer or the merger for any reason other than a higher bid for our company by a
third-party, then the price of the shares of our common stock will probably fall
and our common stock may trade below the levels they were trading at prior to
the time we announced that we had hired Goldman Sachs to explore alternatives.
The value of the Note Warrants and the Preference Warrants is linked to the
value of the common stock and therefore, in such an event, the value of the Note
Warrants and the Preference Warrants would also drop. If United Pan-European
Communications withdraws or terminates the tender offer or the merger due to a
higher bid, and that higher bid is unsuccessful, the value of our common stock,
the Note Warrants and the Preference Warrants and the Preference Shares will
probably fall.
THERE IS NO PUBLICLY TRADED MARKET FOR THE NOTE WARRANTS, PREFERENCE SHARES OR
PREFERENCE WARRANTS AND THERE IS NO CERTAINTY THAT A MARKET WILL DEVELOP IN THE
FUTURE
If an active market for the Note Warrants, Preference Shares or Preference
Warrants does not develop, the market price and liquidity of the trading market
for these securities may be adversely affected. There may not be a market where
you can sell or resell your securities and, if a market develops, it may end at
any time. The Note Warrants are eligible for trading in the PORTAL market.
Merrill Lynch and Deutsche Bank have advised us that they currently intend to
make a market in the Note Warrants, but, they have no obligation to do so and
they may discontinue these market-making activities at any time without notice.
If a market for the Note Warrants develops, future trading prices for the Note
Warrants will depend on many factors, including, among other things, our results
of operations and the market for similar securities.
10
<PAGE>
WE MAY NOT BE ABLE TO KEEP THE REGISTRATION STATEMENT CONTINUOUSLY EFFECTIVE FOR
THE CONTRACTUALLY PRESCRIBED TIME PERIODS
We are required, under the terms of the Warrant Registration Rights
Agreement, to use our reasonable efforts to maintain the effectiveness of the
registration statement, of which this prospectus forms a part, until such time
as all Note Warrants have been exercised and the underlying shares of common
stock have been resold. The Preference Warrant Registration Rights Agreement
requires us to use our reasonable efforts to maintain the effectiveness of the
registration statement of which this prospectus forms a part, until such time as
all the Preference Warrants have expired or have been exercised or redeemed. The
Preference Registration Rights Agreement also requires us to use our reasonable
efforts to maintain the effectiveness of this registration statement until
January 26, 2001. We may not be able to keep a registration statement
continuously effective for these required time periods. For more information on
these registration rights, you should read the sections entitled "General
Description of Securities Being Offered--Description of the Note
Warrants--Registration Rights" and "General Description of the Securities Being
Offered--Description of the Preference Warrants-- Registration Rights."
THE MARKET PRICE OF OUR COMMON STOCK MAY CONTINUE TO BE VOLATILE
The market price of our common stock has been volatile and may be volatile
in the future. Future announcements concerning our company or our competitors,
including, but not limited to, technological innovations, new commercial
products, status of network implementation, government regulations, proprietary
rights, litigation, available satellite transponder capacity, programming
availability, customer acceptance, operating results and general market and
economic conditions may have a significant impact on the market price of our
common stock and, consequently, the Note Warrants, Preference Shares and
Preference Warrants. In addition, any delays or difficulties in establishing our
networks or attracting network subscribers are likely to result in pronounced
fluctuations in the market price of our common stock and, consequently, the Note
Warrants, Preference Shares and Preference Warrants.
OUR SUBSTANTIAL LEVERAGE POSES POTENTIAL FINANCIAL AND OPERATING PROBLEMS
We are, and will continue to be, highly leveraged. On March 31, 1999, our
outstanding indebtedness was approximately $373.7 million. Also, on January 30,
2010, we will be required to redeem our Preference Shares for $50 million, plus
any unpaid dividends.
We must generate substantial additional cash flow in order to pay interest
and repay principal on our indebtedness. Our business may not generate
sufficient cash flow that, together with the financing available to us, will
allow us to meet our anticipated requirements for working capital, capital
expenditures, minimum guaranteed contractual commitments, interest payments and
scheduled principal payments. We will need to attract substantial numbers of
additional subscribers beyond the 380,000 initial targeted D-DTH subscribers in
order to repay principal and pay interest on our indebtedness.
We also expect that we may have to refinance all or a portion of the 14 1/2%
Series B Senior Discount Notes when they mature in February 2009, the Series C
Senior Discount Notes, and the Series B Senior Discount Notes when they mature
in July 2008, and the notes issued by our cable television operating subsidiary
Poland Communications, Inc. ("PCI") when they mature in November 2003. If our
cash flow is less than expected, we may need to refinance all or part of our
existing indebtedness or reduce the scope of our planned expansion or capital
expenditures.
Such leverage poses the following risks:
- A significant portion of our cash flow from operations must be dedicated
to servicing our indebtedness.
11
<PAGE>
- We may not be able to generate sufficient cash flow or obtain sufficient
additional financing to service the 14 1/2% Series B Senior Discount Notes
due 2009, the Series C Senior Discount Notes, the Series B Senior Discount
Notes due 2008, the notes issued by PCI and any other outstanding
indebtedness.
- We may not be able to adequately fund our contractual commitments.
- We could be more vulnerable to changes in general economic conditions.
- Our ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes
may be impaired.
- Our operating and financial flexibility may be impaired by restrictions
imposed by various debt instruments.
- If interest rates increase, we will be subject to higher interest expenses
because at least part of our future borrowings may be at variable rates of
interest.
WE EXPECT OUR OPERATING LOSSES AND NEGATIVE CASH FLOWS TO CONTINUE
We expect to experience substantial operating losses and negative free cash
flows for at least the next two years. We may not be able to generate operating
income or positive cash flows in the future. We had operating losses of $1.3
million for 1996, $42.7 million for 1997, $100.8 million for 1998 and $24.2
million for the first three months of 1999.
For a detailed discussion of the factors we believe have influenced our
historical financial results and the factors we believe will affect our
financial performance in the near future, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our Quarterly
Report on Form 10-Q.
AS A RESULT OF OUR HOLDING COMPANY STRUCTURE, WE ARE DEPENDENT ON THE RECEIPT OF
MONIES FROM OUR SUBSIDIARIES TO PAY DIVIDENDS AND YOUR RIGHT TO PARTICIPATE IN
THE ASSETS OF OUR SUBSIDIARIES MAY BE SUBJECT TO CLAIMS OF OUR SUBSIDIARIES'
CREDITORS
In the event of liquidation or bankruptcy of any of our operating
subsidiaries, your securities rank behind the holders of any indebtedness for
money borrowed by those subsidiaries (such as the holders of the notes issued by
PCI), trade creditors of those subsidiaries, and other persons granted priority
claim rights under the laws applicable to those subsidiaries.
In addition, we may not be able to pay dividends on our common stock or the
Preference Shares or to redeem the Preference Shares if the cash flows and
earnings of our subsidiaries and their payment of funds to us in the form of
repayment of loans, interest payments, dividends or otherwise are not
sufficient, if we cannot otherwise realize economic benefits from equity
interests in our subsidiaries.
Our subsidiaries have no obligation to pay dividends to us and may not be
able to make payments to us if funds are not available or if the terms of those
subsidiaries' indebtedness restricts payments, or if other various business
considerations limit payments. Further, we currently do not own a majority
interest in certain subsidiaries, and may not have operating control of other
entities in which we currently have or may in the future acquire direct or
indirect interests. In such cases, we may be unable, without the consent of the
relevant partners, to cause such entities to pay dividends on or to implement
business strategies that we may favor. Our ability to pay dividends will be
further restricted by regulatory and contractual obligations, including the
indenture governing the notes issued by PCI, New York Business Corporation Law,
Delaware General Corporation Law, Polish law, English company law, and Dutch
corporate law.
12
<PAGE>
The Preference Shares are junior to all of our other liabilities and
obligations, including liabilities and obligations of our company and its
subsidiaries, except for our common stock and any series of preference shares
that we may establish, where we expressly provide that such newly-issued
preference shares will rank junior to the Preference Shares. In addition, as a
holder of the Preference Shares, you will not have a claim on the assets of our
subsidiaries, unless we, ourselves, have a claim and at the time we realize that
claim, we have assets over which you, as holders of the Preference Shares, have
a claim.
WE MAY NEED TO OBTAIN ADDITIONAL FINANCING IN THE NEAR TERM IF OUR PLANS OR
ASSUMPTIONS CHANGE AND THE TERMS OF THE ADDITIONAL FINANCING MAY RESTRICT OUR
OPERATIONS OR REDUCE OUR CASH FLOW
Sources of financing or refinancing may not be available to us in the near
future. We may need to obtain additional financing in the near future if one or
more of the following situations occur:
- Our plans change or the assumptions in our business development plan prove
inaccurate;
- We do not acquire sufficient subscribers to our D-DTH business;
- We enter into additional programming agreements;
- We make unanticipated investments in or acquisitions of other companies;
- We experience unexpected costs or competitive pressures;
- We continue to provide D-DTH reception systems to subscribers (other than
the 380,000 initial subscribers) at promotional prices; or
- Our actual cash flow is less than we expect.
We will need to attract a substantial number of additional subscribers
beyond the 380,000 initial subscribers in order to make dividend payments on and
to redeem the Preference Shares. Future sources of financing for us could
include public or private debt or equity offerings or bank financings or any
combination thereof.
Our ability to obtain sources of financing or refinancing may be limited
because certain of our lenders have taken security interests in some of our
assets. We have a $6.5 million credit facility with American Bank in Poland,
S.A., which was fully drawn as of March 31, 1999, and which is secured. In
addition, our subsidiary PCI has pledged notes issued to PCI by a major
subsidiary to the holders of notes issued by PCI. The amount pledged, together
with cash of PCI, must equal 110% of the outstanding principal amount of the
notes issued by PCI and the interest payments due on those notes. Approximately
$165.0 million of the notes of the PCI subsidiary were pledged by PCI as of
March 31, 1999.
Even if sources of financing or refinancing are available, we may only be
able to obtain such financing on less than favorable terms. In this case, we
might be forced to operate under terms that would restrict our operations and
reduce our cash flow. If for any reason additional financing is not available to
us when required, or is only available on less than favorable terms, we may not
be able to meet our minimum guaranteed contractual commitments. Our failure to
meet these commitments may require us to:
- reduce the scope of our presently anticipated expansion of operations;
- reduce capital expenditures (including expenditures related to
acquisitions);
- slow the development of our D-DTH business; and/or
- refinance all or a portion of our indebtedness.
13
<PAGE>
For a discussion of our liquidity and capital resources, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" in our Quarterly Report on Form
10-Q.
OUR LIMITED EXPERIENCE WITH THE D-DTH BUSINESS AND UNCERTAINTIES ASSOCIATED WITH
THE D-DTH MARKET MAY LIMIT THE GROWTH OF OUR D-DTH BUSINESS OR CAUSE US TO LOSE
SUBSCRIBERS
We may face competition from D-DTH providers which have more experience than
we do in the D-DTH business, and this competition could hinder our ability to
develop our D-DTH business.
The roll out of our D-DTH business may not proceed as planned and our
service may not attract enough subscribers to be profitable and to generate
positive cash flow for us in future years. We also cannot assure you that the
market for D-DTH services in Poland will develop.
In addition, the Polish D-DTH market is subject to a developing regulatory
framework that may change as the market develops. Our broadcast of programming
from outside of Poland could become subject to the application of Polish laws
regulating television broadcasting if certain European Union or trans-European
broadcasting regulations are amended, which could prevent us from broadcasting.
Application of these laws may negatively impact our business.
Our D-DTH business is also subject to the following factors that are beyond
our control and difficult to predict:
- the size of the D-DTH service market in Poland;
- the rates of penetration of such market;
- the acceptance of our D-DTH service by subscribers and commercial
advertisers;
- the sensitivity of our potential subscribers to the price of installation
and subscription fees;
- the technical challenges of providing long-term D-DTH services;
- the extent and nature of the development of multi-channel alternatives,
including the continued expansion of cable television and competition from
other D-DTH services in Poland; and
- the immediate and long-term commercial viability of providing D-DTH
services in Poland.
We may not be able to establish a substantial subscriber base. In addition,
the investment required from subscribers (beyond our target of 380,000 initial
subscribers) may increase unless we decide to continue to provide D-DTH
reception systems at promotional prices. Accordingly, we may not be able to
attract or retain additional subscribers if we cease to provide DTH reception
systems at promotional prices.
IF PHILIPS FAILS TO SUPPLY THE CRITICAL COMPONENTS AND SERVICES USED IN OUR
D-DTH BUSINESS, THE DEVELOPMENT AND OPERATION OF OUR D-DTH BUSINESS COULD BE
DELAYED AND DAMAGED
If Philips fails to deliver D-DTH reception systems on schedule, or at all,
the development and operation of our D-DTH service could be interrupted or
delayed. In addition, failure by Philips' retail network to provide the desired
levels of service, quality and expertise (which are outside our control) could
have a material adverse impact on our operations and financial condition. Our
agreement with Philips provides a means by which we can obtain a second or third
supplier, in addition to Philips, of our D-DTH reception systems, but we may not
be able to secure these additional suppliers. For a detailed description of the
critical components and services Philips has agreed to supply to us, see
"Business--D-DTH--Technology and Infrastructure" in our Annual Report on Form
10-K.
14
<PAGE>
OUR D-DTH BUSINESS DEPENDS ON OUR ABILITY TO BROADCAST USING TRANSPONDERS ON
SATELLITES, WHICH ARE SUBJECT TO SIGNIFICANT RISKS AND WHICH WE HAVE NOT INSURED
Our D-DTH business depends on our ability to broadcast using satellites.
Satellites are subject to significant risks that may prevent or impair proper
commercial operations, including satellite defects, destruction and damage.
We are not a "protected customer" under our satellite transponder leases.
This means that if one or more of our transponders fails to operate, we would
not be able to pre-empt any other transponder customer. Due to the high cost of
insurance policies relating to satellite operations, we do not insure against
possible interruption of access to transponders. The operation of the Astra
satellites is outside of our control and a disruption of transmissions on those
satellites could pose significant operational problems depending upon the
duration of the disruption. For a more detailed discussion of our satellite
agreements and satellite technology, see the section entitled
"Business--D-DTH--Technology and Infrastructure" in our Annual Report on Form
10-K.
The leases for our Astra satellite transponders will expire in 2007. Our
ability to transmit our programming following the termination of our leases of
the transponders (and following the expiration of the expected useful lives of
the Astra satellites in approximately 2015) will depend upon our ability to
extend our existing leases and/or to obtain rights to utilize additional
transponders on future Astra or other satellites.
THE ENCRYPTION TECHNOLOGY USED WITH OUR D-DTH SYSTEM MAY NOT PREVENT SIGNAL
THEFT OR PIRACY
The encryption technology, Philips' CryptoWorks-Registered Trademark-, used
with our D-DTH system to prevent signal theft or "piracy," may not remain
effective. If the encryption technology is compromised in a manner which is not
promptly corrected, we may not be able to enter into contracts or maintain
contracts for programming services from unrelated third parties and our revenues
could decrease. For a more detailed description of the encryption technology we
use in our D-DTH system, see "Business-- D-DTH--Technology and Infrastructure"
in our Annual Report on Form 10-K.
TERMINATION OF OUR CONDUIT AGREEMENTS WITH TPSA COULD RESULT IN THE LOSS OF OUR
PERMITS, THE TERMINATION OF AGREEMENTS WITH COOPERATIVE AUTHORITIES AND
PROGRAMMERS, AND AN INABILITY TO SERVICE OUR CUSTOMERS
Our ability to build out our existing cable television networks and to
integrate acquired systems into our cable television networks will depend on
many factors that are beyond our control including our ability to design and
obtain access to network routes and to secure other construction resources at a
reasonable cost and on satisfactory terms.
In addition, as of March 31, 1999, approximately 61.8% of our cable plant
was constructed utilizing pre-existing conduits of the Polish national telephone
company (known in the Polish telecommunications industry by the acronym "TPSA").
Generally speaking, TPSA may terminate a conduit agreement immediately (and
without penalty) if:
- we do not have a valid permit from the Polish State Agency of Radio
Communications authorizing the construction and operation of a cable
television network in a specified geographic area covering the subscribers
to which the conduit delivers the signal;
- our cable network serviced by the conduit does not meet the technical
specifications required by the Polish Communications Act of 1990;
- we do not have a contract with the cooperative authority allowing for the
installation of the cable network; or
15
<PAGE>
- we does not pay the rent required under the conduit agreement.
As of March 31, 1999, TPSA was legally entitled to terminate conduit
agreements covering approximately 37,250 or 4% of our subscribers.
Any termination by TPSA of these contracts could result in the loss of our
permits, the termination of our agreements with cooperative authorities and
programmers, and an inability to service customers in the affected areas. If
TPSA terminated our access to these conduits, we may not be able to replace or
locate a substitute for these conduits. In addition, we would incur significant
costs if we were forced to build our own conduits.
IF WE ARE UNABLE TO OBTAIN HIGH-QUALITY PROGRAMMING OR SUCCESSFULLY DEVELOP OUR
OWN PROGRAMMING, OUR GROWTH MAY BE LIMITED OR WE MAY LOSE SUBSCRIBERS
We may lose subscribers or experience only limited growth in the number of
our subscribers if:
- Our competitors are able to produce or obtain Polish-language programming
at commercially reasonable costs and we are not able to do so;
- Our programming is less popular than our competitors' programming; or
- Our programming is non-exclusive to us.
If our existing programming agreements are canceled, are not renewed, or
otherwise become unenforceable, we will have to seek programming material from
other sources. We may not be able to create or obtain programs acceptable to our
subscribers on commercially favorable terms.
We have purchased exclusive Polish pay television rights from third parties
for programming on 11 of the 24 channels of Wizja TV. In some of the agreements,
there are restrictions that will limit our flexibility in the future to package
some of the channels together or in different combinations.
In addition, we are negotiating additional agreements with channel suppliers
and sports rights organizations that, if completed, may require us to pay
additional guaranteed minimum payments throughout the term of such agreements
and/or payments at the time of execution. The amounts of our programming and
sport rights commitments are set forth in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in our Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999.
The development and production of television programs involve a high degree
of risk associated with the creative content of programs and their acceptance by
the viewing audience, as well as the general economic climate, public tastes and
other intangible factors. Some or all of our programming projects may not be
successful or the programming to which we will have access may lose its audience
appeal more quickly than we anticipated. This loss may result in a portion of
costs not being recovered or expected profits not being realized. In addition,
we may not succeed in introducing into the Polish market our additional planned
channels based on specific thematic content.
Certain programming for the Polish market is subject to regulation by the
Polish authorities. For a discussion of the risks related to the regulation of
programming, see the section in "Risk Factors" entitled "Extensive Government
Regulation of the Cable Television and Direct-to-Home Industries Could Restrict
the Way We Operate Our Business."
OUR GROWTH MAY SUFFER FROM COMPETITION IN THE MULTI-CHANNEL PAY TELEVISION
INDUSTRY
We may be unable to increase our number of subscribers or may lose
subscribers as a result of competition for subscribers from other signal
delivery methods, from competitors with greater financial and operational
resources and from competitors with more experience in the D-DTH market. Also,
we may not be able to compete with other alternative delivery systems if we are
not able to provide a greater variety of Polish-language programming at more
reasonable prices than those systems offer. In addition, the Polish market for
D-DTH services may not be sufficiently large to support competing D-DTH
businesses.
16
<PAGE>
Our cable operations also face competitive threats from Poland's many small
cable operators, which incur lower capital expenditures and operating costs and
therefore have the ability to charge lower fees to subscribers.
Our programming operations compete with other television companies for the
acquisition of sports rights and other programming (particularly for the
exclusive rights to such programming), and also for the hiring of personnel with
creative and production talent.
A more detailed discussion of the competition we face in our cable
television, D-DTH and programming businesses is set forth in the section called
"Business--Competition" in our Annual Report on Form 10-K.
WE MAY INCUR SIGNIFICANT COSTS AND LOSE SUBSCRIBERS DUE TO CHANGES IN TECHNOLOGY
The changes in the digital compression technology used in our D-DTH business
may require us to expend substantial financial resources on the development or
implementation of new competitive technologies. In addition, we may from time to
time explore alternative technologies for delivering our programming and
alternative methods for allowing subscribers to receive signals from multiple
satellites.
If another satellite platform, encryption technology or decoder besides the
ones we use becomes the preferred standard in Poland, or if Poland enacts
regulations regarding such technology or decoders, we may not be able to attract
and retain subscribers. We may be required to switch our suppliers and replace
our reception systems and our encryption technology system. This switch would
cause confusion for existing and potential subscribers, delays in providing
subscribers with reception systems and access systems and significant unexpected
costs.
OUR GROWTH MAY SUFFER IF WE CANNOT MAKE STRATEGIC ACQUISITIONS
We may not be able to identify and acquire cable television networks that
either are located in reasonable proximity to our existing regional cluster
networks or are large enough to serve as the basis for new regional cluster
networks. In addition, if we are able to identify and enter into acquisition
agreements with such cable networks we may not be able to obtain the required
approvals from the Polish Anti-Monopoly Office for these acquisitions. We also
may face competition for the acquisition of cable networks from existing cable
television operators and also from financial investors.
OUR FAILURE TO SUCCESSFULLY MANAGE GROWTH AND TO INTEGRATE ACQUIRED BUSINESSES
MAY POSE OPERATING AND FINANCIAL PROBLEMS
If we fail to successfully manage our expected rapid growth and development
and if we experience difficulties in managing our expansion into the D-DTH
business and in integrating that business with our cable and programming
operations, our business, results of operations and financial condition could
suffer.
Our recent acquisitions have involved and other possible future acquisitions
will involve risks, including successful integration with our existing systems
and operations and, possibly, lower relative operating margins associated with
such acquisitions before the economic benefits of integration (if successful)
are fully realized. We may also experience increased capital expenditure costs
as the acquired systems are rebuilt (if necessary) to upgrade the networks to
our standards. If we underestimate the costs of integrating and upgrading
acquired networks, these activities could harm our financial condition and
operating results. The integration of acquired systems may also lead to
diversion of management's attention from other ongoing business concerns. Our
short-term operating results have suffered from the costs of integrating some
acquisitions.
17
<PAGE>
In addition, if we were to enter into capital-intensive businesses in which
we have limited experience (such as interactive television, pay per view,
near-video-on-demand, video-on-demand, data transfer, services related to
electronic banking, telephone services, Internet access, sports clubs ownership,
publishing and other media), there is a risk that we would not be successful or
that the capital utilized in these businesses would decrease the amount of
capital available for use in our cable, D-DTH and programming businesses. We
have applied for a license to provide Internet access services.
WE HAVE NO INSURANCE ON UNDERGROUND PORTIONS OF OUR CABLE TELEVISION NETWORKS
Any catastrophe affecting a significant portion of our cable television
networks could result in substantial uninsured losses and could disrupt our
business operations. While we carry general liability insurance on our
properties, we do not insure the underground portion of our cable television
networks.
EXTENSIVE GOVERNMENT REGULATION OF THE CABLE TELEVISION AND DIRECT-TO-HOME
INDUSTRIES COULD RESTRICT THE WAY WE OPERATE OUR BUSINESS
We are subject to extensive regulatory controls and may have to comply with
amended or additional regulations in the future in each of the jurisdictions in
which we operate our business. Currently we are required to comply with
applicable regulations in Poland, the United Kingdom and the European Union,
which address, but are not limited to, the following activities and subjects:
- securing of and compliance with required permits and licenses related to
the operation of cable networks and digital direct-to-home systems;
- the construction and operation of cable networks in Poland;
- copyright and other intellectual property laws pertaining to programming
which is broadcast over our cable networks and our digital direct-to-home
system;
- restrictions on anti-competitive behavior regarding pricing, contracting
practices and acquisitions;
- restrictions on ownership and operation of cable networks in Poland by
foreign entities;
- protection against unfair competition and anti-monopoly practices; and
- content requirements and restrictions for programming which is broadcast
over our Polish cable networks and our digital direct-to-home system.
We have taken steps to structure the ownership and operation of our cable
networks, our D-DTH system and our programming businesses and other ventures so
as to attempt to comply with all applicable regulations in each of the
jurisdictions in which we operate our business. However, a number of our
acquired cable networks are not yet in full compliance with certain Polish
regulations. In addition, because our D-DTH service was the first such service
available in Poland, there are likely to be issues of first impression arising
under Polish law with respect to various aspects of the our digital
direct-to-home business and related programming arrangements. Furthermore, each
of the relevant governmental authorities may conclude that our operations and
ownership structure do not comply with all applicable regulations. Any
determination by one or more of the relevant governmental authorities which
regulate our business and operations that our operations or ownership structure
do not comply could have a material adverse effect on the way we conduct our
business or our ability to carry it on at all, and any fines or penalties which
may be imposed could have a material adverse effect on our business, financial
condition and results of operations.
Changes in laws or regulations (or in the interpretation of existing laws or
regulations), whether caused by changes in the Polish government or otherwise,
could harm our operations. For example, foreign exchange control restrictions,
taxes or limitations could be imposed or increased in the future
18
<PAGE>
with regard to repatriation of earnings and investments from Poland. If these
types of exchange control restrictions, taxes or limitations are imposed, we may
not be able to receive dividends, interest payments, debt repayments or other
payments from our Polish subsidiaries.
From time to time, we may have violated, may be violating and may violate in
the future the requirements of certain Polish laws, including provisions of
labor, foreign exchange, customs, tax, antitrust and corporate laws and
requirements to obtain regulatory approvals. This may be due to the many
formalities required for compliance with the laws in Poland's highly regulated
economy, the rapid changes that Polish laws and regulations have undergone, and
numerous uncertainties regarding the interpretation of these laws and
regulations. These types of violations could also restrict our operations.
YOU MAY NOT BE ABLE TO ENFORCE U.S. COURT JUDGMENTS AGAINST OUR ASSETS, MOST OF
WHICH ARE HELD OUTSIDE THE U.S.
You may not be able to enforce judgments of U.S. courts against our assets.
Investors in our securities will be able to effect service of process in the
U.S. upon us and may be able to effect service of process upon our directors.
However, we are primarily a holding company which holds stock in various
entities in Poland, the United Kingdom and the Netherlands, and all or a
substantial portion of our assets are located outside the U.S. As a result,
investors may not be able to enforce asset judgments of U.S. courts if those
judgments are based on the civil liability provisions of U.S. laws.
Awards of punitive damages in actions brought in the U.S. or elsewhere may
be unenforceable in Poland. Polish courts may not give judgment in your favor in
cases based solely on U.S. laws.
English courts may not give judgment to you in original actions or in
actions for the enforcement of judgments of U.S. courts for certain civil
liabilities based upon the U.S. federal and state securities laws.
Courts in The Netherlands will not recognize and enforce a judgment obtained
in actions brought in the U.S. and it will be necessary to bring the matter
before the competent Netherlands court. You may, in the course of these
proceedings, submit the judgment rendered by the U.S. court. If the Netherlands
court is of the opinion that fairness and good faith so require, it will give
binding effect to such foreign judgment, unless such foreign judgment
contravenes Dutch principles of public policy.
WE ARE DEPENDENT ON OUR EXECUTIVE OFFICERS
If any of our key employees leaves our company, our business could suffer.
We are particularly dependent upon the skills and contributions of the following
individuals:
- Robert E. Fowler, III, Chief Executive Officer of @ Entertainment;
- Donald Miller-Jones, Chief Financial Officer, Vice President and Treasurer
of @ Entertainment;
- Przemyslaw Szmyt, Senior Vice President Business Development, General
Counsel and Secretary of @ Entertainment;
- David Warner, Chief Executive Officer of At Entertainment Limited;
- Dorothy Hansberry, Vice President and General Counsel of PCI; and
- Warren Mobley, Jr., Chief Operating Officer and Vice President of
Marketing and Sales of PCI.
This is because these individuals have significant experience in our
business and would be difficult to replace. In addition, our success will depend
in part on our ability to hire, train, and retain high-quality personnel.
19
<PAGE>
OUR PRINCIPAL STOCKHOLDERS CAN CONTROL OR INFLUENCE CERTAIN MAJOR CORPORATE
ACTIONS
There is a concentration of ownership of our common stock among Polish
Investments Holding L.P., the Cheryl A. Chase Marital Trust and Advent
International Group. These three entities own approximately 47% of our
outstanding common stock. In addition, Morgan Grenfell Private Equity Limited as
the holder of the Series A 12% Cumulative Preference Shares has the right to
appoint two members to our Board of Directors and certain special voting rights.
This concentration of ownership of our common stock, the director appointment
rights of the holders of the Series A 12% Cumulative Preference Shares and their
special voting rights may delay or prevent transactions involving an actual or
potential change in control of @ Entertainment. All of such holders have
executed agreements permitting United Pan-Europe Communications N.V. to purchase
their shares of common stock, Note Warrants, Preference Shares and Preference
Warrants, in connection with United Pan-Europe Communications N.V.'s tender
offer for all of the outstanding shares of common stock of our company. This
concentration of ownership in a few entities could limit the price that certain
investors might be willing to pay in the future for our common stock, the Note
Warrants, the Preference Warrants and the Preference Shares.
THE EXCHANGE RATE OF THE U.S. DOLLAR TO THE ZLOTY MAY AFFECT OUR FINANCIAL
CONDITION AND WE REMAIN EXPOSED TO CURRENCY RISK BECAUSE OUR REVENUES ARE IN
ZLOTY
Our business operations and financial condition may suffer if inflation and
currency exchange rates continue to fluctuate. Historical inflation rates are
provided in the "Industry" section of our Annual Report on Form 10-K, and
historical exchange rates are provided in the section of this prospectus called
"Address; Exchange Rate and Statistical Data."
We may continue to encounter currency exchange rate risks in relation to our
debt obligations. Some of our operating expenses and capital expenditures are
expected to continue to be denominated in or indexed to U.S. dollars. By
contrast, substantially all of our revenue is denominated in zloty. Any
devaluation of the zloty against the U.S. dollar that we are unable to offset
through price adjustments will require us to use a larger portion of our revenue
to service our U.S. dollar denominated obligations. While we may consider
entering into transactions to hedge the risk of exchange rate fluctuations, it
is unlikely that we will be able to obtain hedging arrangements on commercially
satisfactory terms. Therefore, shifts in currency exchange rates may have an
adverse effect on our financial results and on our ability to meet our U.S.
dollar denominated debt obligations and contractual commitments.
WE DO NOT INTEND TO PAY DIVIDENDS
Neither we nor PCI, our major cable operating subsidiary, has ever declared
or paid a cash dividend on our common stock. We intend to retain our earnings,
if any, for use in our business and do not anticipate paying cash dividends on
our common stock in the foreseeable future.
CERTAIN ANTITAKEOVER PROVISIONS COULD MAKE A CHANGE OF CONTROL INVOLVING OUR
COMPANY MORE DIFFICULT
The following provisions of Delaware law applicable to our company and
provisions in our Certificate of Incorporation and By-Laws could delay or make
more difficult a merger, tender offer, proxy contest or other change of control
involving our company:
- Section 203 of the Delaware General Corporation Law prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years from the date the person became an
interested stockholder unless certain conditions are met.
20
<PAGE>
- Our Certificate authorizes the issuance of 19.95 million additional shares
of preferred stock, the terms of which may be fixed by our Board without
further stockholder action. The terms of any series of this preferred
stock may include, among other things, priority claims to assets and
dividends and special voting rights, and could adversely affect your
rights as holders of the common stock, the Note Warrants, Preference
Warrants, or Preference Shares. We have no present plans to issue shares
of this type of preferred stock.
- Our Certificate and By-Laws provide for a classified board of directors,
eliminate the right of stockholders to act by written consent without a
meeting (unless they have obtained the approval of a two-thirds vote of
the directors), require advanced stockholder notice to nominate directors
and raise matters at the annual stockholders' meeting, do not provide for
cumulative voting in the election of directors and allow for the removal
of directors only for cause and with a two-thirds vote of our outstanding
common stock.
- Acquisition of more than 10% of our outstanding voting stock could require
the approval of the Polish Anti-Monopoly Office.
These provisions could also limit the price that certain investors might be
willing to pay in the future for our common stock and the Note Warrants,
Preference Warrants, and Preference Shares.
In connection with United Pan-Europe Communications N.V.'s tender offer for
all of the outstanding shares of our company's common stock, and pursuant to the
Agreement and Plan of Merger executed among our company, United Pan-Europe
Communications N.V. and Bison Acquisition Corp. on June 2, 1999, the Board of
Directors of our company has waived the application of Section 203 of the
Delaware General Corporation Law and agreed not to issue additional shares of
preferred stock. In addition, the parties have filed applications to the Polish
Anti-Monopoly Office for approval of the tender offer.
21
<PAGE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERENCE DIVIDENDS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- -------------------------------------
1999 1998 1997 1996
----------------------- ----- ----- -----
<S> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed Charges and Preference
Dividends............................................... N/A N/A N/A 0.15
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Ratio of Earnings to Combined Fixed Charges and Preference
Dividends............................................... 0.86 0.21
</TABLE>
For purposes of computing these ratios, our combined earnings before income
taxes have been increased by the amount of our fixed charges plus preference
dividends. The amount of earnings was then divided by the amount of fixed
charges and preference dividends, the result being the ratio of earnings to
combined fixed charges and preference dividends. Fixed charges consist of
interest expense on all indebtedness, amortization of deferred financing costs
and that portion of operating lease expense deemed to be interest expense.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Note Warrants, the
common stock, the Preference Shares, or the Preference Warrants by any of the
holders of these securities. The proceeds, if any, that we receive from the
exercise of the Note Warrants and the Preference Warrants will be used for
general corporate purposes.
ADDRESS; EXCHANGE RATE AND STATISTICAL DATA
Our principal executive office is located at and our legal address is One
Commercial Plaza, Hartford, Connecticut 06103-3585. Our telephone number is
(860) 549-1674.
In this prospectus, references to "U.S. dollars" or "$" are to U.S.
currency, references to "Deutsche-Marks" or "DM" are to German currency, and
references to "zloty" or "PLN" are to Polish currency. We have presented our
primary consolidated financial statements in accordance with generally accepted
accounting principles in the U.S. in U.S. dollars. Amounts originally measured
in zloty for all periods presented have been translated into U.S. dollars.
For your convenience, this prospectus contains certain zloty amounts not
derived from the consolidated financial statements which have been translated
into U.S. dollars. You should not assume that the zloty amounts actually
represent such U.S. dollar amounts or could be, or could have been, converted
into U.S. dollars at the rates indicated or at any other rate. Unless otherwise
stated, such U.S. dollar amounts have been derived by converting from zloty to
U.S. dollars at the rate of PLN 4.01 = $1.00, the exchange rate quoted by the
National Bank of Poland at noon on March 31, 1999. This rate may differ from the
actual rates in effect during the periods covered by the financial information
discussed in this prospectus. The Federal Reserve Bank of New York does not
certify for customs purposes a noon buying rate for zloty.
The following table sets forth, for the periods indicated, the noon exchange
rate quoted by the National Bank of Poland.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Exchange rate at end of period.............. 1.58 2.13 2.44 2.47 2.88 3.51
Average exchange rate during period(1)...... 1.39 1.84 2.27 2.43 2.71 3.31
Highest exchange rate during period......... 1.58 2.13 2.45 2.54 2.89 3.56
Lowest exchange rate during period.......... 1.15 1.58 2.14 2.32 2.47 2.86
<CAPTION>
THREE MONTHS ENDED
-----------------------
1998 MARCH 31, 1999
----- -----------------------
<S> <C> <C>
Exchange rate at end of period.............. 3.50 4.01
Average exchange rate during period(1)...... 3.51 3.76
Highest exchange rate during period......... 3.82 4.01
Lowest exchange rate during period.......... 3.36 3.41
</TABLE>
- ------------------------
(1) The average of the exchange rates on the last day of each month during the
applicable period.
22
<PAGE>
Amounts and percentages appearing in this prospectus may not total due to
rounding.
SELLING SECURITY HOLDERS
We originally issued and sold the Note Warrants in a private placement to
Merrill Lynch and Deutsche Bank on January 27, 1999 as part of an offering of
256,800 units. Each unit consisted of a $1,000 principal amount at maturity
14 1/2% Senior Discount Note due 2009 and four Note Warrants. The notes and Note
Warrants were separately tradeable immediately after issuance.
The identities of selling Note Warrant holders will be disclosed in a
prospectus supplement in the case of subsequent sales.
We originally issued and sold the Series A 12% Cumulative Preference Shares
and Series A Preference Warrants in a private placement to Morgan Grenfell
Private Equity Limited on behalf of Morgan Grenfell Development Capital
Syndication Limited on January 27, 1999.
The following tables set forth the number of Series A 12% Cumulative
Preference Shares and Series A Preference Warrants that are being offered by
Morgan Grenfell Private Equity Limited pursuant to this prospectus.
<TABLE>
<CAPTION>
SECURITIES BENEFICIALLY OWNED PRIOR TO
OFFERING
----------------------------------------
<S> <C> <C> <C>
NUMBER OF
SERIES A NUMBER OF SHARES OF COMMON NUMBER OF SERIES A
NAME OF SELLING PREFERENCE STOCK UNDERLYING SERIES A PREFERENCE WARRANTS
SECURITYHOLDER WARRANTS PREFERENCE WARRANTS BEING OFFERED
- --------------------------------------------- ----------- --------------------------- -------------------
Morgan Grenfell Private Equity Limited on
behalf of Morgan Grenfell Development
Capital Syndication Limited (1)............ 45,000 4,950,000 45,000
</TABLE>
- ------------------------
(1) Scott A. Lanphere, a director of Morgan Grenfell Private Equity Limited, is
also a director of our company.
Morgan Grenfell Private Equity Limited on behalf of Morgan Grenfell
Development Capital Syndication Limited owns 100% of the outstanding Series A
Preference Warrants. Upon completion of the offering Morgan Grenfell Private
Equity Limited will own no Series A Preference Warrants.
<TABLE>
<CAPTION>
NUMBER OF SERIES A
12% CUMULATIVE
PREFERENCE SHARES NUMBER OF SERIES A
NAME OF SELLING BENEFICIALLY OWNED 12% CUMULATIVE SHARES
SECURITYHOLDER PRIOR TO OFFERING BEING OFFERED
- ---------------------------------------------------------------------- ------------------- -----------------------
<S> <C> <C>
Morgan Grenfell Private Equity Limited on behalf of Morgan Grenfell
Development Capital Syndication Limited (1)......................... 45,000 45,000
</TABLE>
- ------------------------
(1) Scott A. Lanphere, a director of Morgan Grenfell Private Equity Limited, is
also a director of our company.
Morgan Grenfell Private Equity Limited, on behalf of Morgan Grenfell
Development Capital Syndication Limited, owns 100% of the Series A 12%
Cumulative Preference Shares. Upon completion of the offering Morgan Grenfell
Private Equity Limited will own no Series A 12% Cumulative Preference Shares.
23
<PAGE>
We originally issued and sold the Series B 12% Cumulative Preference Shares
and Series B Preference Warrants to Arnold Chase, Cheryl Chase, Rhoda Chase and
The Darland Trust in a private placement on January 27, 1999.
The following tables set forth the number of these securities being offered
in this prospectus and by whom they are offered.
<TABLE>
<CAPTION>
SECURITIES BENEFICIALLY OWNED PRIOR TO
OFFERING
----------------------------------------
<S> <C> <C> <C>
NUMBER OF
SERIES B NUMBER OF SHARES OF COMMON NUMBER OF SERIES B
NAME OF SELLING PREFERENCE STOCK UNDERLYING SERIES B PREFERENCE WARRANTS
SECURITYHOLDER WARRANTS PREFERENCE WARRANTS BEING OFFERED
- --------------------------------------------- ----------- --------------------------- ---------------------
Arnold Chase (1)............................. 2,000 220,000 2,000
Rhoda Chase (1).............................. 1,000 110,000 1,000
Cheryl Chase (1)............................. 1,000 110,000 1,000
The Darland Trust (1)........................ 1,000 110,000 1,000
</TABLE>
- ------------------------
(1) Arnold Chase is the son of David Chase. David Chase is the Chairman of the
Board of our company and Arnold Chase is a director of our company. Rhoda
Chase is the wife of David Chase and the mother of Arnold Chase and Cheryl
Chase. Cheryl Chase is the daughter of David Chase and the sister of Arnold
Chase. The Darland Trust holds these securities on behalf of Cheryl Chase
and her children.
Arnold Chase owns 40% of the Series B Preference Warrants and each of Rhoda
Chase, Cheryl Chase and The Darland Trust owns 20% of the Series B Preference
Warrants. Upon completion of the offering they will own no Series B Preference
Warrants.
<TABLE>
<CAPTION>
NUMBER OF SERIES B
12% CUMULATIVE
PREFERENCE SHARES NUMBER OF SERIES B
NAME OF SELLING BENEFICIALLY OWNED 12% CUMULATIVE SHARES
SECURITYHOLDER PRIOR TO OFFERING BEING OFFERED
- ---------------------------------------------------------------------- ------------------- -----------------------
<S> <C> <C>
Arnold Chase.......................................................... 2,000 2,000
Rhoda Chase........................................................... 1,000 1,000
Cheryl Chase.......................................................... 1,000 1,000
The Darland Trust..................................................... 1,000 1,000
</TABLE>
- ------------------------
(1) Arnold Chase is the son of David Chase. David Chase is the Chairman of the
Board of our company and Arnold Chase is a director of our company. Rhoda
Chase is the wife of David Chase and the mother of Arnold Chase and Cheryl
Chase. Cheryl Chase is the daughter of David Chase and the sister of Arnold
Chase. The Darland Trust holds these securities on behalf of Cheryl Chase
and her children.
Arnold Chase owns 40% of the Series B 12% Cumulative Prefernce Shares and
each of Rhoda Chase, Cheryl Chase and The Darland Trust own 20% of the Series B
12% Cumulative Preference Shares. Upon completion of the offering they will own
no Series B 12% Cumulative Preference Shares.
24
<PAGE>
GENERAL DESCRIPTION OF SECURITIES BEING OFFERED
For a description of our common stock and Preference Shares, you should read
"Item 5-Market for Company's Equity and Related Stockholder Matters" in our
Annual Report on Form 10-K.
DESCRIPTION OF THE NOTE WARRANTS
GENERAL
We issued the Note Warrants under a Warrant Agreement between us and Bankers
Trust as warrant agent, dated as of January 27, 1999. The following summary of
certain provisions of the Note Warrants and the Warrant Agreement is not
complete and is subject to all the provisions of the Note Warrants and the
Warrant Agreement, including the definitions of certain terms contained in those
documents. The form of the Note Warrants and the Warrant Agreement are filed as
exhibits to the registration statement of which this prospectus forms a part.
Capitalized terms used in this part of the prospectus but not defined have the
meanings attributed to them in the Note Warrants or the Warrant Agreement.
EXERCISE
As a holder of a Note Warrant, you are entitled, at your option, during the
period beginning on the earlier of (i) the date this registration statement is
effective or (ii) July 7, 1999, and ending on the expiration date at 5:00 P.M.,
New York City time, on February 1, 2009 to purchase from us 1.7656 shares of
common stock at an exercise price of $9.125 per share of common stock. You,
however, will be able to exercise your Note Warrants only if the registration
statement relating to this prospectus is effective or the exercise of the Note
Warrants is exempt from the registration requirements of the Securities Act of
1933, and the securities are qualified for sale or exempt from qualification
under the applicable securities laws of the state or other jurisdiction in which
you reside. You may also exercise your Note Warrants pursuant to an effective
piggy-back registration statement. Unless earlier exercised, your Note Warrants
will expire on February 1, 2009. We will give notice of expiration not less than
90 nor more than 120 days prior to the expiration date to the registered holders
of the then outstanding Note Warrants. If we fail to give this notice, the Note
Warrants will nevertheless expire and become void on the expiration date.
You may exercise your Note Warrants (i) by surrendering the Note Warrant
certificate evidencing the Note Warrants with the form of election to purchase
shares of common stock set forth on the reverse side of the certificate duly
completed and executed by the holder of the Note Warrants and (ii) by paying in
full the exercise price for the Note Warrants at the office or agency in the
City of New York maintained for such purposes (which will initially be the
corporate trust office of Bankers Trust located at Four Albany Street, New York,
New York 10006).
You may only exercise each Note Warrant in whole and the exercise price may
be paid in full, at your option (i) in cash or by certified or official bank
check, (ii) by a cashless exercise or (iii) by any combination of (i) and (ii).
For purposes of the Warrant Agreement, a "cashless exercise" means an exercise
of a Note Warrant in accordance with the following:
- to effect a cashless exercise, the holder may exercise a Note Warrant or
Note Warrants without payment of the exercise price in cash by
surrendering the Note Warrant or Note Warrants (represented by one or more
Note Warrant certificates) and, in exchange therefor, receiving such
number of shares of common stock equal to the product of (1) the number of
shares of common stock for which the Note Warrant or Note Warrants are
exercisable and which would be issuable in the event of an exercise with
payment in cash of the exercise price, and (2) the cashless exercise
ratio;
- for purposes of the Warrant Agreement, the "cashless exercise ratio"
equals a fraction, the numerator of which is the excess of the Current
Market Value (calculated as set forth in the
25
<PAGE>
Warrant Agreement) per share of common stock on the date of exercise over
the 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 the
common stock on the date of exercise.
Upon surrender of a Note Warrant certificate representing more than one Note
Warrant in connection with a holder's option to elect a cashless exercise, the
holder must specify the number of Note Warrants for which the Note Warrant
certificate is to be exercised (without giving effect to such cashless
exercise). All provisions of the Warrant Agreement shall be applicable with
respect to a cashless exercise of a Note Warrant certificate for less than the
full number of Note Warrants represented thereby. No fractional share of common
stock will be issued upon exercise of the Note Warrants. We will pay to the
holders of the Note Warrants at the time of exercise an amount in cash equal to
the current market value of any such fractional share of common stock. No
payment or adjustment shall be made on account of any dividends on the common
stock issued upon exercise of a Note Warrant.
The holders of Note Warrants are not entitled, by virtue of being such
holders, to receive dividends, to vote, to consent, to exercise any preemptive
rights or to receive notice as stockholders of our company in respect of any
stockholders meeting for the election of our directors or any other purpose, or
to exercise any rights whatsoever as stockholders of our company.
No service charge will be made for registration of transfer or exchange upon
surrender of any Note Warrant certificate at the office of Bankers Trust. We may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration or transfer or
exchange of Note Warrant certificates into the ownership of another person.
In the event a bankruptcy or reorganization is commenced by or against us, a
bankruptcy court may hold that the unexercised Note Warrants are executory
contracts which may be subject to rejection by us with approval of the
bankruptcy court. As a result, you may not, even if sufficient funds are
available, be entitled to receive any consideration or may receive an amount
less than you would be entitled to receive if you had exercised your Note
Warrants prior to the commencement of that bankruptcy or reorganization.
ADJUSTMENTS
The number of shares of common stock issuable upon the exercise of the Note
Warrants and the exercise price will be subject to adjustment in certain
circumstances, including:
- our payment of dividends and other distributions on our common stock
payable in common stock or other equity security;
- subdivisions, combinations and certain reclassifications of our common
stock;
- the issuance to all holders of common stock of rights, options or warrants
entitling them to subscribe for additional shares of common stock, or of
securities convertible into or exercisable or exchangeable for additional
shares of common stock, at an offering price (or with an initial
conversion, exercise or exchange price plus such offering price) which is
less than the current market value per share of common stock;
- the distribution to all holders of common stock of any of our assets
(including cash), our debt securities or any rights or warrants to
purchase any securities (excluding those rights and warrants referred to
in the clause above and cash dividends and other cash distributions from
current or retained earnings);
- the issuance of shares of common stock for a consideration which is less
than the Current Market Value per share of common stock (this issuance is
subject to certain exceptions described in the Warrant Agreement,
including, without limitation, certain bona fide public offerings and
private placements and certain issuances of common stock pursuant to
employee stock incentive plans); and
26
<PAGE>
- the issuance of securities convertible into or exercisable or exchangeable
for common stock for a conversion, exercise or exchange price per share
which is less than the Current Market Value per share of common stock
(this issuance is subject to certain exceptions described in the Warrant
Agreement, including, without limitation, certain bona fide public
offerings and private placements and certain issuances of common stock
pursuant to employee stock incentive plans).
Notwithstanding the foregoing, no adjustment in the exercise price will be
required unless and until the adjustment would result, either by itself or with
other adjustments not previously made, in an increase or decrease of at least 1%
in the exercise price or the numbers of shares of common stock issuable upon
exercise of Note Warrants immediately prior to the making of such adjustment;
PROVIDED, HOWEVER, that any adjustment that is not made as a result of this
paragraph will be carried forward and taken into account in any subsequent
adjustment. In addition, we may at any time reduce the exercise price (not to an
amount that is less than the par value of the common stock) for any period of
time (but not less than 20 business days) as deemed appropriate by our Board of
Directors.
If we, in a single transaction or through a series of related transactions,
consolidate with or merge with or into any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of our
properties and assets to another person or group of affiliated persons or are a
party to a merger or binding share exchange which reclassifies or changes our
outstanding common stock, as a condition to consummating any such transaction
the person formed by or surviving any such consolidation or merger if other than
our company or the person to whom such transfer has been made shall enter into a
supplemental warrant agreement. The supplemental warrant agreement shall
provide:
(a) that the holder of a Note 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 Note Warrant immediately before the effective
date of the transaction (regardless of whether the Note 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 entity shall succeed to and be substituted for every
right and obligation of our company in respect of the Warrant Agreement
and the Note Warrants. The surviving person shall mail to holders of Note
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 Note Warrants is an affiliate of
the surviving entity, that issuer shall join in the supplemental warrant
agreement.
Notwithstanding the foregoing, (i) if we enter into a fundamental
transaction and the consideration payable to holders of the common stock (or
other securities) issuable or deliverable upon exercise of the Note Warrants in
connection with the fundamental transaction consists solely of cash or (ii)
there is a dissolution, liquidation or winding up of our company, then the
holders of Note 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 Note Warrants) as if the
Note 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 Note Warrant shall terminate and cease and such holder's Note
Warrants shall expire. The proposed merger with Bison Acquisition Corp., a
wholly-owned subsidiary of United Pan-Europe Communications N.V., if completed,
would be a fundamental transaction entitling the holders of the Note Warrants to
a cash payment. This transaction is described in the section called "Material
Changes."
In the event of a taxable distribution to holders of common stock which
results in an adjustment to the number of shares of common stock or other
consideration for which such a Note Warrant may be
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exercised, the holders of the Note Warrants may, in certain circumstances, be
deemed to have received a distribution subject to United States federal income
tax as a dividend.
PROVISIONS OF FINANCIAL STATEMENTS AND REPORTS
We will file the reports we are required to file under the Securities
Exchange Act of 1934, and the rules, regulations and policies adopted by the
Commission under this Act, in a timely manner in accordance with the
requirements of this Act, and if at any time we are not required to file such
reports, we will, upon the request of any holder or beneficial owner of Note
Warrants, make available such information as necessary to permit sales pursuant
to Rule 144A under the Securities Act of 1933.
We will also agree to comply with all applicable laws, including the
Securities Act of 1933 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 Note Warrants.
REGISTRATION RIGHTS
We have entered into the Warrant Registration Rights Agreement with Merrill
Lynch and Deutsche Bank that provides that you have registration rights and
other rights and obligations with respect to the Note Warrants and shares of
common stock underlying the Note Warrant. The following summary of the material
provisions of the Warrant Registration Rights Agreement is not complete and you
should refer to the provisions of the Warrant Registration Rights Agreement,
which was filed as an exhibit to the registration statement of which the
prospectus forms a part.
Under the terms of the Warrant Registration Rights Agreement, we are
required to use our best efforts to cause to be declared effective under the
Securities Act of 1933, no later than July 7, 1999, this registration statement
to provide for the resale of the Note Warrants and the shares of common stock
underlying these Note Warrants. We are required to use reasonable efforts to
maintain the effectiveness of the registration statement until such time as all
Note Warrants have been exercised and the shares of common stock underlying the
Note Warrants have been resold. During any consecutive 365-day period while the
Note Warrants are exercisable, we have the ability to suspend the availability
of such registration statement for up to two 30-consecutive-day periods (except
during (i) the 30 days immediately after the exercise date and (ii) the 30 days
immediately prior to the expiration of the Note Warrants) if our Board of
Directors determines in good faith that there is a valid purpose for the
suspension and provides notice of such determination to you at your address
appearing in the register of warrants maintained by Bankers Trust. The Warrant
Registration Rights Agreement requires us to pay the expenses associated with
such registration.
In the event that:
- the registration statement has not been declared effective by the
Commission on or prior to the date specified for such effectiveness, or
- following the date such registration statement is declared effective by
the Commission, it shall cease to be effective without being restored to
effectiveness by amendment or otherwise within the time period specified
in the Warrant Registration Rights Agreement (each such event referred to
in clauses (i) and (ii), a "registration default"),
we shall pay as liquidated damages to each holder of Note Warrants a damage
amount equal to $.0025 per week per Note Warrant for each week that the
registration default continues. The amount of liquidated damages will increase
by an additional $.0025 per week per Note Warrant with respect to subsequent
90-day periods until all registration defaults have been cured, up to a maximum
amount of liquidated damages of $.0125 per week per Note Warrant.
As holders of shares of common stock underlying the Note Warrants, you will
also have the right to include your shares in any registration statement under
the Securities Act of 1933 filed by us for our own account or for the account of
any of our securityholders covering the sale of common stock, other
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than (a) a registration statement on Forms S-4 or S-8 or (b) a registration
statement filed in connection with an offer of securities solely to existing
securityholders, for sale on the same terms and conditions as the securities of
our company or any other selling securityholders included therein. In the case
of a piggy-back registration statement, the number of shares of common stock
underlying the Note Warrants requested to be included therein is subject to pro
rata reduction to the extent that we are advised by the managing underwriter
therefor, if any, that the total number or type of shares of common stock
underlying the Note Warrants and other securities proposed to be included
therein pursuant to similar piggy-back registration rights of other holders, is
such as to materially and adversely affect the success of the offering.
If we have complied with all our obligations under the Warrant Registration
Rights Agreement with respect to a piggy-back registration statement relating to
an underwritten public offering, all holders of Note Warrants or shares of
common stock underlying the Note Warrants, upon request of the lead managing
underwriter with respect to such underwritten public offering, will be required
to not sell or otherwise dispose of any Note Warrant or shares of common stock
underlying the Note Warrants owned by them for a period not to exceed 30 days
prior to or 180 days after the completion of such underwritten public offering.
The Warrant Registration Rights Agreement includes customary covenants on
our part and provides that we will indemnify the holders of shares of common
stock underlying the Note Warrants included in any registration statement and
any underwriter with respect thereto against certain liabilities, including
liabilities under the Securities Act of 1933 and the Securities Exchange Act of
1934.
Each holder of Note Warrants that sells Note Warrants or shares of common
stock underlying the Note Warrants pursuant to this registration statement or a
piggy-back registration statement generally will be:
- required to be named as a selling securityholder in the related prospectus
and to deliver a prospectus to the purchaser,
- subject to the applicable civil liabilities provisions under the
Securities Act of 1933 in connection with such sales,
- bound by the provisions of the Warrant Registration Rights Agreement which
are applicable to such holder (including certain indemnification
obligations), and
- required to deliver information to be used in connection with any such
registration in order to have its Note Warrants or shares of common stock
underlying the Note Warrants included in such registration.
DESCRIPTION OF THE PREFERENCE WARRANTS
GENERAL
We issued 50,000 Preference Warrants under a Preference Warrant Agreement,
dated as of January 27, 1999, and entered into between us and Bankers Trust, as
preference warrant agent for the Preference Warrants. The following summary of
certain provisions of the Preference Warrants and the Preference Warrant
Agreement does not purport to be complete and is subject to all the provisions
of the Preference Warrants and the Preference Warrant Agreement, including the
definitions of certain terms contained therein. For a complete description, you
should refer to the form of the preference warrant certificate and the
Preference Warrant Agreement. We have filed a copy of the form of the Preference
Warrants and the Preference Warrant Agreement in the registration statement of
which this prospectus is a part. Capitalized terms used in this section but not
defined have the meanings attributed to them in the Preference Warrants
themselves, the Preference Warrant Agreement or the Preference Warrant
Registration Rights Agreement.
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EXERCISE
As a Preference Warrant holder, you will be entitled at your option, subject
to and upon compliance with the provisions of the Preference Warrant itself and
of the Preference Warrant Agreement, to purchase from us, at any time prior to
5:00 P.M., New York City time, on the expiration date of February 1, 2010, 110
shares of our common stock at an exercise price of $10.00 per share of common
stock for each Preference Warrant, subject to adjustments as provided in the
Preference Warrant Agreement. You, however, will not be allowed to sell or
otherwise dispose of these shares of common stock underlying the Preference
Warrants prior to January 27, 2000. After such period the shares of common stock
underlying the Preference Warrants may be resold if a registration statement
covering such shares of common stock is effective or if such sale is exempt from
the registration requirements of the Securities Act of 1933, and such securities
are qualified for sale or exempt from qualification under the applicable
securities laws of the state or other jurisdiction in which you reside. Unless
earlier exercised, the Preference Warrants will expire on February 1, 2010. We
will give notice of expiration not less than 90 nor more than 120 days prior to
the expiration date to the registered holders of the then outstanding Preference
Warrants. If we fail to give such notice, the Preference Warrants will
nevertheless expire and become void on February 1, 2010.
You may exercise your Preference Warrants (i) by surrendering the preference
warrant certificate evidencing the Preference Warrants with the form of election
to purchase shares of common stock set forth on the reverse side of the
certificate duly completed and executed by the holder of the Preference Warrants
and (ii) by paying in full the exercise price for the Preference Warrants at the
office or agency in The City of New York maintained for such purposes (which
will initially be the corporate trust office of Bankers Trust located at Four
Albany Street, New York, New York 10006).
You may only exercise each Preference Warrant in whole and the exercise
price may be paid in full, at the option of the holder (i) in cash or by
certified or official bank check, (ii) by a cashless exercise or (iii) by any
combination of (i) and (ii). For purposes of the Preference Warrant Agreement, a
"cashless exercise" means an exercise of a Preference Warrant in accordance with
the following:
- to effect a cashless exercise, the holder may exercise a Preference
Warrant(s) without payment of the exercise price in cash by surrendering
the Preference Warrant(s) (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) the number of shares of common
stock for which the Preference Warrant(s) is exercisable and which would
be issuable in the event of an exercise with payment in cash of the
exercise price and (2) the cashless preference exercise ratio.
- for purposes of the Preference Warrant Agreement, the "cashless preference
exercise ratio" equals a fraction, the numerator of which is the excess of
the Current Market Value (calculated as set forth in the Preference
Warrant Agreement) per share of common stock on the date of exercise over
the 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 the
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, the holder must specify the number of Preference Warrants for which
the preference warrant certificate is to be exercised (without giving effect to
such Cashless Exercise). All provisions of the Preference Warrant Agreement
shall be applicable with respect to a Cashless Exercise of a warrant certificate
for less than the full number of Preference Warrants represented thereby. No
fractional share of common stock will be issued upon exercise of the Preference
Warrants. We will pay to the holders of the Preference Warrants at the time of
exercise an amount in cash equal to the current market value of any such
fractional share of common stock. No payment or adjustment shall be made on
account of any dividends on the common stock issued upon exercise of a
Preference Warrant.
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The holders of unexercised Preference Warrants are not entitled, by virtue
of being such holders, to receive dividends, to vote, to consent or to receive
notice as stockholders of our company in respect of any stockholders meeting for
the election of our directors or any other purpose, or to exercise any rights
whatsoever as our stockholders.
No service charge will be made for registration of transfer or exchange upon
surrender of any preference warrant certificate at the office of Bankers Trust.
We may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration or
transfer or exchange of preference warrant certificates.
In the event a bankruptcy or reorganization is commenced by or against us, a
bankruptcy court may hold that the unexercised Preference Warrants are executory
contracts which may be subject to rejection by us with approval of the
bankruptcy court. As a result, you may not, even if sufficient funds are
available, be entitled to receive any consideration or may receive an amount
less than they would be entitled to receive if they had exercised their
Preference Warrants prior to the commencements of any such bankruptcy or
reorganization.
ADJUSTMENTS
The number of shares of our common stock issuable upon the exercise of the
Preference Warrants, and the exercise price will be subject to adjustment in
certain circumstances, including:
(i) our payment of dividends and other distributions on our common stock
payable in common stock or other of our equity;
(ii) subdivisions, combinations and certain reclassifications of the common
stock;
(iii) the issuance to all holders of common stock of rights, options or
warrants entitling them to subscribe for additional shares of common
stock, or of securities convertible into or exercisable or exchangeable
for additional shares of common stock, at an offering price (or with an
initial conversion, exercise or exchange price plus such offering
price) which is less than the Current Market Value per share of common
stock;
(iv) the distribution to all holders of common stock of any of our assets
(including cash), debt securities or any rights or warrants to purchase
any securities (excluding those rights and warrants referred to in the
clause above and cash dividends and other cash distributions from
current or retained earnings);
(v) the issuance of shares of common stock for a consideration which is less
than the Current Market Value per share of common stock (this issuance
is subject to certain exceptions described in the Preference Warrant
Agreement, including, without limitation, certain bona fide public
offerings and private placements and certain issuances of common stock
pursuant to employee stock incentive plans); and
(vi) the issuance of securities convertible into or exercisable or
exchangeable for common stock for a conversion, exercise or exchange
price per share which is less than the Current Market Value per share
of common stock (this issuance is subject to certain exceptions
described in the Preference Warrant Agreement, including, without
limitation, certain bona fide public offerings and private placements
and certain issuances of common stock pursuant to employee stock
incentive plans).
Notwithstanding the foregoing, no adjustment in the exercise price will be
required unless and until such adjustment would result, either by itself or with
other adjustments not previously made, in an increase or decrease of at least 1%
in the exercise price or the numbers of shares of common stock issuable upon
exercise of Preference Warrants immediately prior to the making of such
adjustment; PROVIDED, HOWEVER, that any adjustment that is not made as a result
of this paragraph will be carried
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forward and taken into account in any subsequent adjustment. In addition, we may
at any time reduce the exercise price (not to an amount that is less than the
par value of the common stock) for any period of time (but not less than 20
business days) as deemed appropriate and determined in good faith by our Board
of Directors.
If we, in a single transaction or through a series of related transactions,
consolidate with or merge with or into any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of our
properties and assets to another person or group of affiliated persons or are a
party to a merger or binding share exchange which reclassifies or changes its
outstanding common stock as a condition to consummating any such transaction the
person formed by or surviving any such consolidation or merger if other than our
company or the person to whom such transfer has been made 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); 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
the 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 for every
right and obligation of ours 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
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.
Notwithstanding the foregoing, (i) if we enter 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 our 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 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. The proposed merger with Bison Acquisition
Corp., a wholly-owned subsidiary of United Pan-Europe Communications N.V., if
completed, would be a fundamental transaction entitling the holders of the
Preference Warrants to a cash payment. This transaction is described in the
section called "Material Changes."
PRE-EMPTIVE RIGHTS
Morgan Grenfell Private Equity Limited, Arnold Chase, Rhoda Chase, Cheryl
Chase and The Darland Trust (together, the "Initial Purchasers") have the right
of first refusal to purchase, at the same per share price and on the same terms
and conditions, a pro rata share of any new securities which we may, from time
to time, sell or issue. An Initial Purchaser's "pro rata share" is the ratio of
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the number of shares of common stock that the Initial Purchaser has the right to
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 securities 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 an Initial Purchaser
(including pursuant to the Preference Warrants) and any other rights to acquire
shares of common stock acquired by an Initial Purchaser (other than the
Preference Warrants) shall not be included in the "pro rata share" that such
Initial Purchaser may be entitled to purchase. 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 an Initial Purchaser (or which such Initial Purchaser 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 will such
adjustment give rise to any rights of first refusal under the Preference Warrant
Agreement.
For the purpose of the Initial Purchasers' pre-emptive rights, the term "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 our 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 our employees, consultants, officers or directors
either (x) pursuant to any stock option, stock purchase, stock bonus or
similar plan that is or has been approved by our Board of Directors on
or before January 27, 1999, or (y) pursuant to any stock option, stock
purchase, stock bonus or similar plan that is approved by the
Compensation Committee of our Board of Directors 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 our 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
the Preference Warrant Agreement;
(v) treasury shares;
(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 we were, on or
before January 27, 1999, required to issue;
(viii) common stock, or any rights, options, warrants or shares convertible
into or exchangeable for common stock which we shall issue on January
27, 1999 in connection with our offering of the 14 1/2% Senior Discount
Notes due 2009; and
(ix) any common stock, or any rights, options or warrants, or shares
convertible into or exchangeable for common stock, issued or sold to
any purchaser by the operation of any rights described in the
Preference Warrant Agreement or pursuant to any other antidilution
arrangement with any other person (including but not limited to any
such rights granted to any of the Initial Purchasers).
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In the event we propose to issue or sell new securities, we shall give the
Initial Purchasers written notice of the proposal 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 we propose to sell or issue the new securities and the proposed
buyers, if known. Each Initial Purchaser shall have 30 days after any notice is
given to agree to purchase such new securities upon the terms specified in the
notice, and in the event that an Initial Purchaser wishes to do so it shall give
written notice to us, stating therein the quantity of new securities to be
purchased, which in any event may not exceed such Initial Purchaser's pro rata
share thereof. In the event that any Initial Purchaser fails to give such
notice, it shall be deemed to have waived its right of first refusal under the
Preference Warrant Agreement. In the event that an Initial Purchaser exercises
its pre-emptive rights pursuant to the notice, such Initial Purchaser shall
purchase the quantity of new securities specified in its notice to us on the
terms specified in the notice (except that if such terms include the giving of
consideration other than cash, such Initial 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 New York City are closed) not more than 210 days after the
date of the notice. We shall give the Initial Purchaser notice of the purchase
date not less than ten days in advance of the purchase date.
From the first day after the first day on which an Initial Purchaser has (i)
exercised its right of first refusal, (ii) waived its right of first refusal in
writing, or (iii) been deemed to have waived its right of first refusal by
failing to respond to the notice within 30 days, we 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, no later than 180 days
from the date of such agreement) to sell or issue, all those new securities
covered by the applicable notice, at a price and upon terms no more favorable to
the purchasers thereof than specified in such notice. If we do not sell such new
securities within the time periods specified in the preceding sentence, we shall
not be permitted to issue or sell such new securities, unless it first offers
such securities to the Initial Purchasers again pursuant to the pre-emptive
rights provisions of the Preference Warrant Agreement.
Upon the disposition by any Initial Purchaser of all of its Preference
Warrants, the Initial Purchaser shall have no further pre-emptive rights under
the Preference Warrant Agreement.
REGISTRATION RIGHTS
We entered into the Preference Registration Rights Agreement and the
Preference Warrant Registration Rights Agreement with Morgan Grenfell Private
Equity Limited, Arnold Chase, Cheryl Chase, Rhoda Chase and The Darland Trust,
which provides that the holders of Preference Shares, Preference Warrants and
the shares of common stock underlying the Preference Warrants will have
registration rights and other rights and obligations with respect to these
securities. The following summary of the material provisions of these
registration rights agreements is not complete and you should refer to all of
the provisions of the agreements themselves.
Under the terms of the Preference Registration Rights Agreement and the
Preference Warrant Registration Rights Agreement, we are required to use our
best efforts to cause to be declared effective under the Securities Act of 1933,
no later than July 7, 1999, this registration statement providing for the resale
of the Preference Shares and the Preference Warrants. Under the Preference
Registration Rights Agreement, we are required to use reasonable efforts to
maintain the effectiveness of this registration statement until two years has
elapsed since the later of the date the Preference Shares were acquired from us
or from one of our affiliates. Under the Preference Warrant Registration Rights
Agreement, we are required to use reasonable efforts to maintain the
effectiveness of this registration statement until such time as all Preference
Warrants have expired or have been exercised or redeemed. During any consecutive
365-day period while a registration statement is required to be effective, we
will under certain circumstances have the ability to suspend the availability of
such registration statement for a period not to exceed 60 days or two periods
not to exceed an aggregate of
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90 days (except during (i) the 30 days immediately after the exercise date and
(ii) the 30 days immediately prior to the expiration of the Preference
Warrants). Both registration rights agreements require us to pay the expenses
associated with such registrations.
In the event that:
(i) the shelf registration statement has not been declared effective by the
Commission on or prior to the date specified for such effectiveness, or
(ii) following the date such registration statement is declared effective by
the Commission, it shall cease to be effective without being restored
to effectiveness by amendment or otherwise within the time period
specified in the Preference Warrant Registration Rights Agreement (each
such event referred to in clauses (i) and (ii), a "Preference Warrant
Shelf Registration Default"),
the dividend rate applicable to the Preference Shares shall increase by 1% per
annum (to a total of 13% per annum) and from the date of such registration
default until the date such registration default is cured dividends shall accrue
on the Preference Shares at an annual rate of 13% of the Accreted Liquidation
Preference per share.
In the event that (a) this registration statement has not been declared
effective by the Commission on or prior to July 7, 1999, or (b) following the
date this registration statement is declared effective by the Commission, it
shall cease to be effective without being restored to effectiveness by amendment
or otherwise within the time period specified in the Preference Warrant
Registration Rights Agreement (each such event referred to in clauses (i) and
(ii), a "Preference Warrant Shelf Registration Default"), we shall pay as
liquidated damages to each holder of Preference Warrants or shares of common
stock underlying the Preference Warrants, an amount equal to $.0025 per week per
Preference Warrant for each week that the Preference Warrant Shelf Registration
Default continues. The amount of liquidated damages will increase by an
additional $.0025 per week per Preference Warrant with respect to each
subsequent 90-day period until such Preference Warrant Shelf Registration
Default has been cured, up to a maximum amount of liquidated damages of $.0125
per week per Preference Warrant.
The Preference Registration Rights Agreement and the Preference Warrant
Registration Rights Agreement will include customary covenants on our part and
will provide that we will indemnify the holders of Preference Shares, Preference
Warrants (and shares of common stock underlying the Preference Warrants)
included in any registration statement and any underwriter with respect thereto
against certain liabilities, including liabilities under the Securities Act of
1933 and the Exchange Act of 1934.
Each holder of Preference Shares, Preference Warrants or shares of common
stock underlying the Preference Warrants that sells such Preference Shares,
Preference Warrants or shares of common stock underlying the Preference Warrants
pursuant to this registration statement, generally will be:
- required to be named as a selling securityholder in the prospectus and to
deliver a prospectus to the purchaser;
- subject to certain of the civil liabilities provisions under the
Securities Act of 1933 in connection with such sales;
- bound by certain provisions of the Preference Registration Rights
Agreement and Preference Warrant Registration Rights Agreement which are
applicable to such holder (including certain indemnification obligations);
and
- required to deliver information to be used in connection with any such
registration in order to have its Preference Shares, Preference Warrants
or shares of common stock underlying the Preference Warrants included in
such registrations.
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BOOK ENTRY; DELIVERY AND FORM
The certificates representing the Note Warrants, Preference Shares and
Preference Warrants were issued in fully registered form. Except as described in
the next paragraph, the Note Warrants that were offered and sold are represented
by permanent global securities which are registered in the name of a nominee of
The Depository Trust Company ("DTC") and which have been deposited on behalf of
purchasers of such Note Warrants or Preference Warrants represented thereby with
a custodian for DTC for credit to the respective accounts of the purchasers (or
to such other accounts as they may direct) at DTC.
Note Warrants held by purchasers who elected to take physical delivery of
their certificates instead of holding their interest through a global security
(and which are thus ineligible to trade through DTC) (referred to in this
section as the "Non-Global Purchasers"), were issued in registered form
("Certificated Securities"). Upon the transfer of such Certificated Securities
to another entity, such Certificated Securities will, unless the global
securities have previously been exchanged in whole for Certificated Securities
or unless the transferee requests otherwise, be exchanged for an interest in a
global security upon delivery of appropriate certifications to the warrant
agent.
THE GLOBAL SECURITIES. We expect that pursuant to procedures established by
DTC (a) upon deposit of the global securities, DTC or its custodian will credit
on its internal system portions of the global securities to the respective
accounts of persons who have accounts with such depositary and (b) ownership of
the global securities will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC or its nominee (with
respect to interests of persons other than persons who have accounts with DTC).
Ownership of beneficial interests in the global securities will be limited to
persons who have accounts with DTC or persons who hold interests through persons
who have accounts with DTC. Investors may hold their interests in the global
securities directly through DTC if they have accounts in such system, or
indirectly through organizations which have accounts in such system.
So long as DTC or its nominee is the registered owner or holder of any
global securities, DTC or such nominee will be considered the sole owner or
holder of the Note Warrants represented by such global securities for all
purposes under the Warrant Agreement and the Note Warrants. No beneficial owner
of an interest in the global securities will be able to transfer such interest
except in accordance with the applicable procedures of DTC in addition to those
provided for under the Warrant Agreement.
Payments and distributions in respect of the global securities will be made
to DTC or its nominee, as the registered owner of the global securities. We,
Bankers Trust and Continental Transfer & Trust Co. will not have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the global
securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of any
dividends or other distributions in respect of the global securities, will
credit participants' accounts with payments in amounts proportionate to the
number of Note Warrants represented by the global securities as shown on the
records of DTC or its nominee. We also expect that payments by persons who have
accounts with DTC to owners of beneficial interests in the global securities
held through persons who have accounts with DTC will be governed by standing
instructions and customary practice as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of persons who have accounts
with DTC.
Transfers between account holders in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of Certificated Securities for any reason, including
to sell the Note Warrants to persons in states which require physical delivery
of such securities or to pledge such securities, such holder must transfer its
interest in the
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global securities in accordance with the normal procedures of DTC and in
accordance with the procedures set forth in the Warrant Agreement.
DTC has advised us that: DTC will take any action permitted to be taken by a
holder of Note Warrants (including the presentation of securities for exchange
as described below) only at the direction of one or more account holders to
whose account the DTC interests in the global securities are credited and only
in respect of the aggregate number of securities as to which such account
holders have given such direction. However, if there is an event of default
under the Warrant Agreement, DTC will exchange the global securities for
Certificated Securities, which it will distribute to its account holders.
DTC also has advised us that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "clearing agency" registered pursuant to the provision of Section 17A
of the Exchange Act. DTC was created to hold securities for its account holders
and facilitate the clearance and settlement of securities transactions between
account holders through electronic book-entry changes in accounts of its account
holders, thereby eliminating the need for physical movement of certificates.
Account holders include securities brokers and dealers, banks, trust companies
and clearing corporations and certain other organizations. Indirect access to
the DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with an
account holder either directly or indirectly ("Indirect Participants").
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interests in the global warrants
among account holders of DTC, Euroclear and Cedel, they are under no obligation
to follow such procedures, and such procedures may be discontinued at any time.
We, Bankers Trust and Continental Stock Transfer & Trust Co. will not have any
responsibility for the performance by DTC, Euroclear or Cedel or the account
holders or Indirect Participants of their respective obligations under the rules
and procedures governing their operations.
CERTIFICATED SECURITIES. Subject to certain conditions, any person having a
beneficial interest in the global securities may, upon request to Bankers Trust,
exchange such beneficial interest for Note Warrants in the form of Certificated
Securities. Upon any such issuance, Bankers Trust is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or any nominee thereof). In addition, interests in the
global securities will be exchangeable or transferable, as the case may be, for
Note Warrants in the form of Certificated Securities if DTC notifies us that it
is unwilling or unable to continue as depositary for such global warrants, or
DTC ceases to be a "Clearing Agency" registered under the Securities Exchange
Act of 1934, and a successor depositary is not appointed by us within 90 days.
Upon the occurrence of any of the events described in the preceding sentence, we
will cause the appropriate Certificated Securities to be delivered. Certificated
Securities may only be transferred on the books and records of the transfer
agent.
The Preference Shares and the Preference Warrants may be deposited with DTC
at the option of their holders. If so, the provisions of this section would also
apply to the Preference Shares and the Preference Warrants represented by global
securities. In the case of the Preference Shares, Continental Stock Transfer &
Trust Co. as registrar, will take actions and give notices in accordance with
the Certificate of Designation instead of Bankers Trust, as warrant agent in
accordance with the relevant warrant agreement.
PLAN OF DISTRIBUTION
We have registered the securities for offer and sale by the selling
securityholders so that the securities will be freely tradeable. The securities
offered hereby may be sold from time to time to purchasers directly by the
selling securityholders. Alternatively, the selling securityholders may offer
the securities to or through underwriters, broker-dealers or agents, who may
receive compensation in the
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form of underwriting discounts, concessions or commissions from the selling
securityholders or the purchasers of the securities. The selling securityholders
and any underwriters, broker-dealers or agents that participate in the
distribution of the securities may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 and any profit on the sale of securities
by them and any discounts, commissions, concessions or other compensation
received by any of them, may be deemed to be underwriting discounts of
commissions under the Securities Act of 1933.
The selling securityholders may offer and sell, from time to time, some or
all of the securities covered by this prospectus in one or more transactions at
fixed prices, at prevailing market prices at the time of sale, at varying prices
determined at the time of sale or at negotiated prices. Such prices will be
determined by the selling securityholders or by agreement between the selling
securityholders and underwriters and dealers who may receive fees or commissions
in connection therewith. The selling securityholders may sell the securities by
variety of methods, including the following (which may involve crosses or block
transactions):
(i) on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale,
(ii) in the over-the-counter market,
(iii) in transactions otherwise than on such exchanges or in the
over-the-counter market, or
(iv) through the writing of options.
If required, at the time a particular offering of securities is made, a
prospectus supplement will be distributed which will set forth the aggregate
amount and type of securities being offered and the terms of the offering,
including the name or names of any underwriters, broker-dealers or agents, any
discounts, commissions and other terms constituting compensation from the
selling securityholders and any discounts, commissions or concessions allowed or
reallowed or paid to broker-dealers.
We have also registered shares of Common Stock which we will issue to
holders of Note Warrants upon the exercise of the Note Warrants in accordance
with the terms of the Note Warrants and the Note Warrant Agreement.
Our outstanding common stock is listed on the NASDAQ National Market, and we
have applied for listing the shares of common stock underlying the Note Warrants
on the NASDAQ National Market. The Note Warrants have been designated for
trading on the Private Offerings Resale and Trading through Automated Linkages
("PORTAL") of NASDAQ. We do not intend to apply for listing of the Note Warrants
or the Preference Shares on any securities exchange or for authorization for
quotation of the Note Warrants or the Preference Shares on any quotation system.
To comply with the securities laws of certain jurisdictions, if applicable,
the Securities may be offered or sold in such jurisdiction only through
registered or licensed brokers or dealers. In addition, in certain jurisdictions
the Securities may not be offered or sold (unless they have been registered or
qualified for sale) in such jurisdictions or an exemption from registration or
qualification is available.
LEGAL MATTERS
The validity of the Note Warrants and the shares of common stock, the
Preference Shares and Preference Warrants offered hereby will be passed upon for
us by Baker & McKenzie, Washington, District of Columbia and New York, New York
with respect to matters of United States law. Certain matters of Polish law will
be passed upon for us by Baker & McKenzie, Warsaw, Poland.
EXPERTS
Our consolidated financial statements as of December 31, 1998 and 1997 and
for each of the years in the three-year period ended December 31, 1998 included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
which is incorporated herein by reference, have been audited by KPMG Polska Sp.
z.o.o., independent auditors, as set forth in its reports thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of KPMG Polska Sp. z.o.o. as experts in accounting and
auditing.
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MATERIAL CHANGES
We entered into an Agreement and Plan of Merger with United Pan-Europe
Communications whereby United Pan-Europe Communications N.V. ("UPC") and its
wholly-owned subsidiary Bison Acquisition Corp. have initiated a tender offer to
purchase all of the outstanding shares of our company in an all cash transaction
valuing our company's shares at $19.00 per share. Promptly upon the completion
of the tender offer, UPC will cause Bison to be merged with and into our
company.
The following is a summary of the material provisions of the merger
agreement and related documents. It does not restate the merger agreement and/or
the related documents. We urge you to read the merger agreement and the related
documents because they, and not this description, define how your rights as
holders of securities in our company will be affected by this transaction if it
is consummated. We have filed a copy of the merger agreement as Exhibit (c)(1)
to our Solicitation/ Recommendation Statement on Schedule 14D-9, as amended from
time to time, which we have incorporated by reference into this prospectus in
its entirety.
The tender offer is conditioned upon, among other things,
- there being validly tendered and not properly withdrawn before the
expiration of the tender offer a number of shares of common stock which
represents at least a majority of all of the issued and outstanding shares
of common stock on a fully diluted basis, on the date the tender offer is
consummated (the "Minimum Condition"),
- the satisfaction of the HSR Condition (as defined herein),
- the satisfaction of the PAMC Condition (as defined herein), and
- if required by applicable law, the satisfaction of the EC Condition (as
defined herein).
"HSR Condition" means the expiration or termination of any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act").
"PAMC Condition" means the granting of all applicable approvals of the
Polish Anti-Monopoly Office before the expiration of the tender offer.
"EC Condition" means the receipt, if applicable, before the expiration of
the tender offer of a decision of the Commission of the European Community
that the purchase of the common stock pursuant to the tender offer and the
merger are compatible with the Common Market.
"Regulatory Condition" shall mean the HSR Condition, the PAMC Condition and
the EC Condition, collectively.
The tender offer is also conditioned upon the satisfaction of certain other
terms and conditions described in the section entitled "Conditions of the Tender
Offer."
At the effective time of the merger,
(a) each share of common stock then issued and outstanding (other than (i)
any shares of common stock which are held by any of our subsidiaries or
in our treasury, or which are held, directly or indirectly, by UPC or any
direct or indirect subsidiary of UPC (including Bison), all of which
shall be canceled and none of which shall receive any payment, and (ii)
shares of common stock held by stockholders exercising their rights to
dissent in accordance with Delaware law) shall be canceled and converted
into and shall represent the right to receive an amount in cash equal to
$19.00, without interest; and
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(b) each share of our outstanding preference shares shall be canceled and no
further consideration shall be payable for these shares.
Under the Delaware General Corporation Law, if Bison acquires at least 90%
of the issued and outstanding shares of our common stock and of each series of
our Preference Shares, Bison will be able to approve and effect the merger
without a vote of our stockholders. If, however, Bison does not acquire at least
90%, a vote of our stockholders to effect the merger is required under the
Delaware General Corporation Law and a longer period of time will be required to
effect the merger. We have been advised that Bison intends to obtain the funds
necessary to purchase the shares in the tender offer and the merger from UPC. In
UPC's Schedule 14D-1, Bison stated that it anticipates that it will obtain these
funds from a planned private placement of high-yield notes. As of the date of
UPC's Schedule 14D-1, UPC stated in the Schedule 14D-1 that:
- it had not completed this financing;
- UPC had approached its customary financing sources in order to arrange
interim financing for the tender offer;
- no commitment letter had been entered into with respect to such financing;
and
- based on conversations with its financing sources, UPC is confident that
such financing can be arranged.
UPC and Bison have entered into Common Stockholder Agreements, dated as of
June 2, 1999, with some relatives of David T. Chase and some of their respective
affiliates (the "Chase Group"), Samuel Chisholm, David Chance, Robert E. Fowler
III, some affiliates of Advent International Group and Morgan Grenfell Capital
Development Syndications Limited ("Morgan Grenfell") (collectively, the
"Stockholders"). The Stockholders are the record and beneficial owners of, in
the aggregate, 16,175,431 shares of common stock, Preference Warrants
exercisable for 5,500,000 shares of common stock and options to purchase
2,286,000 shares of common stock (together with all additional shares of common
stock, warrants exercisable for common stock and options to purchase common
stock thereafter acquired by the Stockholders, the "Option
Securities")(representing approximately 48.4% of our outstanding common stock
and approximately 51.5% of our common stock on a fully diluted basis). Mr. Chase
is the Chairman of our Board of Directors, Mr. Fowler is the Chief Executive
Officer and a director of our company and Messrs. Chisholm and Chance are
directors of our company. Pursuant to the Common Stockholder Agreements, these
Stockholders have agreed to the following:
- to irrevocably tender pursuant to the tender offer (and not withdraw) all
shares of common stock held by them,
- to grant to Bison an option to purchase all of the Option Securities held
by them, and
- with respect to some questions put to our stockholders for a vote, to vote
their shares of common stock in accordance with the terms and conditions
of the Common Stockholder Agreement to which the Stockholder is a party.
Under the Common Stockholder Agreements, Bison has agreed to purchase the
Option Securities (other than shares of common stock) held by the Stockholders
after the completion of the tender offer.
UPC and Bison also have entered into Preferred Stockholder Agreements, dated
as of June 2, 1999. with some members of the Chase Group and Morgan Grenfell
(the "Preferred Stockholders") who are the holders of all of the Preference
Shares (the "Preferred Stockholder Agreements"). (In this prospectus, we refer
to the Common Stockholder Agreements and Preferred Stockholder Agreements
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as the Stockholders Agreements.) Under these Preferred Stockholder Agreements,
the Preferred Stockholders have agreed:
- to grant to Bison an option to purchase all of the Preference Shares held
by such Preferred Stockholder, and
- with respect to some questions put to our stockholders for a vote, to vote
their Preference Shares in accordance with the terms and conditions of the
applicable Preferred Stockholder Agreement to which the Preferred
Stockholder is a party.
Under the Preferred Stockholder Agreements, UPC has agreed to purchase the
Preference Shares held by the Preferred Stockholders after the completion of the
tender offer.
As of June 2, 1999, we had
- 33,406,000 shares of common stock issued and outstanding,
- warrants (including the Note Warrants and the Preference Warrants) to
purchase 9,138,179 shares of common stock issued and outstanding, and
- stock options issued under our stock option plans covering 3,998,000
shares of common stock.
As a result, as of June 2, 1999, the Minimum Condition would be satisfied if at
least 23,271,090 shares of common stock were validly tendered and not properly
withdrawn before the expiration of the tender offer.
MERGER AGREEMENT
We have summarized below the material provisions of the merger agreement. We
urge you to read the merger agreement because it, and not this summary, defines
how your rights as holders of securities in our company will be affected in this
transaction.
THE TENDER OFFER. The merger agreement provides that Bison will start the
tender offer and that the obligation of Bison to complete the tender offer and
to accept for payment and to pay for any common stock tendered in the tender
offer shall be subject to only those conditions set forth in the section
entitled "Conditions of the Tender Offer." Any of these conditions may be waived
by UPC or Bison in their sole discretion; PROVIDED, HOWEVER, that Bison may not
waive the Minimum Condition without our prior written consent. The conditions to
the tender offer are for the sole benefit of UPC and Bison and may be asserted
by UPC and Bison regardless of the circumstances giving rise to any of these
conditions. In addition, except as expressly set forth in this prospectus, these
conditions may be waived by UPC and Bison in whole or in part. UPC and Bison
expressly reserve the right to modify the terms of the tender offer; PROVIDED,
HOWEVER, that without our prior written consent, Bison shall not:
- reduce the number of shares of common stock to be purchased in the tender
offer,
- reduce the tender offer price,
- modify or add to the conditions to the tender offer,
- change the form of consideration payable in the tender offer or
- make any other change in the terms of the tender offer which is materially
adverse to the holders of common stock.
Notwithstanding the foregoing sentence, Bison may, without our consent,
- extend the tender offer, if at the then scheduled expiration of the tender
offer if any of the conditions to Bison's obligations to purchase shares
of common stock have not been satisfied or
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waived, until the third business day after the day Bison reasonably
believes to be the earliest date on which these conditions will be
satisfied,
- extend the tender offer from time to time up to a maximum of an aggregate
of thirty (30) days beyond the first day all of the conditions to the
tender offer have been met, and/or
- extend the tender offer for any period required by any rule, regulation,
interpretation or position of the Commission or the staff of the
Commission applicable to the tender offer.
Notwithstanding the foregoing, (x) the tender offer may not, without our
written consent, be extended beyond September 30, 1999, and (y) the tender offer
may not, without our prior written consent, be extended if the failure to
satisfy any condition of the tender offer was caused by a material breach by UPC
or Bison of any of their representations, warranties, covenants or agreements
set forth in the merger agreement.
Notwithstanding anything to the contrary in the merger agreement, UPC and
Bison agree that if immediately before any scheduled expiration date of the
tender offer, the Regulatory Condition shall not have been satisfied, but at
such scheduled expiration date each of the other conditions set forth in the
section entitled "Conditions of the Tender Offer" (other than the Minimum
Condition) shall then be satisfied, at our request, Bison shall extend the
tender offer from time to time, subject to the right of UPC, Bison or us to
terminate the merger agreement under its terms. Upon the terms and subject to
the conditions of the tender offer, Bison shall, and UPC shall cause Bison to,
promptly purchase all shares of common stock which are validly tendered on or
before the expiration of the tender offer and not withdrawn.
UPC shall provide, or cause to be provided, to Bison on a timely basis all
funds necessary to accept for payment, and pay for, all shares of common stock
that Bison becomes obligated to purchase pursuant to the tender offer.
Under the terms of the merger agreement, we have approved of and consented
to the tender offer and our Board of Directors has:
- determined that each of the tender offer and the merger is (x) advisable
and (y) fair to, and in the best interests of, the holders of shares of
our capital stock, including but not limited to the holders;
- approved the tender offer and the merger and approved and adopted the
merger agreement, the Stockholder Agreements and the transactions
contemplated in those agreements in accordance with the provisions of the
Delaware General Corporate Law;
- recommended acceptance of the tender offer, approval of the merger and
approval and adoption of the merger agreement by our stockholders;
- approved the changes in our options and warrants and our stock incentive
plans contemplated by the merger agreement; and
- taken all other applicable action necessary to render (x) Section 203 of
the Delaware General Corporate Law and any other applicable state takeover
statutes and (y) Article VIII of our Amended and Restated Certificate of
Incorporation inapplicable to the tender offer and the merger.
In addition, Goldman Sachs, our financial advisor, has delivered to our Board of
Directors its opinion that the tender offer price to be received by our
stockholders pursuant to the merger agreement is fair, from a financial point of
view, to the stockholders subject to the assumptions and qualifications
contained in its opinion.
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CONDITIONS OF THE TENDER OFFER. Bison is not required to accept for payment
or, subject to any applicable rules and regulations of the Commission, pay for
any shares of common stock tendered in the tender offer and may terminate or
amend the tender offer and may postpone the acceptance of, and payment for, any
shares of common stock, if:
- before the expiration of the tender offer a number of shares of common
stock (representing at least a majority of all of the issued and
outstanding shares of common stock, on a fully diluted basis, on the date
the tender offer is consummated) is not validly tendered and not properly
withdrawn,
- any applicable waiting period (and any extension thereof) under the HSR
Act has not expired or been terminated,
- all applicable approvals of the Polish Anti-Monopoly Office has not been
granted before the expiration of the tender offer,
- if required by applicable law, a decision of the Commission of the
European Community that the purchase of shares of common stock pursuant to
the tender offer and the merger are compatible with the Common Market has
not been received before the expiration of the tender offer, or
- if at any time on or after June 2, 1999, and at or before the time of
payment for any such shares of common stock (whether or not any shares of
common stock have theretofore been accepted for payment or paid for
pursuant to the tender offer) any of the following occurs:
- there is instituted or pending any action or proceeding by any
supranational, national, provincial, county, local, municipal or other
legislative or executive body or governmental department, authority,
commission, court, board, bureau, agency or instrumentality, including,
without limitation, any of the foregoing constituted by the Republic of
Poland, the United Kingdom, the United States of America or any of their
respective political subdivisions (each a "Governmental Body") or by any
other person or entity, domestic or foreign, before any court of competent
jurisdiction or governmental authority or agency, domestic or foreign
(other than existing claims disclosed to UPC),
(i) challenging or seeking to, or which could reasonably be expected to
make illegal, impede, delay or otherwise directly or indirectly
restrain, prohibit or make materially more costly the tender offer
or the merger or would reasonably be expected to result in material
damages,
(ii) seeking to prohibit or materially limit the ownership or operation
by UPC or Bison of all or any material portion of the business or
assets of our company and our subsidiaries taken as a whole or to
compel UPC or Bison to dispose of or hold separately all or any
material portion of the business or assets of UPC and its
subsidiaries taken as a whole or our company and our subsidiaries
taken as a whole, or seeking to impose any limitation on the
ability of UPC or Bison to conduct its business or own such assets,
(iii) seeking to impose limitations on the ability of UPC or Bison
effectively to exercise full rights of ownership of the shares of
the capital stock of our company, including, without limitation,
the right to vote any such shares of capital stock acquired or
owned by Bison or UPC on all matters properly presented to our
stockholders,
(iv) seeking to require divestiture by UPC or Bison of any shares of
capital stock of our company,
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(v) requiring or permitting our competitors to share access to our
broadcast systems (other than access required under Polish law on
the date of the merger agreement), or
(vi) otherwise directly or indirectly relating to the tender offer or
the merger and which would have a Material Adverse Effect or a
material adverse effect on the business, properties, assets,
liabilities, operations, results of operations or condition
(financial or otherwise) of UPC and its subsidiaries, taken as a
whole;
- there is any statute, rule, regulation, legislation, interpretation,
judgment, order or injunction, enacted, enforced, promulgated, amended or
issued and applicable to or deemed by a Governmental Body to be
applicable to:
(i) UPC, Bison, our company or any subsidiary, or
(ii) the tender offer or the merger, by any Governmental Body, court,
administrative or regulatory authority or agency, other than the
routine application of the waiting period provisions of the HSR
Act, the approval process of the Polish Anti-Monopoly Office and,
if required by applicable law, the approval process of the
Commission of the European Community to the tender offer or to the
merger, which could reasonably be expected to, directly or
indirectly, result in any of the consequences referred to in
clauses (i) through (vi) in the immediately preceding bullet point;
- any change has occurred, or UPC has become aware of any fact, that has
had or would have a Material Adverse Effect;
- there has occurred
(i) any general suspension of trading in, or limitation on prices for,
securities on the NASDAQ National Market (excluding any coordinated
trading halt triggered solely as a result of a specified decrease in
a market index),
(ii) any decline in the NASDAQ Composite Index in excess of 30% measured
from the close of business on the trading day immediately preceding
June 2, 1999,
(iii) a suspension of the currency exchange markets for the U.S. dollar
which continues in effect for three business days or for the Dutch
Guilder which continues in effect for five business days,
(iv) a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States or The Netherlands,
(v) any material limitation (whether or not mandatory) by any United
States or Dutch Governmental Body on the extension of credit by
banks or other lending institutions,
(vi) the actual declaration of war on or by the United States, The
Netherlands or Poland, or the invasion of the territory of a NATO
member state by a non-NATO member state, or
(vii) in the case of any of the foregoing existing at the time of the
commencement of the tender offer, a material acceleration or
material worsening thereof;
- any of the representations or warranties made by our company in the
merger agreement that are qualified as to materiality are untrue or
incorrect in any respect or any representations and warranties that are
not so qualified shall be untrue or incorrect in any material respect, in
each case as of the date of the merger agreement and the scheduled
expiration of the tender offer, except (i) for changes specifically
permitted by the merger agreement and (ii) that those
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representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date;
- we fail to perform any material obligation or to comply with any material
agreement or covenant under the merger agreement;
- our Board of Directors or any committee of our Board withdraws, or
modifies or amends in a manner adverse to UPC or Bison, the approval,
adoption or recommendation, of the tender offer, the merger or the merger
agreement, or approve or recommend, or announce a neutral position with
respect to, any merger, consolidation, other business combination, sale
of material assets, takeover proposal or other acquisition of shares of
common stock other than this tender offer and the merger or upon request
by UPC, fail to reaffirm its approval and recommendation of the tender
offer, the merger or the merger agreement;
- it is disclosed, or Bison learns otherwise, that beneficial ownership
(determined for the purposes of this paragraph) as set forth in Rule
13d-3 promulgated under the Securities Exchange Act) of 30% or more of
the shares of Common stock has been acquired by any person or entity
(including us or any of our subsidiaries or affiliates) or group (as
defined in Section 13(d)(3) under the Exchange Act), which person or
group is not, on the date of the merger agreement, the beneficial owner
of 30% or more of the shares of Common stock;
- the merger agreement is terminated in accordance with its terms;
- any Stockholder Agreement fails or ceases to be in full force and effect
or any party to any such agreement (other than UPC or Bison) materially
breaches or repudiates any of those agreements; which, in the reasonable
judgment of Bison, in any such case and regardless of the circumstances
giving rise to that condition, makes it inadvisable to proceed with such
acceptance for payment or payment.
"Material Adverse Effect" means a material adverse effect on the business,
properties, assets, liabilities, operations, results of operations or
condition (financial or otherwise) of our company and our subsidiaries
taken as a whole.
These conditions are for the sole benefit of UPC and Bison and may be
asserted or waived by either party, in whole or in part at any time and from
time to time in their respective reasonable discretion. The failure by UPC or
Bison at any time to exercise any of these rights shall not be deemed a waiver
of that right and each right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by UPC or Bison
concerning the events described in this section shall be final and binding upon
all parties.
THE MERGER. The merger agreement provides that Bison shall be merged with
and into our company on the later of the date the Certificate of Merger is
accepted for recording or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on the closing
date of the merger or as soon as practicable after the satisfaction or waiver of
the conditions to the merger. Following the merger, the separate corporate
existence of Bison shall cease and we shall be the surviving corporation and
shall continue our corporate existence as a wholly-owned subsidiary of UPC and
shall continue to be governed by the laws of the State of Delaware. At the
effective time of the merger, by virtue of the merger and without any action on
the part of UPC, Bison or us, each share of our common stock then issued and
outstanding (other than (i) any shares of common stock which are held by any of
our subsidiaries or in our treasury, or which are held, directly or indirectly,
by UPC or any direct or indirect subsidiary of UPC (including Bison), all of
which shall be canceled and none of which shall receive any payment with respect
thereto and (ii) shares of common stock, if any, held by stockholders who
perfect their appraisal rights under Delaware law) shall be canceled and
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converted into and represent the right to receive an amount in cash, without
interest, equal to the price paid for each share of common stock pursuant to the
tender offer. In addition, at the effective time of the merger, each issued and
outstanding share of the capital stock of Bison will be converted into and
become one fully paid and nonassessable share of common stock of the surviving
corporation. The merger agreement provides that in the event that Bison acquires
in the aggregate at least 90% of the outstanding shares of common stock, and 90%
of the outstanding shares of each outstanding class of Preference Shares, we,
along with UPC and Bison, shall take all necessary action to cause the merger to
become effective as soon as practicable after the expiration of the tender
offer, without a meeting of our stockholders, in accordance with Section 253 of
the Delaware General Corporate Law. The merger agreement provides that the
respective obligations of UPC and Bison, on the one hand, and us, on the other
hand, to effect the merger are subject to the fulfillment, of each of the
following conditions:
- the holders of a majority of the outstanding shares of common stock
approve and adopt the merger agreement and merger;
- the HSR Condition shall have been satisfied;
- the PAMC Condition shall have been satisfied, and
- the EC Condition shall have been satisfied;
- no preliminary or permanent injunction or other order shall have been
issued by any court or by any governmental or regulatory agency, body or
authority which prohibits the completion of the tender offer or the merger
and the transactions contemplated by the merger agreement and which is in
effect at the effective time of the merger; PROVIDED, HOWEVER, that, in
the case of a decree, injunction or other order, each of the parties shall
have used reasonable best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any
injunction, decree or other order that may be entered;
- no statute, rule, regulation, executive order, decree or order of any kind
shall have been enacted, entered, promulgated or enforced by any court or
governmental authority which prohibits the completion of the tender offer
or the merger or has the effect of making the purchase of the common stock
illegal;
- Bison shall have purchased shares of common stock pursuant to the tender
offer in a number sufficient to satisfy the Minimum Condition; and
- Bison shall have purchased all of the outstanding Preference Shares from
the owners thereof and shall be the sole record and beneficial owner of
all of our issued and outstanding Preference Shares; PROVIDED, HOWEVER,
that UPC and Bison will not be entitled to assert the condition described
in this clause if UPC or Bison shall have failed to purchase any
Preference Shares in breach of their obligations under the Preferred
Stockholder Agreements.
CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION. The merger agreement provides that, at the effective time
of the merger, the directors of Bison immediately before the effective time
shall be the directors of the surviving corporation and our officers immediately
before the effective time shall be the officers of the surviving corporation, in
each case until successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
surviving corporation's Certificate of Incorporation and By-Laws. In addition,
the Certificate of Incorporation (as amended to change the name of Bison to "@
Entertainment, Inc.") and By-Laws of Bison, as in effect immediately before the
effective time of the merger, shall be the Certificate of Incorporation and
By-Laws of the surviving corporation until amended.
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COMPANY STOCKHOLDERS' MEETING. Pursuant to the merger agreement, promptly
after the purchase of shares of common stock in the tender offer, if required by
the Delaware General Corporate Law in order to consummate the merger, we, acting
through our Board of Directors, shall, duly call, give notice of, convene and
hold a meeting of the holders of common stock and Preference Shares to vote on
the merger agreement and the merger. We have agreed that we will use our
reasonable best efforts to solicit from our stockholders proxies, and shall take
all other action necessary and advisable, to secure the vote of stockholders
required by applicable law and our Amended and Restated Certificate of
Incorporation or By-Laws to obtain the approval for the merger agreement. We
have agreed that, if stockholder approval of the merger is required by
applicable law or by our Amended and Restated Certificate of Incorporation or
By-Laws, as promptly as practicable, following UPC's request, we will prepare
and file a preliminary proxy statement with the Commission and will use our
reasonable best efforts to respond to the comments of the Commission, if any, in
connection with the proxy statement. We will also use our reasonable best
efforts to furnish all information regarding our company required in the
definitive proxy statement (including, without limitation, financial statements
and supporting schedules and certificates and reports of independent public
accountants). UPC, Bison and our company will cooperate in preparing the proxy
statement. Each of UPC and Bison have agreed to furnish to us the information
relating to them required by the Securities Exchange Act to be included in the
proxy statement. We have agreed that we will include in the proxy statement the
recommendation of our Board of Directors that holders of common stock and
Preference Shares approve and adopt the merger agreement and approve the merger.
UPC will cause all shares of common stock and Preference Shares owned by UPC and
its subsidiaries (including Bison) to be voted in favor of the merger agreement
and the merger.
BOARD REPRESENTATION. Once Bison has acquired a majority of the outstanding
shares of common stock, Bison shall be entitled to designate such number of
directors on our Board, rounded up to the next whole number, as will give Bison
representation on that Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors elected pursuant to this sentence)
multiplied by a fraction, the numerator of which shall be the number of shares
of common stock beneficially owned by Bison and UPC and the denominator of which
shall be the number of shares of common stock then outstanding. We and our Board
of Directors shall, at that time, take any and all action needed to cause
Bison's designees to be appointed to our Board of Directors (including using our
reasonable best efforts to cause directors to resign). We have agreed to take
all action requested by UPC which is reasonably necessary to effect any such
election. We will also increase the size of our Board of Directors, or use our
reasonable efforts to secure the resignation of directors, or both, as is
necessary to permit Bison's designees to be elected to our Board of Directors.
At the effective time, we, if so requested, will use our reasonable efforts to
cause persons designated by Bison to constitute the same percentage of each
committee of such board, each board of directors of each subsidiary and each
committee of each such board. Following the election or appointment of Bison's
designees and before the effective time of the merger, any amendment or
termination of the merger agreement or our Amended and Restated Certificate of
Incorporation or By-Laws, any termination of the merger agreement by us, any
extension by us of the time for the performance of any of the obligations or
other acts of UPC and Bison or waiver of any of our rights under the merger
agreement, and any other consent or action by the Board of Directors under the
merger agreement, will require the concurrence of a majority (which shall be at
least two) of our directors then in office who were directors on June 2, 1999
and who voted to approve the merger agreement or are designated by a majority of
our directors who were directors on June 2, 1999 and who voted to approve the
merger agreement.
INTERIM OPERATIONS. The merger agreement provides that except as otherwise
expressly contemplated thereby or as described in our Company Disclosure
Statement (which was delivered with the merger agreement) as required by any
change in applicable law, or as otherwise agreed by UPC in writing, during the
period from the date of the merger agreement to the effective time,
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- we will, and will cause each of our subsidiaries to, conduct our business
in the ordinary course of business consistent with past practice, and
- to the extent consistent with conducting our business in the ordinary
course, we will, and will cause each of our subsidiaries to, use our
reasonable best efforts to preserve intact our current business
organizations, keep available the service of our current officers and
employees, and preserve our relationships with customers, suppliers and
others having business dealings with them (but without the obligation to
pay any additional compensation to those officers, employees, customers,
suppliers and other persons), in each case with respect to our current
business, with the objective that the goodwill and ongoing businesses of
our company shall be materially unimpaired at the effective time.
During this interim period, we have agreed that we will not, and will not
permit any of our subsidiaries to, without the prior written consent of UPC
(except to the extent set forth in the Company Disclosure Statement):
- except for certain security, issue, deliver, sell, dispose of, pledge or
otherwise encumber, or authorize or propose the issuance, sale,
disposition or pledge or other encumbrance (in each instance, whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) of
(A) any additional shares of its capital stock of any class, or any
Voting Debt (as defined in the merger agreement), or any securities
or rights convertible into, exchangeable for, or evidencing the right
to subscribe for any shares of our capital stock or debt with voting
rights or any rights, warrants, options, calls, commitments or any
other agreements of any character to purchase or acquire any shares
of ours capital stock or debt with voting rights or any securities or
rights convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of ours capital stock, or
(B) any other securities in respect of, in lieu of, or in substitution
for, our common stock outstanding on June 2, 1999;
- redeem, purchase or otherwise acquire, or propose to redeem, purchase or
otherwise acquire, any of our outstanding securities, other than pursuant
to existing agreements requiring us to repurchase or acquire any shares of
our capital stock (provided that such repurchase or acquisition is in
accordance with the terms of that agreement as in effect on the date of
the merger agreement);
- split, combine, subdivide or reclassify any shares of our capital stock or
declare, set aside for payment or pay any dividend, or make any other
actual, constructive or deemed distribution in respect of any shares of
our capital stock or otherwise make any payments to stockholders in their
capacity as such (other than dividends or distributions paid by any wholly
owned subsidiary of our company, of our company to our company or another
wholly owned subsidiary of our company);
- grant any increases in the compensation of any of ours directors, officers
or employees, except for increases granted to employees other than
officers in the ordinary course of business consistent with past practice,
- pay or award or agree to pay or award any pension, retirement allowance,
or other non-equity incentive awards, or other employee benefit, not
required by any of the Employee Plans (as defined in the merger
agreement), to any current or former director, officer or employees,
except for payments or awards to current employees other than officers
that are in the ordinary course of business, consistent with past
practice,
- pay or award or agree to pay or award any stock option or equity incentive
awards,
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- except as provided for in our business plan, enter into any new or amend
any existing employment agreement with any director, officer or employee
except for employment agreements with new employees entered into in the
ordinary course of business consistent with past practice and except for
amendments in the ordinary course of business, consistent with past
practice, that do not materially increase benefits or payments,
- enter into any new, or amend any existing, severance agreement with any
current or former director, officer or employee, except for agreements or
amendments in the ordinary course of business, consistent with past
practice, that do not provide for material benefits, or
- become obligated under any new Employee Plan which was not in existence on
June 2, 1999, or amend any Employee Plan in existence on June 2, 1999,
except for any amendment in the ordinary course of business, consistent
with past practice, that does not provide for material additional
benefits;
- adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
our company or any subsidiary of our company not constituting an inactive
subsidiary;
- make any acquisition, by means of stock or asset purchase,
recapitalization, merger, consolidation or otherwise, of (i) any direct or
indirect ownership interest in or assets comprising any business
enterprise or operation or (ii) except in the ordinary course and
consistent with past practice, any other assets; PROVIDED, FURTHER, that
such acquisitions do not and would not prevent or materially delay the
completion of the merger; we will not be prevented from exploring on a
preliminary basis and conducting diligence investigations (including
having discussions with any potential acquisition target) with respect to
any potential acquisition that would require UPC's consent under the
merger agreement, to determine the desirability of a potential acquisition
and developing the basis on which to seek UPC's consent, so long as we do
not submit any formal proposal or indication of interest with respect to
such an acquisition to an acquisition target, or make any binding
commitments with respect to that potential acquisition, without obtaining
UPC's consent;
- dispose of any interest in any material business enterprise or operation
of our company,
- make any other disposition of any other direct or indirect ownership
interest in any material assets of our company (except for the replacement
or upgrade of assets, or disposition of unnecessary assets, in the
ordinary course and consistent with past practice), or
- except in the ordinary course and consistent with past practice, dispose
of any other assets of our company;
- adopt any amendments to our Amended and Restated Certificate of
Incorporation or our by-laws or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any subsidiary of our company;
- incur any indebtedness for borrowed money or guarantee any indebtedness of
any other person or entity or make any loans, advances or capital
contributions to, or investments in, any other person or entity (other
than to us or any wholly-owned subsidiary of ours);
- except as provided for in our business plan, engage in the conduct of any
business other than our existing businesses;
- enter into any agreement or exercise any discretion providing for
acceleration of payment or performance as a result of a change of control
of our company or our subsidiaries, except in connection with the tender
offer and the merger;
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- enter into any contracts, arrangements or understandings requiring in the
aggregate the purchase of equipment, materials, supplies or services in
excess of $2 million individually or $20 million in the aggregate other
than any such contracts, arrangements or understandings providing for
capital spending of our company or our subsidiaries in accordance with our
business plan;
- enter into or amend, modify, terminate or waive any right under any
agreement with any of our affiliates (other than our subsidiaries), other
than what may be done in the ordinary course of business and that (x)
would not be reasonably be expected, individually or in the aggregate, to
have a material adverse effect on the business, properties, assets,
liabilities, operations, results of operations or condition (financial or
otherwise) of our company or our subsidiaries, taken as a whole (a
"Material Adverse Effect"), or (y) would be reasonably likely to prevent
or materially delay completion of the transactions contemplated by the
merger agreement;
- settle or compromise any material litigation or material tax controversy,
with respect to our company or our subsidiaries or waive, release or
assign any material rights or claims with respect to our company or our
subsidiaries, except in the ordinary course of business consistent with
past practice;
- effect any material change in any of our methods of accounting, except as
may be required by law or generally accepted accounting principles;
- take any action, engage in any transaction or enter into any agreement
which would cause any of our representations or warranties contained in
the merger agreement that are subject to, or qualified by, a "Material
Adverse Effect", "material adverse change" or other materiality
qualification to be untrue as of the effective time of the merger, or any
such representations and warranties that are not so qualified to be untrue
in any respect which would have a Material Adverse Effect;
- take any action, including without limitation, the adoption of any
shareholder rights plan or amendments to Bison's Certificate of
Incorporation, which would, directly or indirectly, restrict or impair the
ability of UPC to vote, or otherwise to exercise the rights and receive
the benefits of a stockholder with respect to, our securities that may be
acquired or controlled by UPC or Bison or permit any shareholder to
acquire our securities on a basis not available to UPC in the event that
UPC were to acquire our securities; or
- authorize, recommend or propose (other than to UPC), or announce an
intention to do any of the activities listed above, or enter into any
contract, agreement, commitment or arrangement to do any of the activities
listed above.
NO SOLICITATION. The merger agreement provides as follows:
- Our company and our Affiliates (as defined in the merger agreement) and
each of their respective officers, directors, employees, representatives,
consultants, investment bankers, attorneys, accountants and other agents
shall immediately cease any discussions or negotiations with any other
parties that may be ongoing with respect to any Acquisition Proposal (as
defined below). Neither we nor any of our Affiliates shall, directly or
indirectly, take (and we shall not authorize or permit our or our
Affiliates, officers, directors, employees, representatives, consultants,
investment bankers, attorneys, accountants or other agents or affiliates,
to so take) any action to
(A) encourage, solicit, initiate or facilitate the making of any
Acquisition Proposal,
(B) enter into any agreement with respect to any Acquisition Proposal or
enter into any arrangement, understanding or agreement requiring us
to abandon, terminate or fail to consummate the merger or any other
transactions contemplated by the merger agreement, or
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(C) participate in any way in discussions or negotiations with, or,
furnish or disclose any information to, any person or entity (other
than UPC or Bison) in connection with, or take any other action to
facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; but we, in response to an unsolicited
Acquisition Proposal, may participate in discussions or negotiations
with or furnish information (pursuant to a confidentiality agreement
with terms not more favorable to such third party than the terms of
the Confidentiality Agreement described below) to any third party
which makes an Acquisition Proposal in the circumstances described
below:
(1) our Board of Directors believes that failing to take the actions
described above would be a breach of its fiduciary duties;
(2) a nationally recognized independent legal counsel has given our
Board of Directors written advice that failing to take the
actions described above would be a breach of the Board's
fiduciary duties;
(3) our Board of Directors reasonably determines, based on the advice
of an independent nationally recognized financial advisor, that
the Acquisition Proposal will lead to a Superior Proposal (as
defined below). We cannot withdraw or modify, or propose to
withdraw or modify, our approval and recommendation of the tender
offer and the merger agreement in a manner adverse to UPC or
Bison and we cannot approve or recommend, or propose to approve
or recommend, any Acquisition Proposal unless,
- a third party makes a Superior Proposal;
- we give UPC five business days written notice of the Superior
Proposal and our plans;
- we cooperate with UPC during the five business day period,
including informing UPC of the terms of the Superior Proposal
and the identity of the third party;
- we negotiate with UPC to amend the merger agreement; and
- at the end of the five business day period, the Acquisition
Proposal continues to constitute a Superior Proposal.
"Superior Proposal" is a proposal by a third party to acquire all of our
common stock in a tender offer, a merger or a sale of all of our assets
- On terms that a majority of our Board of Directors determines in their
good faith reasonable judgment to be more favorable to us and our
stockholders than the terms in the merger agreement where the decision of
our Board of Directors is based on the advice of an independent outside
nationally recognized financial and legal advisors;
- where financing is available (financing evidenced by "highly confident"
letters will not be considered available);
- which is not subject to a financing or due diligence condition; and
- which an independent nationally recognized financial advisor has advised
our Board of Directors is more favorable to our stockholders from a
financial point of view than the terms of the merger agreement.
"Acquisition Proposal" means
(A) any inquiry, proposal or tender offer from any person or entity
relating to any direct or indirect acquisition or purchase of a
substantial amount of the assets of our company or any of our
subsidiaries or of over 10% of any class of equity securities of our
company or any of our subsidiaries,
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(B) any tender offer or exchange tender offer that, if consummated, would
result in any person or entity beneficially owning 10% or more of any
class of equity securities of our company or any of our subsidiaries,
(C) any merger, consolidation, business combination, sale of substantially
all the assets, recapitalization, liquidation, dissolution or similar
transaction involving our company or any of our subsidiaries, or
(D) any other transaction that could reasonably be expected to impede,
interfere with, prevent or materially delay the tender offer or the
merger or that could reasonably be expected to dilute materially the
benefits to UPC of the transactions contemplated hereby.
- From and after the date of the merger agreement, on the date of receipt of
an Acquisition Proposal, we shall also advise UPC of any request for
information or of any Acquisition Proposal, or any inquiry, proposal,
discussions or negotiation with respect to any Acquisition Proposal, the
terms and conditions of such request, Acquisition Proposal, inquiry,
proposal, discussion or negotiation and we shall promptly provide to UPC
copies of any written materials received by us in connection with the
proposal, and the identity of the person or entity making any such
Acquisition Proposal or such request, inquiry or proposal or with whom any
discussion or negotiation is taking place. We shall keep UPC fully
informed of the status and details. We shall promptly provide to UPC any
non-public information concerning us provided to any other person or
entity in connection with any Acquisition Proposal which was not
previously provided to UPC.
- Immediately following the execution of the merger agreement, we shall
request each person or entity which has before June 2, 1999 executed
confidentiality agreement in connection with its consideration of
acquiring us or any portion thereof to return all confidential information
furnished before June 2, 1999 to such person or entity by or on behalf of
us.
DIRECTORS' AND OFFICERS' INDEMNIFICATION. The merger agreement provides
that, from and after the effective time of the merger, UPC and the surviving
corporation will jointly and severally indemnify, defend and hold harmless
certain individuals specified on the Company Disclosure Statement, and each of
the present and former officers and directors of ours and any of our
subsidiaries, former subsidiaries and our predecessors, and any person who is or
was serving at our request as an officer, director or employee or agent of
another person or entity against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions occurring on or before the
effective time of the merger to the fullest extent permitted under applicable
law with some qualifications. UPC and surviving corporation have agreed that all
rights to indemnification, including provisions relating to advances of expenses
incurred in defense of any action, suit or proceeding, whether civil, criminal,
administrative or investigative, existing in favor of the indemnified parties
will survive the merger and shall continue in full force and effect for a period
of not less than six years from the effective time of the merger with certain
qualifications and exceptions.
OPTIONS AND WARRANTS. Before the shares of common stock are accepted for
payment in the tender offer, both our Board of Directors (or, if appropriate,
any committee of our Board) and our company will use our reasonable best efforts
to obtain the consent of all of the holders of options to purchase common stock
(the "Company Options") granted under any stock option plans of our company. And
the consent of the holders of any outstanding warrants (including the Note
Warrants and the Preference Warrants) to purchase shares of our common stock to
provide for the cancellation, of all the outstanding Company Options and
warrants on the terms set forth in the merger agreement. Within three business
days after the date on which shares of common stock are accepted for payment
pursuant to the tender offer, each Company Option, whether or not then vested or
exercisable, and each warrant (including the Note Warrants and the Preference
Warrants), whether or not then vested or exercisable,
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shall subject to the receipt by us of any required consents from the holder of
Company Options and warrants, no longer be exercisable for the purchase of
shares of common stock but shall entitle each holder, in cancellation and
settlement therefor, to payments in cash. The cash payments will be equal to the
product of (x) the total number of shares of common stock subject to such
Company Option or warrant, as the case may be, as to which such Company Option
or warrant could have been exercisable (assuming that security was fully vested)
and (y) the excess, if any, of the price per share of common stock paid pursuant
to the tender offer over the exercise price per share of common stock subject to
such Company Option or warrant. We will make these cash payments to each holder
of an outstanding Company Option or warrant, as the case may be, within six
business days of the date on which shares of common stock are accepted for
payment pursuant to the tender offer; PROVIDED that the holder has delivered the
proper consent to us. UPC has agreed to provide, or cause to be provided, to us
on a timely basis all funds necessary to make these cash payments.
To the extent that Company Options and warrants (including the Note Warrants
and the Preference Warrants) were not canceled as mentioned above before the
effective time of the merger, our Board of Directors (or, if appropriate, any
committee of our Board) and our company shall use our best efforts to obtain the
consent of all of the holders of Company Options granted under any stock plans
to provide for the cancellation, effective at the effective time of the merger,
of all the outstanding Company Options, as follows: immediately before the
effective time of the merger, each Company Option, (whether or not then vested
or exercisable), and each warrant, (whether or not then vested or exercisable),
shall no longer be exercisable for the purchase of shares of common stock but
shall entitle each holder, in cancellation and settlement therefor, to a cash
payment to each holder of an outstanding Company Option or warrant, as the case
may be, at the effective time of the merger.
We will ensure that any then-outstanding stock appreciation rights or
limited stock appreciation rights shall be canceled as of immediately before the
effective time of the merger without any payment therefor. Our stock plans and
any other plan, program or arrangement providing for the issuance or grant of
any other interest in respect of the capital stock of our company or any
subsidiary shall terminate as of the effective time of the merger. The merger
agreement provides that we will ensure that neither we nor any of our
subsidiaries is or will be bound by any Company Options, other options, warrants
(including the Note Warrants and the Preference Warrants), rights or agreements
which would entitle any person, other than UPC or its affiliates (including
Bison), to own any capital stock of the surviving corporation or any of its
subsidiaries or to receive any payment in respect thereof. We will ensure that
after the effective time of the merger, the only rights of the holders of
Company Options to purchase shares of common stock or warrants (including the
Note Warrants and the Preference Warrants) in respect of such Company Options
and warrants will be to receive the cash payment in cancellation and settlement
thereof.
CERTAIN EMPLOYEE BENEFITS. After the effective time of the merger, UPC will
cause the surviving corporation to honor, in accordance with their terms, the
employment contracts, severance agreements and similar agreements with officers
and employees of our company and our subsidiaries disclosed to UPC in the
Company Disclosure Statement. Company performance in respect of any performance
or other programs shall be calculated without taking into account any expenses
or costs directly associated with or arising as a result of the transactions
contemplated by the merger agreement or any non-recurring charges that would not
reasonably be expected to have been incurred had the transactions contemplated
by the merger agreement not occurred. With respect to employees of our company
and our subsidiaries, UPC will assume the obligations of our company and our
subsidiaries under the Employee Plans as in effect immediately before the
effective time of the merger and will provide employee benefit plans with
aggregate employee benefits to our employees that are no less favorable than the
aggregate benefits provided to them immediately before the effective time of the
merger pursuant to the plans set forth in the Company Disclosure Statement;
PROVIDED that UPC at its sole option may provide employee benefits to our
employees which, in the aggregate, are no less
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favorable than those applicable to similarly situated employees of UPC. With
respect to any plans established by UPC, to the extent our employee becomes
eligible to participate in these plans, UPC shall grant to our employee from and
after the effective time of the merger, credit for all service with us and our
affiliates and predecessors before the effective time of the merger for
eligibility to participate, benefit accrual and vesting purposes. To the extent
UPC benefit plans provide medical or dental welfare benefits, these plans shall
waive any preexisting conditions and actively at-work exclusions with respect to
our employees and shall provide that any expenses incurred on or before the
effective time of the merger in the applicable plan year by or on behalf of any
of our employees shall be taken into account under UPC benefit plans for the
purposes of satisfying applicable deductible, co-insurance and maximum
out-of-pocket provisions for those employees.
AGREEMENT TO USE REASONABLE BEST EFFORTS. Our company and UPC have agreed
that we shall, and shall use our reasonable best efforts to cause our respective
subsidiaries, to:
- promptly make all filings and seek to obtain all authorizations
(including, without limitation, all filings required under the HSR Act,
the applicable merger regulations of the European Community and all
applicable Polish competition statutes) required under all applicable laws
with respect to the merger and the other transactions contemplated by the
merger agreement and will reasonably consult and cooperate with each other
to do so;
- not take any action which would impair the ability of the parties to
consummate the merger; and
- use our reasonable best efforts to promptly take all other actions and do,
all other things reasonably necessary, proper or appropriate to satisfy
the conditions set forth in the section entitled "Conditions of the Tender
Offer" and the conditions precedent to the obligations of UPC, Bison and
our company to effect the merger and to consummate and make effective the
transactions contemplated by the merger agreement.
REPRESENTATIONS AND WARRANTIES. In the merger agreement, we have made
customary representations and warranties to UPC and Bison with respect to, among
other things, our organization, corporate authority, capital structure,
financial statements, public filings, litigation, compliance with applicable
laws, consent and approvals, employee benefit plans, brokers' offenders' fees,
state takeover statutes, voting requirements, taxes, intellectual property, Year
2000 compliance and the absence of any material adverse change in our company
since December 31, 1998.
TERMINATION. The merger agreement may be terminated and the merger may be
abandoned at any time before the effective time of the merger, whether before or
after any approval by our stockholders:
- by mutual written consent of UPC and us; or
- by UPC or us if:
(i) Bison has not paid for the shares of common stock pursuant to the
tender offer by September 30, 1999 (the "Termination Date"); or
(ii) any court of competent jurisdiction or Governmental Body issues an
order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the acceptance for
payment of, or payment for, shares of common stock pursuant to the
tender offer or the payment for shares of common stock or the making
of any cash payment under the merger and such order, decree, ruling or
other action becomes final and nonappealable.
- by us if:
(i) UPC or Bison breaches or fails in any material respect to perform or
comply with its covenants and agreements contained in the merger
agreement or breaches its representations
54
<PAGE>
and warranties in any material respect and the breach cannot or has not
been fixed within fifteen (15) days; or
(ii) UPC or Bison fails to commence the tender offer within five (5)
business days following the date of the merger agreement, terminates
the tender offer in violation of its terms or the merger agreement; or
fails to pay for shares of common stock in accordance with the tender
offer.
- by UPC or Bison if:
(i) our Board of Directors withdraws or modifies its approval or
recommendation of the merger agreement, the tender offer or the merger
in a manner adverse to UPC or Bison;
(ii) the tender offer is terminated or expires and Bison has not purchased
any common stock because of a failure to satisfy any one or more of
the conditions set forth in the section entitled "Conditions of the
Tender Offer";
(iii) in the event of a breach by us of any representation, warranty,
covenant or agreement contained in the merger agreement leading to a
failure of certain conditions, and which is not fixed within a certain
period;
(iv) any condition is not satisfied by the expiration of the tender offer
and before that date has not been publicly disclosed, or UPC has not
learned, that beneficial ownership of 30% or more of the common stock
has been acquired by any person, entity or group (as defined in
Section 13(d)(3) under the Exchange Act); or
(v) any Stockholder Agreement is no longer in full force and effect or any
party to any such agreement (other than UPC or Bison) has materially
breached or repudiated any such agreement.
In general, a party whose failure to fulfill any obligation under the merger
agreement has been the cause of or resulted in the failure of the Effective Time
cannot terminate the merger agreement.
PAYMENT OF CERTAIN FEES AND EXPENSES UPON TERMINATION. Except in certain
cases, all costs and expenses incurred in connection with the merger agreement
and the transactions contemplated by the merger shall be paid by the party
incurring such costs and expenses.
If the merger agreement is terminated by UPC because:
A. our Board of Directors withdrew or modified its approval or
recommendation of the merger agreement, the tender offer or the merger in
a manner adverse to UPC;
B. the tender offer is terminated or expires in accordance with its terms
without Bison having purchased any common stock as a result of the
failure to satisfy the conditions to the tender offer (unless the failure
was due to the failure of UPC or Bison to perform in any material
respects their covenants or agreements in the merger agreement or their
material breach of their representations and warranties); or
C. breach by us of any of our representations, warranties, covenants or
agreements in the merger agreement (except for breaches resulting from
our willful actions, willful omissions or gross negligence)
then we will reimburse UPC in immediately available funds for the reasonable
documented expenses of UPC and Bison incurred in connection with the
transactions contemplated by the merger agreement (including, without
limitation, printing fees, filing fees and fees and expenses of its legal and
financial advisors and all fees and expenses payable to any financing sources).
This amount will not exceed $8,000,000.
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If the merger agreement is terminated by UPC because:
A. the tender offer is terminated by UPC because
- we failed to perform any material obligation or to comply with any
material covenant of ours in the merger agreement or
- our Board of Directors withdrew or modified its approval or
recommendation of the merger agreement, the tender offer or the merger
in a manner adverse to UPC or
- our Board of Directors approved, recommended or took a neutral position
with respect to the competing bid for our company;
- material breach of our representations and warranties in the merger
agreement which cannot be remedied within specified time periods
resulting from our willful action or willful omission or gross
negligence;
B. the conditions to the tender offer have not been satisfied and another
bidder for our company acquires more than 30% of our outstanding common
stock.
and within twelve (12) months of the date of the termination we enter into a
definitive agreement for a transaction relating to an Acquisition Proposal with
any person or entity other than UPC or its affiliates, we will pay to UPC an
amount equal to $32,000,000.
STOCKHOLDER AGREEMENTS
We have summarized below the material terms of the Common Stockholder
Agreements and the Preferred Stockholder Agreements. This summary does not
restate these agreements. We urge you to read the Common Stockholder Agreements
and the Preferred Stockholder Agreements because they, and not this description,
defines how your rights as holders of securities in our company will be affected
by this transaction if it is consummated. We have filed copies of the Common
Stockholder Agreements as Exhibit (c)(4) to our Solicitation/Recommendation
Statement on Schedule 14D-9 and the Preferred Stockholder Agreements as Exhibit
(c)(5) to our Solicitation/Recommendation Statement on Schedule 14D-9, which we
have incorporated by reference into this prospectus in their entirety.
COMMON STOCKHOLDER AGREEMENTS.
UPC and Bison have entered into the Common Stockholder Agreements with
Samuel Chisholm, David Chance, Robert E. Fowler III, certain affiliates of
Advent International Group and the Chase Group and Morgan Grenfell. These
individuals and entities are the record and beneficial owners of, in the
aggregate, 16,175,431 shares of common stock, warrants exercisable for 5,500,000
shares of common stock and options to purchase 2,286,000 shares of common stock
(representing approximately 48.4% of the outstanding common stock and
approximately 51.5% of the common stock on a fully-diluted basis). We have
summarized below the material terms of the Common Stockholder Agreements. This
summary does not restate these agreements. We urge you to read the Common
Stockholder Agreements because it is the fullest description of the agreement.
The form of the Common Stockholder Agreements was filed as Exhibit 2.4 of the
registration statement related to this prospectus.
AGREEMENT TO TENDER COMMON STOCK. Each Stockholder has agreed to validly
tender (and not to withdraw) to Bison in the tender offer, all of such
Stockholder's Option Securities which constitute shares of common stock. The
Common Stockholder Agreement provides that each Stockholder shall be entitled to
receive the highest price per share of common stock paid by Bison in the tender
offer for the shares of common stock tendered. The price per share of common
stock paid in the tender offer shall not be less than $19.00, payable in cash.
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OPTION TO PURCHASE COMMON STOCK; CERTAIN PURCHASE OBLIGATIONS. Each
Stockholder has granted to Bison (x) an irrevocable option to purchase all
shares of common stock constituting Option Securities owned by such Stockholder
at a purchase price per share equal to $19.00, payable in cash, and (y) an
irrevocable option to purchase the Option Securities at a price per Option
Security equal to the $19.00 LESS the exercise price of such Option Security,
payable in cash. They have agreed to do this in each case until the termination
date of the applicable Common Stockholder Agreement.
Until such termination date, if
- the tender offer is terminated, abandoned or withdrawn by UPC or Bison,
- the tender offer is consummated but the Stockholder has not validly
tendered into the tender offer such Stockholder's Option Securities
constituting shares of common stock or
- the merger agreement is terminated in accordance with its terms,
These options shall become exercisable, in whole but not in part, upon one of
these events occurring and will remain exercisable, in whole but not in part, 90
days after one of these events occur.
CERTAIN COVENANTS. Each Stockholder has agreed that beginning June 2, 1999,
until the effective time of the merger or other time described in the agreement
the Stockholder will vote (or cause to be voted) the shares of common stock (if
any) owned by such Stockholder
(i) in favor of the merger, the merger agreement the applicable Common
Stockholder Agreement and any related actions required;
(ii) against any action or agreement that would result in a breach in any
respect of any covenant, representation or warranty or any other
obligation or agreement of ours under the merger agreement; and
(iii) against the following actions:
(A) any extraordinary corporate transaction,
(B) a sale, lease or transfer of a material amount of assets of our
company or our subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of our company or our subsidiaries;
(C) (1) any change in a majority of the persons who constitute our Board
of Directors;
(2) any change in the present capitalization of our company or any
amendment of our Amended and Restated Certificate of
Incorporation or By-laws;
(3) any other material change in our corporate structure or
business; or
(4) any other action involving our company or our subsidiaries which
is intended, or could affect the merger and the transactions
contemplated by the applicable Common Stockholder Agreement and
the merger agreement.
Each Stockholder has also agreed not to enter into any agreement or
understanding with any person or entity the effect of which would be to violate
the provisions and agreements contained in this paragraph.
Each Stockholder has also agreed as follows:
- Beginning on June 2, 1999, and ending when the option is no longer
exercisable, a Stockholder shall not do anything that reasonably may be
expected to lead to, an Acquisition Proposal, or enter into or maintain or
continue discussions or negotiate with any person or entity to obtain any
Acquisition Proposal,
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- Beginning on June 2, 1999, and ending when the option is no longer
exercisable, a Stockholder will not (i) transfer, or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding
with respect to or consent to any disposition of, any or all of such
Stockholder's Option Securities or any interest in those securities,
except in certain cases; (ii) grant any proxies or powers of attorney,
deposit any Option Securities into a voting trust or enter into a voting
agreement with respect to any Option Securities in those securities,
except in certain cases; or (iii) take any action that would make any
representation or warranty of that Stockholder untrue or incorrect or have
the effect of preventing such Stockholder from performing the
Stockholder's obligations under the applicable Common Stockholder
Agreement.
- A Stockholder irrevocably waives any rights of appraisal or rights to
dissent from the merger that it may have.
- A Stockholder must not request that we register the transfer of any
Certificate or uncertificated interest representing any of such
Stockholder's Option Securities, unless such transfer is made in
compliance with the applicable Common Stockholder Agreement.
REPRESENTATIONS AND WARRANTIES. Each Stockholder has made customary
representations and warranties to UPC with respect to, among other things,
ownership of, and capacity with respect to the Option Securities subject to the
Common Stockholder Agreement, legal capacity to enter into the Common
Stockholder Agreement, absence of conflicts or of violations of laws and absence
of liens in respect of the securities subject to such agreements.
TERMINATION. The obligations of the Stockholder under these agreements end
on the fifth day after the earlier of (i) the expiration of the 90 day exercise
period, (ii) at the Stockholder's option, upon the valid termination of the
merger agreement by us or (iii) 180 days after the date of the Common
Stockholder Agreement.
PREFERRED STOCKHOLDER AGREEMENTS
UPC and Bison have entered into the Preferred Stockholder Agreements with
members of the Chase Group and Morgan Grenfell who are the holders of all of the
outstanding Preference Shares. We have summarized below the material terms of
the Preference Stockholder Agreements. This summary does not restate these
agreements. We urge you to read the Preference Stockholder Agreements because it
is the fullest description of the agreement. The form of the Preference
Stockholder Agreements was filed as Exhibit 2.5 of the registration statement
related to this prospectus.
OPTION TO PURCHASE PREFERENCE SHARES; CERTAIN PURCHASE OBLIGATIONS. Each
Preferred Stockholder has granted to Bison (x) an irrevocable option to purchase
all Preference Shares owned by that Preferred Stockholder at a purchase price
per Preference Share equal to the liquidation preference of such Preference
Share PLUS all accrued and unpaid dividends thereon on the date of purchase,
payable in cash, until the termination date of the applicable Preferred
Stockholder Agreement.
Until that time, if (i) the tender offer is terminated, abandoned or
withdrawn by UPC or Bison, (ii) the tender offer is consummated but Bison has
not accepted for payment and paid for shares of common stock, or (iii) the
merger agreement is terminated, the option will, in any of these cases, become
exercisable, in whole but not in part, upon the first to occur of any such event
and remain exercisable until 90 days after the date of the occurrence of such
event, but shall not be exercisable unless certain conditions are present.
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CERTAIN COVENANTS. Each Stockholder has agreed that beginning June 2, 1999,
until effective time of the merger or other time described in the agreement, at
any meeting of the holders of Preference Shares, a Preferred Stockholder will
vote (or cause to be voted) the Preference Shares owned by such Preferred
Stockholder,
(i) in favor of the merger, the merger agreement and the applicable
Preferred Stockholder Agreement and any related actions required;
(ii) against any action or agreement that would result in a breach in
any respect of any covenant, representation or warranty or any other
obligation or agreement of our company under the merger agreement; and
(iii) against the following actions:
(A) any extraordinary corporate transaction,
(B) a sale, lease or transfer of a material amount of assets of our
company or our subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of our company or our subsidiaries;
(C) (1) any change in a majority of the persons who constitute our
Board of Directors;
(2) any change in the present capitalization of our company or
any amendment of our Amended and Restated Certificate of
Incorporation or By-Laws;
(3) any other material change in our corporate structure or
business; or
(4) any other action involving our company or our subsidiaries
which is intended, or could materially adversely affect the merger
and the transactions contemplated by the applicable Preferred
Stockholder Agreement and the merger agreement. Each Preferred
Stockholder has also agreed not to enter into any agreement or
understanding with any person or entity the effect of which would be
to violate the provisions and agreements contained in this paragraph.
Each Preferred Stockholder has also agreed as follows:
- Beginning on June 2, 1999 when the option is no longer exercisable, a
Preferred Stockholder will do anything that reasonably may be expected to
lead to, an Acquisition Proposal, or enter into or maintain or continue
discussions or negotiate with any person or entity to obtain any
Acquisition Proposal.
- Beginning on June 2, 1999, and ending when the option is no longer
exercisable, a Preferred Stockholder shall not (i), transfer, or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the tender offer for transfer,
or other disposition of, any or all of such Stockholder's Preference
Shares or any interest in those securities except in certain cases (ii)
grant any proxies or powers of attorney, deposit any Preference Shares
into a voting trust or enter into a voting agreement with respect to any
Preference Shares; or (iii) take any action that would make any
representation or warranty of such Preferred Stockholder untrue or
incorrect or have the effect of preventing such Preferred Stockholder from
performing such Preferred Stockholder's obligations under the applicable
Preferred Stockholder Agreement.
- Such Preferred Stockholder irrevocably waives any rights of appraisal or
rights to dissent from the merger that such Preferred Stockholder may
have.
- Such Preferred Stockholder shall not request that we register the transfer
of any Certificate or uncertificated interest representing any of the
Stockholder's Preference Shares, unless such transfer is made in
compliance with the applicable Preferred Stockholder Agreement.
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REPRESENTATIONS AND WARRANTIES. Each Preferred Stockholder has made
customary representations and warranties to UPC with respect to, among other
things, ownership of, and capacity with respect to the Preference Shares subject
to the Preferred Stockholder Agreements, legal capacity to enter into the
Preferred Stockholder Agreements, absence of conflicts or of violations of laws
and absence of liens in respect of the shares subject to such agreements.
TERMINATION. The obligations of the Preferred Stockholder under these
agreements end on the fifth day after the earlier of (i) the expiration of the
90 day exercise period, (ii) at the Stockholder's option, upon the valid
termination of the merger agreement by us under certain conditions or (iii) 180
days after the date of the Preferred Stockholder Agreements.
CONFIDENTIALITY AGREEMENT
We have summarized below the material terms of the Confidentiality
Agreement. This summary does not restate this agreement. We urge you to read the
Confidentiality Agreement because it, and not this description, defines our
confidentiality arrangement with UPC. We have filed a copy of the
Confidentiality Agreement as Exhibit 2.6 of the registration statement related
to this prospectus.
UPC has agreed, among other things,
(i) to keep confidential, except as required by law or regulation or rule of
certain stock exchanges on all non-public, confidential or proprietary
information furnished to UPC by us, together with analyses,
compilations, forecasts, studies or other documents prepared by UPC
which contain such information ("the Information") and to disclose any
of this information only to UPC's representatives on a need to know
basis to evaluate the transaction, and
(ii) to indemnify and hold us harmless from and against all liabilities,
claims, losses, costs, damages and reasonable in any way caused by, or
arising directly or indirectly from, or in consequence of any breach of
the Confidentiality Agreement by UPC or any of its Representatives.
EXECUTIVE OFFICERS UPC's Schedule 14D-1 indicates that UPC currently intends
to cause our operations to continue to be run and managed by, amongst others,
our existing executive officers. UPC has also indicated that it will continue to
evaluate all aspects of the business, operations, capitalization and management
of our company during the pendency of the tender offer and after the completion
of the tender offer and the merger and will take any further actions as it deems
appropriate. UPC has also indicated that it intends to seek additional
information about us during this period and that it intends to review such
information as part of a comprehensive review of our business, operations,
capitalization and management.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
involve risks and uncertainties. Words such as "believe," "expect," "intend,"
"plan," "anticipate," "likely," "will" and similar expressions are intended to
identify such forward-looking statements. Our actual results may differ
significantly from the results discussed in these forward-looking statements.
The risks, uncertainties and other factors that might cause such differences
include, but are not limited to:
- general economic conditions in Poland and in the pay television business
in Poland;
- changes in regulations under which we operate;
- actions by competitors;
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- uncertainties inherent in new business strategies, including our satellite
television business, new product launches and development plans, which we
have not used before;
- rapid technology changes;
- changes in the acquisition, development and/or financing of
telecommunications networks and services;
- the development and provision of programming;
- the continued strength of competitors in the multi-channel video
programming distribution industry and satellite services industry and the
growth of satellite delivered programming;
- future financial performance, including availability, terms and deployment
of capital;
- the ability of vendors to deliver required equipment, software and
services on schedule at the budgeted cost;
- our ability to attract qualified personnel;
- changes in, or failure or inability to comply with government regulations;
- changes in the nature of strategic relationships with third parties;
- competitor responses to our products and services;
- the overall market acceptance of those products and services, including
acceptance of the pricing of those products and services;
- possible interference by satellites in adjacent orbital positions with the
satellites currently being used for our satellite television business; and
- acquisition opportunities.
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[LOGO] [LOGO]
@ ENTERTAINMENT, INC.
1,027,200 NOTE WARRANTS
1,813,665 SHARES OF COMMON STOCK
45,000 SERIES A 12% CUMULATIVE PREFERENCE SHARES
5,000 SERIES B 12% CUMULATIVE PREFERENCE SHARES
45,000 SERIES A PREFERENCE WARRANTS
5,000 SERIES B PREFERENCE WARRANTS
---------------------
PROSPECTUS
---------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON
ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN OFFER TO
SELL ONLY THE SECURITIES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND IN
JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
---------------------
JUNE , 1999
---------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses (other than underwriting discounts
and commissions) of the issuance and distribution of the securities being
registered to be paid by our company.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 35,458
Printing and engraving expenses................................... $ 50,000
Accounting fees and expenses...................................... $ 15,000
Blue Sky fees and expenses........................................ $ 1,500
Listing fees...................................................... $ 17,500
Counsel Fees...................................................... $ 25,000
Miscellaneous..................................................... $ 5,000
Total............................................................. $ 149,458
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation to
indemnify its directors, officers, employees and other agents in terms
sufficiently broad to permit indemnification (including reimbursement for
expenses) under certain circumstances for liabilities arising under the
Securities Act of 1933.
@ Entertainment's Bylaws provide for the indemnification of directors and
executive officers to the fullest extent not prohibited by the Delaware General
Corporation Law and authorize the indemnification by @ Entertainment of other
officers, employees and other agents as set forth in the Delaware General
Corporation Law. @ Entertainment has entered into, or will enter into,
indemnification agreements with its directors and executive officers, in
addition to the indemnification provided for in @ Entertainment's Bylaws. The
Purchase Agreement filed as Exhibit 1.1 and the Registration Rights Agreements
filed as Exhibit 4.5 to this registration statement provides for indemnification
by Merrill Lynch and Deutsche Bank of @ Entertainment and its officers and
directors for certain liabilities arising under the Securities Act of 1933 or
otherwise. The Purchase Agreements filed as Exhibits 1.2 and 1.3 and the
Registration Rights Agreements filed as Exhibit 4.4 and 4.6 to this registration
statement provides for indemnification by Morgan Grenfell Private Equity Limited
on behalf of Morgan Grenfell Development Capital Syndication Limited and by
Arnold Chase, Cheryl Chase and Rhoda Chase and The Darland Trust, as applicable
of @ Entertainment and its officers and directors for certain liabilities
arising under the Securities Act of 1933 or otherwise.
The merger agreement provides that, from and after the effective time of the
merger, UPC and the surviving corporation will jointly and severally indemnify,
defend and hold harmless certain individuals specified on the Company Disclosure
Statement, and each of the present and former officers and directors of ours and
any of our subsidiaries, former subsidiaries and our predecessors, and any
person who is or was serving at our request as an officer, director or employee
or agent of another person or entity (collectively, the "Indemnified
Parties"),against all losses, expenses, claims, damages or liabilities arising
out of actions or omissions occurring on or before the effective time of the
merger (including the transactions contemplated by the merger agreement) to the
fullest extent permitted under applicable law (and shall also, subject to
certain limitations, advance expenses as incurred to the fullest extent
permitted under applicable law; PROVIDED that, the person to whom expenses are
advanced provides an undertaking reasonably satisfactory to us to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification); PROVIDED, HOWEVER, that such indemnification shall be provided
only to the extent any directors' and officers' liability insurance policy of
our company or our subsidiaries does not provide coverage and actual payment
thereunder with
II-1
<PAGE>
respect to the matters that would otherwise be subject to indemnification
hereunder (it being understood that UPC or the surviving corporation shall,
subject to certain limitations, advance expenses on a current basis as provided
in this paragraph notwithstanding such insurance coverage to the extent that
payments thereunder have not yet been made, in which case UPC or the surviving
corporation, as the case may be, shall be entitled to repayment of such advances
from the proceeds of such insurance coverage).UPC and surviving corporation have
agreed that all rights to indemnification, including provisions relating to
advances of expenses incurred in defense of any action, suit or proceeding,
whether civil, criminal, administrative or investigative (each, a "Claim"),
existing in favor of the Indemnified Parties as provided in our Amended and
Restated Certificate of Incorporation or By-Laws or pursuant to other
agreements, or certificates of incorporation or by-laws or other similar
documents of any of our subsidiaries, as in effect as of the date of the merger
agreement, with respect to matters occurring through the effective time of the
merger, shall survive the merger and shall continue in full force and effect for
a period of not less than six years from the effective time of the merger;
PROVIDED, HOWEVER, that all rights to indemnification in respect of any Claim
asserted, made or commenced within such period shall continue until the final
disposition of such Claim. The merger agreement also provides that the surviving
corporation shall maintain in effect for not less than six years after the
effective time of the merger the current policies of directors' and officers'
liability insurance maintained by us and our subsidiaries with respect to
matters occurring before the effective time of the merger; PROVIDED, HOWEVER,
that in no event shall UPC be required to expend in any one year an amount in
excess of 150% of the annual premiums currently paid by us for such insurance;
PROVIDED, FURTHER, HOWEVER, that the surviving corporation may substitute
therefor policies of at least the same coverage containing terms and conditions
which are no less advantageous to the Indemnified Parties with an insurance
company or companies, the claims paying ability of which is substantially
equivalent to the claims paying ability of the insurance company or companies
providing such insurance coverage for directors and officers of UPC.
Officers and directors of @ Entertainment will be covered by insurance which
(with certain exceptions and within certain limitations) indemnifies them
against losses and liabilities arising from any alleged "wrongful act" including
any alleged error or misstatement or misleading statement, or wrongful act or
omission or neglect or breach of duty.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of exhibits filed as part of this
registration statement, which are incorporated herein.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 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 reference to Exhibit 1.1 of @Entertainment's
Registration Statement on Form S-4, Registration No. 333-72361.)
1.2 Form of Purchase Agreement dated January 22, 1999, between @Entertainment and Arnold Chase, Cheryl
Chase, and Rhoda Chase relating to 5000 shares of Series B 12% Cumulative Preference Stock and 5,000
warrants to purchase an aggregate of 4,950,000 shares of Common Stock.
1.3 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.
2.1 Contribution Agreement among Polish Investment Holdings, LP ("PIHLP"), ECO Holdings Limited Partnership
("ECO"), Roger M. Freedman, Steele LLC, the AESOP Fund LP, the Cheryl Anne Chase Marital Trust (the
"CACMT") and @Entertainment, dated as of June 22, 1997. (Incorporated by reference to Exhibit 2.1 of
@Entertainment's Registration Statement on Form S-1, Registration No. 333-29869)
2.2 Purchase Agreement among ECO, @Entertainment, and L. Ciesla International, Inc., dated as of June 22,
1997. (Incorporated by reference to Exhibit 2.2 of @Entertainment's Registration Statement on Form S-1,
Registration No. 333-29869)
2.3 Merger Agreement and Plan of Merger among @Entertainment, Inc., United-Pan Europe Communications N.V.,
and Bison Acquisition Corp., dated as of June 2, 1999 (Incorporated by reference to Exhibit (c)(1) of
@Entertainment, Inc.'s Schedule 14D-9)
2.4 Form of Common Stockholder Agreement, dated as of June 2, 1999, between United-Pan Europe Communications
N.V., Bison Acquisition Corp. and certain common stockholders of @Entertainment, Inc.
2.5 Form of Preferred Stockholder Agreement, dated as of June 2, 1999, among United-Pan Europe
Communications N.V., Bison Acquisition Corp. and each of the holders of Preference Shares of
@Entertainment, Inc.
2.6 Confidentiality Agreement between @Entertainment, Inc. and United Pan-Europe Communications N.V., dated
April 12, 1999 (Incorporated by reference to Exhibit (c)(2) of @Entertainment, Inc.'s Schedule 14D-9)
4.1 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.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.2 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 of @Entertainment, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1998.)
4.3 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 5,000,000 shares of
common stock.
4.4 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 reference to Exhibit
4.11 of @Entertainment, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.)
4.5 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 reference to Exhibit 4.13 of @Entertainment, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1998.)
4.6 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.
4.7 Certificate of Designations, Preferences and Rights of Series A 12% Cumulative Preference Shares and
Series B 12% Cumulative Preference Shares. (Incorporated by reference to Exhibit 4.15 of @Entertainment,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.)
4.8 Form of Note Warrant (Contained in Warrant Agreement filed as Exhibit 4.2).
4.9 Form of Preference Warrant (Contained in Preference Warrant Agreement filed as Exhibit 4.3).
5.1 Opinion of Baker & McKenzie with respect to legality of the securities being registered.
12* Statement re computation of ratios.
23.1 Consent of KPMG Polska sp. z.o.o. with respect to @Entertainment.
23.2 Consent of Baker & McKenzie with respect to the legality of the securities being registered (contained
in Exhibit 5).
24 Power of Attorney (included on the signature pages in Part II of this registration statement).
27 Financial Data Schedule.
</TABLE>
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-4
<PAGE>
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
PROVIDED, HOWEVER, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference into the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, there unto duly authorized, in the City of London, England on the
30th day of June, 1999.
@ ENTERTAINMENT, INC.
BY: /s/ ROBERT E. FOWLER, III
-----------------------------------------
Robert E. Fowler, III
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated. Each person whose signature to this
registration statement appears below hereby appoints Robert E. Fowler, III as
his attorney-in-fact to sign on his behalf, individually and in the capacities
stated below, and to file any and all amendments and post-effective amendments
to this registration statement, which amendment or amendments may make such
changes and additions as such attorney-in-fact may deem necessary or
appropriate.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/S/ ROBERT E. FOWLER, III Chief Executive Officer and
- ------------------------------ Director (Principal June 30, 1999
Robert E. Fowler, III Executive Officer)
Chief Financial Officer
/S/ DONALD MILLER-JONES (Principal Financial and
- ------------------------------ Principal Accounting June 30, 1999
Donald Miller-Jones Officer)
/S/ DAVID T. CHASE Director
- ------------------------------ June 30, 1999
David T. Chase
/S/ ARNOLD L. CHASE Director
- ------------------------------ June 30, 1999
Arnold L. Chase
/S/ DAVID CHANCE Director
- ------------------------------ June 30, 1999
David Chance
Director
- ------------------------------
Samuel Chisholm
/S/ AGNIESZKA HOLLAND Director
- ------------------------------ June 30, 1999
Agnieszka Holland
/S/ SCOTT A. LANPHERE Director
- ------------------------------ June 30, 1999
Scott A. Lanphere
/S/ JERZY Z. SWIRSKI Director
- ------------------------------ June 30, 1999
Jerzy Z. Swirski
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 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 reference to Exhibit 1.1 of @Entertainment's
Registration Statement on Form S-4, Registration No. 333-72361.)
1.2 Form of Purchase Agreement dated January 22, 1999, between @Entertainment and Arnold Chase, Cheryl
Chase, and Rhoda Chase relating to 5000 shares of Series B 12% Cumulative Preference Stock and 5,000
warrants to purchase an aggregate of 4,950,000 shares of Common Stock.
1.3 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.
2.1 Contribution Agreement among Polish Investment Holdings, LP ("PIHLP"), ECO Holdings Limited Partnership
("ECO"), Roger M. Freedman, Steele LLC, the AESOP Fund LP, the Cheryl Anne Chase Marital Trust (the
"CACMT") and @Entertainment, dated as of June 22, 1997. (Incorporated by reference to Exhibit 2.1 of
@Entertainment's Registration Statement on Form S-1, Registration No. 333-29869)
2.2 Purchase Agreement among ECO, @Entertainment, and L. Ciesla International, Inc., dated as of June 22,
1997. (Incorporated by reference to Exhibit 2.2 of @Entertainment's Registration Statement on Form S-1,
Registration No. 333-29869)
2.3 Merger Agreement and Plan of Merger among @Entertainment, Inc., United-Pan Europe Communications N.V.,
and Bison Acquisition Corp., dated as of June 2, 1999 (Incorporated by reference to Exhibit (c)(1) of
@Entertainment, Inc.'s Schedule 14D-9)
2.4 Form of Common Stockholder Agreement, dated as of June 2, 1999, between United-Pan Europe Communications
N.V., Bison Acquisition Corp. and certain common stockholders of @Entertainment, Inc.
2.5 Form of Preferred Stockholder Agreement, dated as of June 2, 1999, among United-Pan Europe
Communications N.V., Bison Acquisition Corp. and each of the holders of Preference Shares of
@Entertainment, Inc.
2.6 Confidentiality Agreement between @Entertainment, Inc. and United Pan-Europe Communications N.V., dated
April 12, 1999 (Incorporated by reference to Exhibit (c)(2) of @Entertainment, Inc.'s Schedule 14D-9)
4.1 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.
4.2 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 of @Entertainment, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1998.)
4.3 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 5,000,000 shares of
common stock.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.4 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 reference to Exhibit
4.11 of @Entertainment, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.)
4.5 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 reference to Exhibit 4.13 of @Entertainment, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1998.)
4.6 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.
4.7 Certificate of Designations, Preferences and Rights of Series A 12% Cumulative Preference Shares and
Series B 12% Cumulative Preference Shares. (Incorporated by reference to Exhibit 4.15 of @Entertainment,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.)
4.8 Form of Note Warrant (Contained in Warrant Agreement filed as Exhibit 4.2).
4.9 Form of Preference Warrant (Contained in Preference Warrant Agreement filed as Exhibit 4.3).
5.1 Opinion of Baker & McKenzie with respect to legality of the securities being registered.
12* Statement re computation of ratios.
23.1 Consent of KPMG Polska sp. z.o.o. with respect to @Entertainment.
23.2 Consent of Baker & McKenzie with respect to the legality of the securities being registered (contained
in Exhibit 5).
24 Power of Attorney (included on the signature pages in Part II of this registration statement).
27 Financial Data Schedule.
</TABLE>
* To be filed by amendment.
<PAGE>
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
-2-
<PAGE>
(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
-3-
<PAGE>
(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
-4-
<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.
-5-
<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
-6-
<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.
-7-
<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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<PAGE>
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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<PAGE>
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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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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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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<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 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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<PAGE>
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.
-32-
<PAGE>
SCHEDULE B
@ENTERTAINMENT, INC.
[Separately Attached]
-33-
<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.
-34-
<PAGE>
Exhibit A
FORM OF CERTIFICATE OF DESIGNATION
[Separately Attached]
-35-
<PAGE>
Exhibit B
FORM OF PREFERENCE WARRANT AGREEMENT
[Separately Attached]
-36-
<PAGE>
Exhibit C
FORM OF PREFERENCE REGISTRATION RIGHTS AGREEMENT
[Separately Attached]
-37-
<PAGE>
Exhibit D
FORM OF PREFERENCE WARRANT REGISTRATION RIGHTS AGREEMENT
[Separately Attached]
-38-
<PAGE>
==============================================================================
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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<PAGE>
(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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<PAGE>
(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
-4-
<PAGE>
@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
-6-
<PAGE>
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
-7-
<PAGE>
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.
-8-
<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 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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
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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<PAGE>
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
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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
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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
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<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
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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.
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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.
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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.
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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 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
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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
====== ======
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SCHEDULE B
@ENTERTAINMENT, INC.
[Separately attached]
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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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<PAGE>
Exhibit D
FORM OF PREFERENCE WARRANT REGISTRATION RIGHTS AGREEMENT
[Separately Attached]
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<PAGE>
Exhibit E
FORM OF UNITED STATES LAW OPINION OF COMPANY'S
COUNSEL TO BE DELIVERED PURSUANT TO
SECTION 5(a)(i)
[Separately Attached]
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<PAGE>
Exhibit F
FORM OF POLISH LAW OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)(i)
[Separately Attached]
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<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]
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<PAGE>
STOCKHOLDERS AGREEMENT
AGREEMENT dated as of June 2, 1999, among UNITED PAN-EUROPE
COMMUNICATIONS NV, a corporation organized under the laws of The Netherlands
("Parent"), BISON ACQUISITION CORP., a Delaware corporation and an indirect
wholly owned subsidiary of Parent ("Sub"), and the other parties signatory
hereto (individually and collectively, the "Stockholder").
W I T N E S S E T H :
WHEREAS, prior to entering into this Agreement, Parent, Sub
and Eagle, Inc., a Delaware corporation (the "Company"), entered into an
Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement),
pursuant to which Sub will be merged with and into the Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company
desire that as soon as practicable (and not later than five business days) after
the execution and delivery of the Merger Agreement, Sub commence a cash tender
offer to purchase all outstanding shares of Company Common Stock (as defined in
Section 1) including all of the Shares (as defined in Section 2); and
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Company Common Stock" shall mean at any time the
common stock, $.01 par value, of the Company.
(b) "Company Securities" shall mean the Existing Options and
the Existing Company Warrants, together with any Options or Company Warrants
acquired by the Stockholder after the date hereof and prior to the termination
of this Agreement, whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means of
purchase, dividend, distribution or otherwise.
(c) "Existing Company Warrants" shall mean the Company
Warrants set forth opposite the Stockholder's name on Schedule I hereto.
(d) "Existing Options" shall mean the Options set forth
opposite the Stockholder's name on Schedule I hereto.
<PAGE>
(e) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
2. TENDER OF SHARES.
(a) Stockholder hereby agrees to validly tender (and not to
withdraw) pursuant to and in accordance with the terms of the Offer, in a timely
manner for acceptance by Sub in the Offer, the number of shares of Company
Common Stock (if any) set forth opposite the Stockholder's name on Schedule I
hereto (the "Existing Shares" and, together with any shares of Company Common
Stock acquired by the Stockholder after the date hereof and prior to the
termination of this Agreement whether upon the exercise of options, warrants or
rights, the conversion or exchange of convertible or exchangeable securities, or
by means of purchase, dividend, distribution or otherwise, the "Shares"), owned
by it. The Stockholder hereby acknowledges and agrees that Parent's obligation
to accept for payment and pay for Company Common Stock in the Offer, including
the Shares, is subject to the terms and conditions of the Offer. The Stockholder
shall be entitled to receive the highest price paid by Sub pursuant to the
Offer. The Offer Price shall not be less than $19.00, payable in cash.
(b) The Stockholder hereby agrees to permit Parent and Sub to
publish and disclose in the Offer Documents and, if approval of the stockholders
of the Company is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the Securities and Exchange Commission)
its identity and ownership of Company Common Stock and the nature of its
commitments, arrangements and understandings under this Agreement.
3. PROVISIONS CONCERNING COMPANY COMMON STOCK. The Stockholder
hereby agrees that during the period commencing on the date hereof and
continuing until the first to occur of (i) the Effective Time, (ii) the last
date the Option is exercisable pursuant to Section 4 and (iii) the termination
date set forth in Section 9, at any meeting of the holders of Company Common
Stock, however called, or in connection with any written consent of the holders
of Company Common Stock, the Stockholder shall vote (or cause to be voted) the
Shares (if any) owned by the Stockholder whether issued, heretofore owned or
hereafter acquired, (i) in favor of the Merger, the execution and delivery by
the Company of the Merger Agreement and the approval of the terms thereof and
each of the other actions contemplated by the Merger Agreement and this
Agreement and any actions required in furtherance thereof and hereof; (ii)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement; and (iii) except as otherwise agreed to
in writing in advance by Parent, against the following actions (other than the
Merger and the transactions contemplated by the Merger Agreement): (A) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or its subsidiaries; (B) a sale,
lease or transfer of a material amount of assets of the Company or its
subsidiaries, or a reorganization, recapitalization, dissolution or liquidation
of the Company or its subsidiaries; (C) (1) any change in a majority of the
persons who constitute the board of directors of the Company; (2) any change in
the present capitalization of the Company or any amendment of the Company's
Certificate of Incorporation or By-laws; (3) any other material change in the
Company's corporate structure or business; or (4) any other action involving the
Company or its subsidiaries which is intended, or
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<PAGE>
could reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the Merger and the transactions contemplated by this
Agreement and the Merger Agreement. The Stockholder shall not enter into any
agreement or understanding with any Person or entity the effect of which would
be to violate the provisions and agreements contained in this Section 3.
4. STOCK OPTION; CERTAIN PURCHASE OBLIGATIONS.
(a) The Stockholder hereby grants to Sub (x) an irrevocable
option (the "Stock Option") to purchase the Shares at a purchase price per Share
(the "Purchase Price") equal to $19.00, payable in cash, and (y) an irrevocable
option (the "Securities Option" and, together with the Stock Option, the
"Option") to purchase the Company Securities at a price per Company Security
equal to the Purchase Price LESS the exercise price of such Company Security,
payable in cash, in each case until the termination date set forth in Section 9.
Until the termination date set forth in Section 9, if (i) the Offer is
terminated, abandoned or withdrawn by Parent or Sub (whether due to the failure
of any of the conditions thereto or otherwise), (ii) the Offer is consummated
but the Shares have not been validly tendered into the Offer or (iii) the Merger
Agreement is terminated in accordance with its terms, the Option shall, in any
such case, become exercisable, in whole but not in part, upon the first to occur
of any such event and remain exercisable, in whole but not in part, until the
date which is 90 days after the date of the occurrence of such event, but shall
not be exercisable in each case unless: (x) all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), required for the purchase of Shares and/or Company Securities, as the
case may be, upon the exercise of the Option shall have expired or been waived
and all other necessary governmental consents required for Sub to purchase
Shares and/or Company Securities, as the case may be, upon the exercise of the
Option, including, but not limited to, all necessary approvals of the Polish
Anti-Monopoly Commission, and (y) there shall not then be in effect any
preliminary or final injunction or other order issued by any court or
governmental, administrative or regulatory agency or authority prohibiting the
exercise of the Option pursuant to this Agreement. Provided that this Agreement
has not been terminated, in the event that the Option is not exercisable because
the circumstances described in clauses (x) and (y) have not occurred, then the
Option shall be exercisable for the 90 day period commencing on the date that
the circumstances set forth in clauses (x) and (y) have occurred. In the event
that Parent wishes to exercise the Option, Parent shall send a written notice to
the Stockholder identifying the place for the closing of such purchase at least
three business days prior to such closing.
(b) In the event that Sub shall have purchased Shares
purchased in the Offer in an amount necessary to satisfy the Minimum Condition
in accordance with the terms of the Merger Agreement, Sub shall thereafter
purchase all of the Company Securities then held by the Stockholder no later
than the date which is the third business day after the date of such
consummation, at a purchase price per Company Security equal to the Offer Price
for the Shares underlying such Company Security less the exercise price of such
Company Security.
5. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Parent as follows:
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<PAGE>
(a) OWNERSHIP OF SHARES. The Stockholder is the record and
beneficial owner of the number of Shares and Company Securities set forth
opposite such Stockholder's name on Schedule I hereto. On the date hereof, the
Existing Shares, Existing Options and Existing Company Warrants set forth
opposite such Stockholder's name on Schedule I hereto constitute all of the
Shares and Company Securities owned beneficially or of record by such
Stockholder. The Stockholder has sole voting power and sole power to issue
instructions with respect to the matters set forth in Sections 2, 3 and 4
hereof, sole power of disposition, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of the matters set forth
in this Agreement, in each case with respect to all of the Existing Shares,
Existing Options and Existing Company Warrants set forth opposite Stockholder's
name on Schedule I hereto, with no limitations, qualifications or restrictions
on such rights, subject to applicable securities laws and the terms of this
Agreement.
(b) POWER; BINDING AGREEMENT. The Stockholder has the legal
capacity, power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by such Stockholder will not violate any other agreement to which
the Stockholder is a party including, without limitation, any voting agreement,
stockholders agreement or voting trust. This Agreement has been duly and validly
executed and delivered by the Stockholder and constitutes a valid and binding
agreement of such Stockholder, enforceable against such Stockholder in
accordance with its terms. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which the Stockholder is trustee
whose consent is required for the execution and delivery of this Agreement or
the consummation by the Stockholder of the transactions contemplated hereby.
(c) NO CONFLICTS. Except for (i) filings and approvals under
the HSR Act or any other applicable Laws related to competition, antitrust,
monopoly or similar matters, (A) no filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by such Stockholder and the
performance by such Stockholder of its obligations hereunder and (B) none of the
execution and delivery of this Agreement by such Stockholder, the performance by
such Stockholder of its obligations hereunder or compliance by such Stockholder
with any of the provisions hereof shall (1) conflict with or result in any
breach of any applicable organizational documents applicable to such
Stockholder, or (2) violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to such Stockholder or any of such
Stockholder's properties or assets.
(d) NO FINDER'S FEES. Except as disclosed in the Merger
Agreement, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of such Stockholder.
(e) NO ENCUMBRANCES. The Stockholder's Shares and Company
Securities and the certificates representing such Shares and Company Securities
are now, and at all times during the term hereof will be, held by such
Stockholder, or by a nominee or custodian for the benefit of such Stockholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising hereunder. The
transfer by the Stockholder of its
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<PAGE>
Shares and Company Securities to Sub in the Offer or hereunder shall pass to and
unconditionally vest in Sub good and valid title to all such Shares and Company
Securities, free and clear of all claims, liens, restrictions, security
interests, pledges, limitations and encumbrances whatsoever.
(f) RELIANCE BY PARENT. The Stockholder understands and
acknowledges that Parent is entering into, and causing Sub to enter into, the
Merger Agreement in reliance upon the Stockholder's execution and delivery of
this Agreement.
6. COVENANTS OF THE STOCKHOLDER. The Stockholder covenants and
agrees as follows:
(a) NO SOLICITATION. Beginning on the date hereof and ending
on the last date the Option is exercisable pursuant to Section 4 hereof, the
Stockholder shall not, in its capacity as such, directly or indirectly,
initiate, solicit (including by way of furnishing information), encourage or
respond to or take any other action knowingly to facilitate, any inquiries or
the making of any proposal by any person or entity (other than Parent or any
affiliate of Parent) with respect to the Company that constitutes or reasonably
may be expected to lead to, an Acquisition Proposal, or enter into or maintain
or continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain any Acquisition Proposal, or agree to or endorse any
Acquisition Proposal, or authorize or permit any Person or entity acting on
behalf of the Stockholder to do any of the foregoing. If the Stockholder
receives any inquiry or proposal regarding any Acquisition Proposal, the
Stockholder shall promptly inform Parent of that inquiry or proposal and the
details thereof.
(b) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE.
Beginning on the date hereof and ending on the last date the Stock Option is
exercisable pursuant to Section 4 hereof, except as expressly contemplated by
this Agreement, the Stockholder shall not (i) directly or indirectly, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of such
Stockholder's Shares and Company Securities or any interest therein; provided
that the Stockholder may transfer any Shares and/or Company Securities to any
Affiliate of the Stockholder; provided, further that such transferee shall have
become a party to this Agreement (or an agreement identical to this Agreement)
and shall be deemed to make all representations and warranties set forth in
paragraph 5 hereof on the date of the transfer of such Shares and/or Company
Securities; (ii) grant any proxies or powers of attorney (except for powers of
attorney granted to Affiliates of the Stockholder solely for administrative
purposes and which require the holder thereof to vote any and all Shares subject
to such powers in accordance with this Agreement), deposit any Shares and/or
Company Securities into a voting trust or enter into a voting agreement with
respect to any Shares and/or Company Securities; or (iii) take any action that
would make any representation or warranty of such Stockholder contained herein
untrue or incorrect or have the effect of preventing the Stockholder from
performing the Stockholder's obligations under this Agreement.
(c) WAIVER OF APPRAISAL RIGHTS. The Stockholder hereby
irrevocably waives any rights of appraisal or rights to dissent from the Merger
that the Stockholder may have.
-5-
<PAGE>
(d) STOP TRANSFER; CHANGES IN SHARES. The Stockholder agrees
with, and covenants to, Parent that the Stockholder shall not request that the
Company register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Stockholder's Shares or Company
Securities, unless such transfer is made in compliance with this Agreement. In
the event of a stock dividend or distribution, or any change in the Company
Common Stock by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall be deemed
to refer to and include the Shares as well as all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
may be changed or exchanged and the Purchase Price shall be appropriately
adjusted. The Stockholder shall be entitled to receive any cash dividend paid by
the Company during the term of this Agreement until Shares are purchased in the
Offer or hereunder.
7. FIDUCIARY DUTIES. Notwithstanding anything in this
Agreement to the contrary, the covenants and agreements set forth herein shall
not prevent of the Stockholder (or any of its designees) from taking any action,
subject to the applicable provisions of the Merger Agreement, while acting in
his or her (or such designee's) capacity as a director of the Company.
8. MISCELLANEOUS.
(a) FURTHER ASSURANCES. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further lawful
action as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement; provided that no party shall be required to incur unreasonable
expense in complying with this paragraph.
(b) ENTIRE AGREEMENT. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understanding, both
written and oral, between the parties with respect to the subject matter hereof.
(c) CERTAIN EVENTS. The Stockholder agrees that this Agreement
and the obligations hereunder shall attach to the Stockholder's Shares and shall
be binding upon any person or entity to which legal or beneficial ownership of
such Shares shall pass, whether by operation of law or otherwise, including,
without limitation, such Stockholder's heirs, guardians, administrators or
successors. Notwithstanding any transfer of Shares, the transferor shall remain
liable for the performance of all obligations under this Agreement of the
transferor in the event such transferee does not perform such obligations.
(d) ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
party provided that Parent may assign, at its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
Parent, although no such assignment shall relieve Parent of its obligations
hereunder if such assignee does not perform such obligations.
-6-
<PAGE>
(e) AMENDMENTS, WAIVERS, ETC. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
relevant parties hereto.
(f) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Stockholders: At the addresses set forth on
Schedule I hereto
copy to:
If to Parent or Sub:
c/o United Pan-Europe Communications NV
Fred. Roeskestraat 123
1076 EE Amsterdam
The Netherlands
Attention: Anton H.E. van Voskuijlen
Facsimile: +31 20 778 9817
copy to: White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: William F. Wynne, Jr., Esq.
Facsimile +212 354 8113
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) SEVERABILITY. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(h) SPECIFIC PERFORMANCE. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity;
provided that no party shall be liable for any consequential or punitive damages
or damages for lost profits or lost opportunities, whether or
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<PAGE>
not such damages, profits or opportunities were foreseen or foreseeable by such
party, except to the extent such damages are the result of a breach of this
Agreement arising out of the gross negligence or willful misconduct of such
party.
(i) REMEDIES CUMULATIVE. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(j) NO WAIVER. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(k) NO THIRD PARTY BENEFICIARIES. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(l) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
(m) JURISDICTION. Each party hereby irrevocably submits to the
exclusive jurisdiction of any United States District Court or any court of the
State of Delaware, in each case located in the City of Wilmington, Delaware, in
any action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding may be brought in such court
(and waives any objection based on forum non conveniens or any other objection
to venue therein); provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this paragraph (m) and shall not be deemed
to be a general submission to the jurisdiction of said Courts or in the State of
Delaware other than for such purposes. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR PROCEEDING.
(n) DESCRIPTIVE HEADINGS. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(o) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same Agreement.
9. TERMINATION. This Agreement shall terminate, and no party
shall have any rights or obligations hereunder and this Agreement shall become
null and void and have no effect upon the fifth day after the earlier of (1) the
expiration of the 90 day exercise period set forth in
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<PAGE>
Section 4 hereof, (2) at the Stockholders, option upon the valid termination of
the Merger Agreement by the Company pursuant to Section 10.3 thereof or (3) the
date which is 180 days after the date hereof.
10. BINDING AGREEMENT. All authority and rights herein
conferred or agreed to be conferred by the Stockholder shall survive the death
or incapacity of the Stockholder. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and each Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
[ ]
By: _______________________
Name:
Title:
[ ]
By: _______________________
Name:
Title:
[ ]
By: _______________________
Name:
Title:
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<PAGE>
SCHEDULE I TO
STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
NAME AND ADDRESS OF STOCKHOLDER NUMBER OF SHARES AND/OR COMPANY SECURITIES OWNED
<S> <C>
</TABLE>
Attention:
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<PAGE>
STOCKHOLDERS AGREEMENT
AGREEMENT dated as of June 2, 1999, among UNITED PAN-EUROPE
COMMUNICATIONS NV, a corporation organized under the laws of The Netherlands
("Parent"), BISON ACQUISITION CORP., a Delaware corporation and an indirect
wholly owned subsidiary of Parent ("Sub"), and the other parties signatory
hereto (individually and collectively, the "Stockholder").
W I T N E S S E T H :
WHEREAS, prior to entering into this Agreement, Parent, Sub
and Eagle, Inc., a Delaware corporation (the "Company"), entered into an
Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement),
pursuant to which Sub will be merged with and into the Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company
desire that as soon as practicable (and not later than five business days) after
the execution and delivery of the Merger Agreement, Sub commence a cash tender
offer to purchase all outstanding shares of Company Common Stock (as defined in
Section 1) including all of the Shares (as defined in Section 2); and
WHEREAS, as a condition to entering into the Merger Agreement,
Parent has required that all of the holders of the Company Preference Shares
agree to sell such Company Preference Shares to Parent; and
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Company Common Stock" shall mean at any time the common
stock, $.01 par value, of the Company.
(b) "Company Preference Shares" shall mean the Series A
Cumulative Preference Shares of the Company, par value $.01 per share and the
Series B Cumulative Preference Shares of the Company, par value $.01 per share.
"Existing Shares" shall mean the Company Preference Shares set
forth on Schedule I hereto.
<PAGE>
(d) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
(e) "Shares" shall mean the Existing Shares, together with
any other Company Preference Shares, in each case which such Company Preference
Shares were acquired by the Stockholder after the date hereof and prior to the
termination of this Agreement, whether upon the exercise of options, warrants or
rights, the conversion or exchange of convertible or exchangeable securities, or
by means of purchase, dividend, distribution or otherwise
2. PROVISIONS CONCERNING COMPANY PREFERENCE SHARES. (a) The
Stockholder hereby agrees that during the period commencing on the date hereof
and continuing until the first to occur of (i) the Effective Time, (ii) the last
date the Stock Option is exercisable pursuant to Section 3 and (iii) the
termination date set forth in Section 8, at any meeting of the holders of
Company Preference Shares (or of the Company Common Stock, to the extent the
holders of Company Preference Shares are entitled to vote as with the holders of
Company Common Stock, whether as a single class or otherwise), however called,
or in connection with any written consent of the holders of Company Preference
Shares, the Stockholder shall vote (or cause to be voted) the Shares owned by
the Stockholder whether issued, heretofore owned or hereafter acquired, (i) in
favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and this Agreement and any actions required
in furtherance thereof and hereof; (ii) against any action or agreement that
would result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement; and (iii) except as otherwise agreed to in writing in advance by
Parent, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries; (B) a sale, lease or
transfer of a material amount of assets of the Company or its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; (C) (1) any change in a majority of the persons who constitute
the board of directors of the Company; (2) any change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation or By-laws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action involving the Company
or its subsidiaries which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or materially adversely affect the
Merger and the transactions contemplated by this Agreement and the Merger
Agreement. The Stockholder shall not enter into any agreement or understanding
with any Person or entity the effect of which would be to violate the provisions
and agreements contained in this Section 2.
(b) The Stockholder hereby agrees to permit Parent and Sub to
publish and disclose in the Offer Documents and, if approval of the stockholders
of the Company is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the Securities and Exchange Commission)
its identity and ownership of Company Preference Shares and the nature of its
commitments, arrangements and understandings under this Agreement.
-2-
<PAGE>
3. PURCHASE RIGHT. (a) The Stockholder hereby grants to Sub an
irrevocable option (the "Stock Option") to purchase the Shares at a purchase
price per Share (the "Purchase Price") equal to the liquidation preference of
such share PLUS all accrued and unpaid dividends thereon on the date of
purchase, payable in cash, until the termination date set forth in Section 8.
Until the termination date set forth in Section 8, if (i) the Offer is
terminated, abandoned or withdrawn by Parent or Sub (whether due to the failure
of any of the conditions thereto or otherwise), (ii) the Offer is consummated
but Sub has not accepted for payment and paid for the Shares or (iii) the Merger
Agreement is terminated in accordance with its terms, the Stock Option shall, in
any such case, become exercisable, in whole but not in part, upon the first to
occur of any such event and remain exercisable, in whole but not in part, until
the date which is 90 days after the date of the occurrence of such event, but
shall not be exercisable in each case unless: (x) all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), required for the purchase of Shares upon the exercise of the Stock Option
shall have expired or been waived and all other necessary governmental consents
required for Sub to purchase Shares upon the exercise of the Stock Option,
including, but not limited to, all necessary approvals of the Polish
Anti-Monopoly Commission, and (y) there shall not then be in effect any
preliminary or final injunction or other order issued by any court or
governmental, administrative or regulatory agency or authority prohibiting the
exercise of the Stock Option pursuant to this Agreement. Provided that this
Agreement has not been terminated, in the event that the Stock Option is not
exercisable because the circumstances described in clauses (x) and (y) have not
occurred, then the Stock Option shall be exercisable for the 90 day period
commencing on the date that the circumstances set forth in clauses (x) and (y)
have occurred. In the event that Parent wishes to exercise the Stock Option,
Parent shall send a written notice to the Stockholder identifying the place for
the closing of such purchase at least three business days prior to such closing.
(b) In the event that Sub shall have purchased Shares of
Company Common Stock in the Offer in an amount necessary to satisfy the Minimum
Condition in accordance with the terms of the Merger Agreement, Sub shall
thereafter purchase all of the Shares then held by the Stockholder no later than
the date which is the third business day after the date of such consummation at
a purchase price per Share equal to the liquidation preference of such share
PLUS all accrued and unpaid dividends thereon on the date of purchase.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Parent as follows:
(a) OWNERSHIP OF SHARES. The Stockholder is the record and
beneficial owner of the number of Shares set forth opposite such Stockholder's
name on Schedule I hereto. On the date hereof, the Existing Shares set forth
opposite such Stockholder's name on Schedule I hereto constitute all of the
Shares owned beneficially or of record by such Stockholder. The Stockholder has
sole voting power and sole power to issue instructions with respect to the
matters set forth in Sections 2 and 3 hereof, sole power of disposition, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Existing Shares set forth opposite Stockholder's name on
Schedule I hereto, with no limitations, qualifications or restrictions on such
rights, subject to applicable securities laws and the terms of this Agreement.
-3-
<PAGE>
(b) POWER; BINDING AGREEMENT. The Stockholder has the legal
capacity, power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by such Stockholder will not violate any other agreement to which
the Stockholder is a party including, without limitation, any voting agreement,
stockholders agreement or voting trust. This Agreement has been duly and validly
executed and delivered by the Stockholder and constitutes a valid and binding
agreement of such Stockholder, enforceable against such Stockholder in
accordance with its terms. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which the Stockholder is trustee
whose consent is required for the execution and delivery of this Agreement or
the consummation by the Stockholder of the transactions contemplated hereby.
(c) NO CONFLICTS. Except for (i) filings and approvals under
the HSR Act or any other applicable Laws related to competition, antitrust,
monopoly or similar matters, (A) no filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by such Stockholder and the
performance by such Stockholder of its obligations hereunder and (B) none of the
execution and delivery of this Agreement by such Stockholder, the performance by
such Stockholder of its obligations hereunder or compliance by such Stockholder
with any of the provisions hereof shall (1) conflict with or result in any
breach of any applicable organizational documents applicable to such
Stockholder, or (2) violate any order, writ, injunction, decree, judgment,
order, statute, rule or regulation applicable to such Stockholder or any of such
Stockholder's properties or assets.
(d) NO FINDER'S FEES. Except as disclosed in the Merger
Agreement, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of such Stockholder.
(e) NO ENCUMBRANCES. The Stockholder's Shares and the
certificates representing such Shares are now, and at all times during the term
hereof will be, held by such Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever, except for any such encumbrances or
proxies arising hereunder. The transfer by the Stockholder of its Shares to Sub
in the Offer or hereunder shall pass to and unconditionally vest in Sub good and
valid title to all Shares, free and clear of all claims, liens, restrictions,
security interests, pledges, limitations and encumbrances whatsoever.
(f) RELIANCE BY PARENT. The Stockholder understands and
acknowledges that Parent is entering into, and causing Sub to enter into, the
Merger Agreement in reliance upon the Stockholder's execution and delivery of
this Agreement.
5. COVENANTS OF THE STOCKHOLDER. The Stockholder covenants and
agrees as follows:
(a) NO SOLICITATION. Beginning on the date hereof and ending
on the last date the Stock Option is exercisable pursuant to Section 3 hereof,
the Stockholder shall not, in its
-4-
<PAGE>
capacity as such, directly or indirectly, initiate, solicit (including by way of
furnishing information), encourage or respond to or take any other action
knowingly to facilitate, any inquiries or the making of any proposal by any
person or entity (other than Parent or any affiliate of Parent) with respect to
the Company that constitutes or reasonably may be expected to lead to, an
Acquisition Proposal, or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain any Acquisition Proposal, or agree to or endorse any Acquisition
Proposal, or authorize or permit any Person or entity acting on behalf of the
Stockholder to do any of the foregoing. If the Stockholder receives any inquiry
or proposal regarding any Acquisition Proposal, the Stockholder shall promptly
inform Parent of that inquiry or proposal and the details thereof.
(b) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE.
Beginning on the date hereof and ending on the last date the Stock Option is
exercisable pursuant to Section 4 hereof, except as expressly contemplated by
this Agreement, the Stockholder shall not (i) directly or indirectly, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of such
Stockholder's Shares or any interest therein; provided that the Stockholder may
transfer any Shares to any Affiliate of the Stockholder; provided, further that
such transferee shall have become a party to this Agreement (or an agreement
identical to this Agreement) and shall be deemed to make all representations and
warranties set forth in paragraph 4 hereof on the date of such transfer of
Shares; (ii) grant any proxies or powers of attorney (except for powers of
attorney granted to Affiliates of the Stockholder for purely administrative
purposes and which require the holder thereof to vote any and all Shares subject
to such powers in accordance with this Agreement), deposit any Shares into a
voting trust or enter into a voting agreement with respect to any Shares; or
(iii) take any action that would make any representation or warranty of such
Stockholder contained herein untrue or incorrect or have the effect of
preventing the Stockholder from performing the Stockholder's obligations under
this Agreement.
(c) WAIVER OF APPRAISAL RIGHTS. The Stockholder hereby
irrevocably waives any rights of appraisal or rights to dissent from the Merger
that the Stockholder may have.
(d) STOP TRANSFER; CHANGES IN SHARES. The Stockholder agrees
with, and covenants to, Parent that the Stockholder shall not request that the
Company register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Stockholder's Shares, unless
such transfer is made in compliance with this Agreement. In the event of a stock
dividend or distribution, or any change in the Company Preference Shares by
reason of any stock dividend, split-up, recapitalization, combination, exchange
of shares or the like, the term "Shares" shall be deemed to refer to and include
the Shares as well as all such stock dividends and distributions and any shares
into which or for which any or all of the Shares may be changed or exchanged and
the Purchase Price shall be appropriately adjusted. The Stockholder shall be
entitled to receive any cash dividend paid by the Company during the term of
this Agreement until Shares are purchased in the Offer or hereunder.
6. FIDUCIARY DUTIES. Notwithstanding anything in this
Agreement to the contrary, the covenants and agreements set forth herein shall
not prevent of the Stockholder (or
-5-
<PAGE>
any of its designees) from taking any action, subject to the applicable
provisions of the Merger Agreement, while acting in his or her (or such
designee's) capacity as a director of the Company.
7. MISCELLANEOUS.
(a) FURTHER ASSURANCES. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further lawful
action as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement; provided that no party shall be required to incur an unreasonable
expense in complying with this paragraph.
(b) ENTIRE AGREEMENT. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understanding, both
written and oral, between the parties with respect to the subject matter hereof.
(c) CERTAIN EVENTS. The Stockholder agrees that this Agreement
and the obligations hereunder shall attach to the Stockholder's Shares and shall
be binding upon any person or entity to which legal or beneficial ownership of
such Shares shall pass, whether by operation of law or otherwise, including,
without limitation, such Stockholder's heirs, guardians, administrators or
successors. Notwithstanding any transfer of Shares, the transferor shall remain
liable for the performance of all obligations under this Agreement of the
transferor in the event such transferee does not perform such obligations.
(d) ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
party provided that Parent may assign, at its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
Parent, although no such assignment shall relieve Parent of its obligations
hereunder if such assignee does not perform such obligations.
(e) AMENDMENTS, WAIVERS, ETC. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
relevant parties hereto.
(f) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Stockholders: At the addresses set forth on
Schedule I hereto
copy to:
-6-
<PAGE>
If to Parent or Sub:
c/o United Pan-Europe Communications NV
Fred. Roeskestraat 123
1076 EE Amsterdam
The Netherlands
Attention: Anton H.E. van Voskuijlen
Facsimile: +31 20 778 9817
copy to: White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: William F. Wynne, Jr., Esq.
Facsimile: +212 354 8113
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) SEVERABILITY. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(h) SPECIFIC PERFORMANCE. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity;
provided that no party shall be liable for any consequential or punitive damages
or damages for lost profits or lost opportunities, whether or not such damages,
profits or opportunities were foreseen or foreseeable by such party, except to
the extent such damages are the result of a breach of this Agreement arising out
of the gross negligence or willful misconduct of such party.
(i) REMEDIES CUMULATIVE. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(j) NO WAIVER. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof shall not constitute a
-7-
<PAGE>
waiver by such party of its right to exercise any such or other right, power or
remedy or to demand such compliance.
(k) NO THIRD PARTY BENEFICIARIES. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(l) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
(m) JURISDICTION. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court or any court of the
State of Delaware, in each case, located in the City of Wilmington, Delaware in
any action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding may be brought in such court
(and waives any objection based on forum non conveniens or any other objection
to venue therein); provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this paragraph (m) and shall not be deemed
to be a general submission to the jurisdiction of said Courts or in the State of
Delaware other than for such purposes. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR PROCEEDING.
(n) DESCRIPTIVE HEADINGS. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(o) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same Agreement.
8. TERMINATION. This Agreement shall terminate, and no party
shall have any rights or obligations hereunder and this Agreement shall become
null and void and have no effect upon the fifth day after the earlier of (1) the
expiration of the 90 day exercise period set forth in Section 4 hereof, (2) at
the Stockholder's option upon the valid termination of the Merger Agreement by
the Company pursuant to Section 10.3 thereof or (3) the date which is 180 days
after the date hereof.
9. BINDING AGREEMENT. All authority and rights herein
conferred or agreed to be conferred by the Stockholder shall survive the death
or incapacity of the Stockholder. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns.
-8-
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and each Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
[ ]
By: ________________________
Name:
Title:
[ ]
By: ________________________
Name:
Title:
[ ]
By: ________________________
Name:
Title:
-9-
<PAGE>
SCHEDULE I TO
STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
NAME AND ADDRESS OF STOCKHOLDER NUMBER OF SHARES OWNED
<S> <C>
</TABLE>
Attention:
-10-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
@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>
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
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 PROVISIONSOF 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
- ----------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 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
</TABLE>
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<PAGE>
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<PAGE>
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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
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
</TABLE>
<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:
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:
<PAGE>
2
(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> <C>
ISSUE DATE (JANUARY 27,
1999)................... $ 389.43
AUGUST 1, 1999.......... 428.75
FEBRUARY 1, 2000........ 471.05
AUGUST 1, 2000.......... 517.53
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
<PAGE>
3
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 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 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
<PAGE>
4
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 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 exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of
<PAGE>
7
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.
"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.
<PAGE>
8
"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 (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).
<PAGE>
9
"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.
"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.
<PAGE>
10
"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 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.
<PAGE>
11
"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.
"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
<PAGE>
12
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 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.
<PAGE>
13
"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, 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
<PAGE>
14
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.
"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,
<PAGE>
15
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.
"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;
<PAGE>
16
(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.
<PAGE>
17
"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 Company or
another Restricted Subsidiary such that such Restricted Subsidiary, in
any such case, ceases to be a Restricted Subsidiary;
<PAGE>
18
(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 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
<PAGE>
19
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 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
<PAGE>
20
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.
"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
<PAGE>
21
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 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
<PAGE>
22
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 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.
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23
"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 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
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24
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.
"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.
<PAGE>
25
"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 Issuers 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."
"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).
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26
"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.
"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
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27
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.
"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.
<PAGE>
28
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:
(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
<PAGE>
29
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.
(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
<PAGE>
30
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 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.
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31
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. 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
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32
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. 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
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33
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. 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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34
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 SECURITY UNDER (C), (D) AND (E) ABOVE ARE
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH
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35
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.
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.
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36
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 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
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 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 (and net proceeds of $96,752,957). 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.
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
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37
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 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
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38
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.
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.
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39
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 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.
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40
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 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
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41
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 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
<PAGE>
42
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) 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
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43
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 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.
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44
(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.
(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.
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45
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.
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
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46
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:
(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
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47
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 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 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):
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(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, 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;
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51
(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.
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
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52
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.
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
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53
(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.
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,
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54
(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.
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.
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55
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;
(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;
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56
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 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.
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57
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.
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.
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58
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 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
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59
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;
(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.
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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, 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);
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(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 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
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62
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.
(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.
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(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 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
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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.
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
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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 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
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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.
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
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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:
(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.
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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.
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.
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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.
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.
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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 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
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71
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.
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
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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 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
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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 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
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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
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);
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(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
(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
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76
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 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
<PAGE>
77
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 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
<PAGE>
78
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
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
<PAGE>
79
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 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.
<PAGE>
80
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 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
<PAGE>
81
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 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
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82
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.
(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
Price"), to the date such Excess Proceeds Offer is consummated (the "Offer
Date"). To the extent that the aggregate Accreted Value of Securities
tendered
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83
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 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
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84
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.
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85
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 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 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
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86
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.
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
<PAGE>
87
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,
(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
<PAGE>
88
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 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.
<PAGE>
89
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.
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,
<PAGE>
90
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 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
<PAGE>
91
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 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
<PAGE>
92
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 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
<PAGE>
93
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.
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
-------------------------
Title:
By
-------------------------
Title:
BANKERS TRUST COMPANY
[SEAL] By
-------------------------
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 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.
</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 o.o.
01/11/95 Management Agreement between WCCI and Telkat.
<PAGE>
96
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, Inc. AmerBank-Bank $6,500,000.00 $6,500,000.00
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.
<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.
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.
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 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.
PCI's ability to make payments on indebtedness is limited by its
Restated Certificate of Incorporation.
<PAGE>
100
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.
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.
The Indenture dated as of January 27, 1999 between Bankers Trust
Company, as Trustee, and @Entertainment, Inc.
<PAGE>
101
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.
<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>
<S> <C> <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>
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: @ENTERTAINMENT, INC.
--------------
By:
----------------------------
Title:
By:
----------------------------
Title:
<PAGE>
A-3
(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
<PAGE>
A-4
@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 15, 2004. Except in the case
of a Registration Default (as defined herein), the principal of this Note
shall not accrue 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 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
<PAGE>
A-5
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 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.
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.
<PAGE>
A-6
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.
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
<PAGE>
A-7
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.
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
<PAGE>
A-8
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.
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
<PAGE>
A-9
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.
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.
<PAGE>
A-10
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.
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
<PAGE>
A-11
represented by this Note, upon compliance by the Company with certain conditions
set forth in the Indenture.
<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>
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-13
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:
<PAGE>
A-14
(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
<PAGE>
A-15
@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 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
<PAGE>
A-16
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.
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.
<PAGE>
A-17
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.
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
<PAGE>
A-18
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>
REDEMPTION
YEAR 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.
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
<PAGE>
A-19
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 exchan?ge 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
<PAGE>
A-20
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.
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.
<PAGE>
A-21
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.
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
<PAGE>
A-22
represented by this Note, upon compliance by the Company with certain conditions
set forth in the Indenture.
<PAGE>
A-23
[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.
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
<PAGE>
A-24
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
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-25
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-26
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:
Date of this Certificate:
-------------------------
<PAGE>
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)
================================================================================
<PAGE>
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
-i-
<PAGE>
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
-ii-
<PAGE>
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
-iii-
<PAGE>
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;
<PAGE>
2
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
<PAGE>
3
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
<PAGE>
4
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.
<PAGE>
5
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
<PAGE>
6
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
<PAGE>
7
(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
<PAGE>
8
(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
<PAGE>
9
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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10
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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11
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
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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
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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
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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
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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.
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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
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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;
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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;
<PAGE>
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>
================================================================================
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,
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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.
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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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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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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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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.
18
<PAGE>
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
19
<PAGE>
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 5.1
[Baker & McKenzie Letterhead]
June 29, 1999
@ Entertainment, Inc.
One Commercial Plaza
Hartford, Connecticut 06103-3585
Ladies and Gentlemen:
We have acted as counsel to @ Entertainment, Inc., a Delaware
corporation (the "Company"), in connection with its filing of a registration
statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), relating to: (i) 1,027,200 warrants
(the "Note Warrants") to purchase shares of the Company's common stock , par
value $.01 per share (the "Common Stock"), issued pursuant to the Warrant
Agreement dated as of January 27, 1999 (the "Note Warrant Agreement"); (ii)
1,813,665 shares of Common Stock (the "Note Warrant Shares") that may be issued
from time to time by the Company upon the exercise of the Note Warrants; (iii)
45,000 Series A 12% Cumulative Preference Shares, par value $.01 per share (the
"Series A 12% Cumulative Preference Shares"), issued pursuant to the Purchase
Agreement between the Company and Morgan Grenfell Private Equity Limited dated
January 22, 1999 (the "Series A Preference Share Purchase Agreement"); (iv)
5,000 Series B 12% Cumulative Preference Shares, par value $.01 per share (the
"Series B 12% Cumulative Preference Shares") pursuant to the Purchase Agreement
between the Company and Arnold Chase, Cheryl Chase, and Rhoda Chase dated
January 22, 1999 (the "Series B Preference Share Purchase Agreement"); (v)
45,000 Series A Preference Warrants (the "Series A Preference Warrants") to
purchase shares of the Company's Common Stock, issued pursuant to the Preference
Warrant Agreement, dated as of January 27, 1999; and (vi) 5,000 Series B
Preference Warrants (the "Series B Preference Warrants") to purchase shares of
the Company's Common Stock, issued pursuant to the Preference Warrant Agreement,
dated as of January 27, 1999.
We have examined the originals, or photostatic or certified copies, of
such records of the Company, certificates of officers of the Company and of
public officials, and such other documents as we have deemed relevant and
necessary as the basis of the opinion set forth below. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us
<PAGE>
as photostatic or certified copies and authenticity of the originals of such
copies.
We are members of the Bar of the State of New York. We have made such
examination of the law of the State of New York, federal law and of the Delaware
General Corporation Law as we have deemed relevant for purposes of this opinion,
and we express no opinion as to laws of any other state or jurisdiction.
Based upon our examination, we are of the opinion that:
1. The Note Warrants, Series A 12% Cumulative Preference Shares,
Series B 12% Cumulative Preference Shares, Series A Preference
Warrants, and Series B Preference Warrants are duly authorized
and validly issued.
2. The issuance of the Note Warrant Shares has been duly
authorized by all necessary corporate action on the part of
the Company and when the Note Warrant Shares are issued upon
the exercise of the Note Warrants in accordance with the terms
of the Note Warrant Agreement against the payment of the
consideration therefor specified in the Note Warrant
Agreement, they will be validly issued, fully paid and
nonassessable.
We hereby consent to the use of our opinion as herein set forth as an
exhibit to the Registration Statement and to the use of our name under the
caption "Legal Matters" in the prospectus forming a part of the Registration
Statement. This consent is not to be construed as an admission that we are a
person whose consent is required to be filed with the Registration Statement
under the provisions of the Securities Act.
Very truly yours,
Baker & McKenzie
<PAGE>
Exhibit 23.1
The Board of Directors
@Entertainment, Inc.:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG
Warsaw, Poland
June 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted 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-BASIC> (1.06)
<EPS-DILUTED> (1.06)
</TABLE>
